<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
Commission file number: 1-7377.
Exact name of registrant as specified in its charter:
BANKAMERICA CORPORATION
Address and telephone
State of incorporation: of principal I.R.S. Employer I.D. No:
Delaware. executive offices: 94-1681731.
Bank of America Center
San Francisco, California 94104
415-622-3530.
Securities registered pursuant to Section 12(b) of the Act:
New York, Chicago, and Pacific Stock Exchanges: Common Stock, Par Value $1.5625
and Preferred Share Purchase Rights
New York Stock Exchange:
<TABLE>
<S> <C> <C>
Cumulative Adjustable Preferred 6 1/2% Cumulative Convertible Depositary Shares Each Representing a
Stock, Series A Preferred Stock, Series G One-Twentieth Interest in a Share of:
Cumulative Adjustable Preferred 9% Cumulative Preferred Stock, 11% Preferred Stock, Series I
Stock, Series B Series H 11% Preferred Stock, Series J
Adjustable Rate Preferred Stock, 8 3/8% Cumulative Preferred Stock, 8.16% Cumulative Preferred Stock
Series 1 Series K Series L
9 5/8% Cumulative Preferred Stock, Floating Rate Subordinated Capital 7 7/8% Cumulative Preferred Stock,
Series F Notes Due August 15, 1996 Series M
8 1/2% Cumulative Preferred Stock,
Series N
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price on the consolidated
transaction reporting system on January 31, 1995, was in excess of $15.9
billion.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 1995.
Common Stock, $1.5625 par value ------371,225,347 shares
outstanding on January 31, 1995.*
*In addition, 751,967 shares were held in treasury.
Documents incorporated by reference and parts of Form 10-K into
which incorporated:
<TABLE>
<S> <C>
Portions of the Annual Report to Shareholders for the Year Ended December 31, 1994 Parts I, II, & IV
Portions of the Proxy Statement for the May 25, 1995 Annual Meeting of Shareholders Part III
</TABLE>
<PAGE>
FORM 10-K
================================================================================
<TABLE>
<S> <C> <C>
PART I
Items 1 and 2. Business and Properties
General................................................................................ 2
Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential............................................ 4
Available-for-Sale and Held-to-Maturity Securities.................................... 8
Loan Portfolio........................................................................ 9
Summary of Credit Loss Experience..................................................... 12
Deposits.............................................................................. 12
Return on Equity and Assets........................................................... 13
Short-Term Borrowings................................................................. 13
Competition........................................................................... 13
Supervision and Regulation............................................................ 14
Employees............................................................................. 17
Item 3. Legal Proceedings................................................................. 17
Item 4. Submission of Matters to a Vote of Security Holders............................... 17
_________________________________________________________________________________________________________________________________
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................................................... 18
Item 6. Selected Financial Data........................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................ 18
Item 8. Financial Statements and Supplementary Data....................................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................................ 18
_________________________________________________________________________________________________________________________________
PART III
Item 10. Directors and Executive Officers of the Registrant............................... 19
Item 11. Executive Compensation........................................................... 21
Item 12. Security Ownership of Certain Beneficial Owners and Management................... 21
Item 13. Certain Relationships and Related Transactions .................................. 21
_________________________________________________________________________________________________________________________________
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 22
_________________________________________________________________________________________________________________________________
SIGNATURES .......................................................................................... 25
</TABLE>
1
<PAGE>
PART I
================================================================================
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
________________________________________________________________________________
GENERAL BankAmerica Corporation (the Parent) is a bank holding
company that was incorporated on October 7, 1968, under the
laws of the state of Delaware, and is registered under the
Bank Holding Company Act of 1956, as amended. At December
31, 1994, BankAmerica Corporation and consolidated
subsidiaries (BAC) was the second largest bank holding
company in the United States, based on total assets of
$215.5 billion.
On August 31, 1994, Continental Bank Corporation
(Continental) was merged with and into the Parent, and
Continental's principal subsidiary, Continental Bank, was
renamed Bank of America Illinois. In addition, during 1994,
BAC acquired United Mortgage Holding Company in Minnesota
and the Virginia processing operations of Margaretten
Mortgage. On February 1, 1995, BAC completed the acquisition
of Arbor National Holdings, Inc., based in New York.
Additional information related to the Continental merger,
the 1992 Security Pacific Corporation (SPC) merger, and
BAC's other acquisitions is incorporated by reference from
page 18 and Notes 2 through 4 on pages 56 through 59 of the
1994 Annual Report to Shareholders.
The Parent's largest subsidiaries, based on total assets at
year-end 1994, are Bank of America NT&SA (the Bank),
Seafirst Corporation (Seafirst), and Bank of America
Illinois. The Bank was founded by A. P. Giannini in San
Francisco, California, and began business as Bank of Italy
on October 17, 1904, offering banking services to
individuals and small businesses in the community. It
adopted its present name on November 1, 1930, and became a
subsidiary of the Parent on April 1, 1969. Seafirst, the
largest bank holding company in Washington State based on
total assets at December 31, 1994, was acquired by the
Parent in 1983. Seafirst's principal banking subsidiary,
Seattle-First National Bank (Seattle-First), has a major
presence in the consumer and commercial banking sectors of
the Pacific Northwest. Bank of America Illinois,
headquartered in Chicago, provides corporate, middle market,
and private banking services.
As a result of the April 22, 1992 SPC merger, and various
acquisitions made during the years 1989 through 1993, the
Parent's subsidiaries also include Bank of America Arizona,
Bank of America Nevada, and Bank of America Oregon, all of
which have state charters; Bank of America Alaska N.A., Bank
of America Idaho, N.A., Bank of America New Mexico, N.A.,
and Bank of America Texas, N.A., which are national banks;
and Bank of America, FSB (FSB), a federal savings bank.
In addition, as a result of the SPC merger, the Parent
acquired a commercial bank, now known as Bank of America
National Association, which holds a national charter and
offers credit card services, primarily to individuals,
throughout the United States.
2
<PAGE>
================================================================================
OPERATIONS
============================================================
BAC, through its banking and other subsidiaries, provides
banking and financial services throughout the United States
and in selected international markets to consumers and
business customers, including corporations, governments, and
other institutions.
Consumer banking products and services provided by BAC
consist primarily of retail deposit services, residential
first mortgages, credit card products, manufactured housing
financing, and other consumer finance products. Consumer
banking operations serve the largest customer base of any
bank in the western United States - approximately 10 million
households in 1994. In the ten western states in which BAC
operates, it offers the largest full-service branch network-
nearly 2,000 branches. In addition, BAC's proprietary
network of more than 5,500 ATMs is by far the nation's
largest. In California, BAC's most significant market, the
Bank operated 975 branches at December 31, 1994. Seattle-
First, the major operating unit of Seafirst, had
approximately 270 branches at December 31, 1994.
BAC is also a global financial intermediary, providing
credit, trade finance, cash management, investment banking
and capital-raising services, capital markets products, and
financial advisory services to large domestic and foreign
institutions throughout the U.S. and overseas.
A wide range of products and services available to consumers
and large institutions is also provided to middle market
customers (companies with annual revenues between $5 million
and $250 million) primarily throughout the west and, since
the Continental merger, in the midwest.
In addition, BAC provides credit and other financial
services to a variety of real estate market segments,
including developers, investors, pension fund advisors, real
estate investment trusts, and property managers.
Furthermore, BAC provides private banking and investment
services to customers worldwide, including personal trust
and a broad range of investment products, such as mutual
funds, fixed-income securities, annuities, and equity
securities.
Additional information about BAC and its operations is
incorporated by reference from the inside front cover, pages
8 through 17, pages 19 through 21, and Note 25 on page 83 of
the 1994 Annual Report to Shareholders.
PROPERTIES
============================================================
BAC's principal offices are located at 555 California Street
in San Francisco, California.
Seafirst's principal offices are located at 701 Fifth Avenue
in Seattle, Washington.
Bank of America Illinois' principal offices are located at
231 South LaSalle Street in Chicago, Illinois.
At December 31, 1994, BAC owned approximately one-half of
its properties. The remaining facilities were leased.
3
<PAGE>
================================================================================
DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
================================================================================
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 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 $ 4,912 $ 325 6.62 % $ 2,642/c/ $ 194 7.36 %
Federal funds sold 1,318 55 4.13 1,131 35 3.12
Securities purchased under resale agreements 6,378 351 5.51 3,903 174 4.46
Trading account assets 6,713 476 7.09 6,341 375 5.91
Available-for-sale securities/d/ 9,675/c/ 593 6.13 4,118 280 6.79
Held-to-maturity securities/d/ 10,805/c/ 794 7.35 15,759 1,123 7.13
Domestic loans:
Consumer--residential first mortgages 32,012 1,913 5.97 29,548 1,858 6.29
Consumer--credit card 7,280 1,139 15.65 7,499 1,220 16.26
Other consumer 25,043 2,226 8.89 24,659 2,230 9.04
Commercial and industrial 23,643 1,665 7.04 20,580 1,301 6.32
Commercial loans secured by real estate 9,407 757 8.04 9,707 729 7.51
Construction & development loans secured by real estate 3,948 307 7.78 5,718 295 5.17
Financial institutions 2,142 108 5.06 1,948 68 3.48
Agricultural 1,641 129 7.87 1,605 122 7.62
Lease financing 1,675 129 7.70 1,773 219 12.36
Loans for purchasing or carrying securities 1,814 92 5.06 1,447 59 4.05
Other 1,244 76 6.10 1,099 55 5.03
-------- ------- -------- -------
Total domestic loans 109,849 8,541 7.77 105,583 8,156 7.73
Foreign loans 18,572 1,273 6.86 19,531 1,312 6.72
-------- ------- -------- -------
Total loans/c/ 128,421 9,814 7.64 125,114 9,468 7.57
-------- ------- -------- -------
Total earning assets 168,222 $12,408 7.38 159,008 $11,649 7.32
======= =======
Nonearning assets 37,366 30,144
Less: Allowance for credit losses 3,520 3,826
-------- --------
TOTAL ASSETS/e/ $202,068 $185,326
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 13,761 $ 160 1.16 % $ 13,469 $ 181 1.34 %
Savings 14,427 294 2.04 13,977 312 2.23
Money market 32,625 818 2.51 34,182 851 2.49
Time 28,259 864 3.06 30,939 772 2.50
-------- ------- -------- ------
Total domestic interest-bearing deposits 89,072 2,136 2.40 92,567 2,116 2.29
Foreign interest-bearing deposits/f/:
Banks located in foreign countries 6,771 421 6.23 3,346 230 6.88
Governments and official institutions 4,646 217 4.67 1,927 78 4.08
Time, savings, and other 11,371 563 4.95 10,276 547 5.32
-------- ------- -------- -----
Total foreign interest-bearing deposits 22,788 1,201 5.27 15,549 855 5.50
-------- ------- -------- -----
Total interest-bearing deposits 111,860 3,337 2.98 108,116 2,971 2.75
Federal funds purchased 611 27 4.48 570 16 2.78
Securities sold under repurchase agreements 6,455 351 5.44 2,837 158 5.58
Other short-term borrowings 4,231 275 6.50 3,088 201 6.52
Long-term debt 13,920 810 5.82 14,090 727 5.16
Subordinated capital notes 606 42 6.84 1,499 113 7.52
-------- ------- -------- -------
Total interest-bearing liabilities 137,683 $ 4,842 3.52 130,200 $ 4,186 3.22
======= =======
Domestic noninterest-bearing deposits 31,938 30,688
Foreign noninterest-bearing deposits 1,498 1,425
Other noninterest-bearing liabilities 13,258 6,728
-------- --------
Total liabilities/e/ 184,377 169,041
Stockholders' equity 17,691 16,285
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $202,068 $185,326
======== ========
Interest income as a percentage of average earning assets 7.38 % 7.32 %
Interest expense as a percentage of average earning assets (2.88) (2.63)
---- ----
NET INTEREST MARGIN 4.50 % 4.69 %
===== =====
</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 basis adjustments are based on a marginal tax
rate of 35 percent for 1994 and 1993, and 34 percent for 1992.
/c/ Average balances include nonaccrual assets.
/d/ Refer to the table on page 7 for more detail on available-for-sale and
held-to-maturity securities.
/e/ The percentage of average total assets attributable to foreign operations
for the years ended December 31, 1994, 1993, and 1992 were 18 percent, 16
percent, and 16 percent, respectively. The percentage of average total
liabilities attributable to foreign operations for the same periods were 18
percent, 15 percent, and 16 percent, respectively.
/f/ Primarily consists of time certificates of deposit in denominations of
$100,000 or more.
4
<PAGE>
================================================================================
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31, 1992 Fourth Quarter 1994
- ---------------------------------- ---------------------------------
Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/
- ---------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
$ 4,055/c/ $ 283 6.97 % $ 5,860 $ 108 7.33 %
1,617 61 3.76 837 11 5.21
4,400 163 3.70 6,956 106 6.05
4,234 300 7.08 6,770 125 7.31
1,401 123 8.79 10,393/c/ 182 6.96
11,092 972 8.76 8,427/c/ 156 7.40
25,577 1,975 7.72 33,400 523 6.27
7,963 1,329 16.70 7,602 289 15.22
23,149 2,273 9.82 26,089 596 9.07
19,640 1,227 6.25 28,523 576 8.02
8,735 697 7.98 10,018 212 8.46
6,700 349 5.21 3,857 85 8.69
1,821 70 3.85 2,761 37 5.32
1,554 121 7.81 1,668 36 8.61
1,669 240 14.40 1,724 26 6.03
1,049 46 4.38 1,590 26 6.47
830 42 5.10 1,355 21 6.15
- -------- ------- -------- -------
98,687 8,369 8.48 118,587 2,427 8.15
17,492 1,364 7.80 19,989 371 7.35
- -------- ------- -------- -------
116,179 9,733 8.38 138,576 2,798 8.03
- -------- ------- ------- -------
142,978 $11,635 8.13 177,819 $ 3,486 7.80
26,638 ======= 40,478 =======
3,764 3,648
- -------- --------
$165,852 $214,649
======== ========
$ 11,368 $ 222 1.95 % $ 13,674 $ 40 1.17 %
13,454 399 2.96 14,190 74 2.06
27,504 896 3.26 32,050 215 2.67
31,925 1,209 3.79 31,411 310 3.92
- -------- ------- -------- ------
84,251 2,726 3.24 91,325 639 2.78
3,440 269 7.83 8,737 138 6.26
1,931 94 4.86 5,183 69 5.28
10,173 680 6.68 12,313 173 5.58
- -------- ------- -------- ------
15,544 1,043 6.71 26,233 380 5.75
- -------- ------- -------- ------
99,795 3,769 3.78 117,558 1,019 3.44
626 20 3.24 1,168 15 5.22
2,015 108 5.35 6,623 93 5.55
3,913 270 6.90 5,094 84 6.53
10,158 614 6.04 14,769 245 6.56
1,836 114 6.22 605 11 7.08
- -------- ------- -------- -------
118,343 $ 4,895 4.14 145,817 $ 1,467 3.99
26,029 ======= 33,930 =======
1,521 1,634
7,360 14,286
- -------- --------
153,253 195,667
12,599 18,982
- -------- --------
$165,852 $214,649
======== ========
8.13 % 7.80 %
(3.42) (3.27)
----- -----
4.71 % 4.53 %
===== =====
Fourth Quarter 1993
- -------------------------------------
Balance/a/ Interest/b/ Rate/b/
- -------------------------------------
<C> <C> <C>
$ 3,142/c/ $ 54 6.82%
878 6 3.09
4,830 54 4.42
7,296 103 5.57
3,388 62 7.30
16,368 273 6.65
30,515 456 5.98
7,227 292 16.16
24,084 532 8.77
20,197 348 6.84
9,317 178 7.62
4,874 74 5.98
2,266 20 3.56
1,572 32 7.93
1,737 44 10.08
2,266 22 3.84
1,178 14 4.83
- -------- -------
105,233 2,012 7.61
19,998 318 6.31
- -------- -------
125,231 2,330 7.41
- -------- -------
161,133 $ 2,882 7.12
29,263 =======
3,690
- --------
$186,706
========
$ 13,684 $ 40 1.16%
14,130 72 2.04
34,007 203 2.37
28,349 185 2.59
- -------- ------
90,170 500 2.20
4,130 67 6.40
2,568 26 4.02
10,343 122 4.70
- -------- ------
17,041 215 5.01
- -------- ------
107,211 715 2.65
511 4 2.81
3,548 46 5.15
3,538 56 6.30
13,871 177 5.04
817 13 6.22
- -------- -------
129,496 $ 1,011 3.10
32,283 =======
1,473
6,602
- --------
169,854
16,852
- --------
$186,706
========
7.12%
(2.49)
-----
4.63%
=====
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
================================================================================
NET INTEREST INCOME ANALYSIS
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 OVER 1993 YEAR ENDED DECEMBER 31, 1993 OVER 1992
--------------------------------------- ---------------------------------------
INCREASE (DECREASE)/a/ INCREASE (DECREASE)/a/
--------------------------------------- ---------------------------------------
(in millions) Volume Rate Net Volume Rate Net
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME/b/
Interest-bearing deposits in banks $ 152 $ (21) $ 131 $(104) $ 15 $ (89)
Federal funds sold 7 13 20 (17) (9) (26)
Securities purchased under resale agreements 129 48 177 (20) 31 11
Trading account assets 23 78 101 131 (56) 75
Available-for-sale securities:
U.S. Treasury and other government agency
securities 74 4 78 69 (9) 60
Mortgage-backed securities 171 (26) 145 71 (14) 57
Other domestic securities 19 (1) 18 2 - 2
Foreign securities 79 (7) 72 42 (4) 38
----- -----
Total available-for-sale securities 313 157
Held-to-maturity securities:
U.S. Treasury and other government agency
securities (183) 41 (142) 30 (25) 5
Mortgage-backed securities (273) (9) (282) 344 (147) 197
State, county, and municipal securities (6) 1 (5) - (2) (2)
Other domestic securities (48) (32) (80) (8) (17) (25)
Foreign securities 180 - 180 (19) (5) (24)
----- -----
Total held-to-maturity securities (329) 151
Domestic loans:
Consumer-residential first mortgages 151 (96) 55 281 (398) (117)
Consumer-credit card (35) (46) (81) (75) (34) (109)
Other consumer 34 (38) (4) 143 (186) (43)
Commercial and industrial 206 158 364 60 14 74
Commercial loans secured by real estate (23) 51 28 75 (43) 32
Construction and
development loans
secured by real estate (109) 121 12 (51) (3) (54)
Financial institutions 7 33 40 5 (7) (2)
Agricultural 3 4 7 4 (3) 1
Lease financing (12) (78) (90) 14 (35) (21)
Loans for purchasing or carrying securities 17 16 33 17 (4) 13
Other 8 13 21 14 (1) 13
----- -----
Total domestic loans 385 (213)
Foreign loans (66) 27 (39) 149 (201) (52)
----- -----
Total loans 346 (265)
----- -----
NET INCREASE $ 759 $ 14
===== =====
INTEREST EXPENSE
Domestic interest-bearing deposits:
Transaction $ 4 $ (25) $ (21) $ 36 $ (77) $ (41)
Savings 10 (28) (18) 15 (102) (87)
Money market (40) 7 (33) 192 (237) (45)
Time (71) 163 92 (36) (401) (437)
----- -----
Total domestic interest-bearing deposits 20 (610)
Foreign interest-bearing deposits:
Banks located in foreign countries 215 (24) 191 (7) (32) (39)
Governments and official institutions 126 13 139 - (16) (16)
Time, savings, and other 56 (40) 16 7 (140) (133)
----- -----
Total foreign interest-bearing deposits 346 (188)
----- -----
Total interest-bearing deposits 366 (798)
Federal funds purchased 1 10 11 (2) (2) (4)
Securities sold under repurchase agreements 197 (4) 193 45 5 50
Other short-term borrowings 75 (1) 74 (55) (14) (69)
Long-term debt (9) 92 83 212 (99) 113
Subordinated capital notes (62) (9) (71) (23) 22 (1)
----- -----
NET INCREASE (DECREASE) $ 656 $(709)
===== =====
</TABLE>
- --------------------------------------------------------------------------------
/a/ Changes that are the result of a joint volume and rate fluctuation are
allocated in proportion to the volume and rate changes.
/b/ Interest income is presented on a taxable-equivalent basis. The taxable-
equivalent basis adjustments are based on a marginal tax rate of 35 percent
for 1994 and 1993, and 34 percent for 1992.
6
<PAGE>
================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES-AVERAGE BALANCES, INTEREST,
- --------------------------------------------------------------------------------
AND AVERAGE RATES
- -----------------
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993
---------------------------------------------------------------------------------------
Rate
Rate based on
based on amortized
(dollar amounts in millions) Balance/a/ Interest/b/ fair value/b/ cost/b/ Balance/a/ Interest/b/ Rate/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $3,029 $164 5.42% 5.41% $1,646 $ 86 5.20%
Mortgage-backed securities 4,410 263 5.96 5.88 1,606 118 7.35
Other domestic securities 427 21 4.78 5.00 39 3 7.19
Foreign securities 1,809/c/ 145 8.05 7.09 827 73 8.83
- ------------------------------------------------------------------------------------------------------------------------------------
$9,675 $593 6.13% 5.95% $4,118 $280 6.79%
- ------------------------------------------------====================================================================================
<CAPTION>
Year Ended December 31, 1992
---------------------------------------
(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 $ 360 $ 26 7.11%
Mortgage-backed securities 671 61 9.09
Other domestic securities 17 1 10.13
Foreign securities 353 35 9.87
- -----------------------------------------------------------------------------------
$1,401 $123 8.79%
- ------------------------------------------------===================================
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993 Year Ended December 31, 1992
------------------------------- ------------------------------ -------------------------------
(dollar amounts in
millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY
SECURITIES
U.S. Treasury and other
government
agency securities $ 689 $ 46 6.72% $ 3,554 $ 188 5.28% $ 3,036 $183 6.06%
Mortgage-backed securities 6,985 503 7.20 10,784 785 7.28 6,341 588 9.27
State, county, and municipal
securities 479 39 8.12 553 44 7.93 549 46 8.34
Other domestic securities 224 16 7.11 740 96 13.01/d/ 797 121 15.13/d/
Foreign securities 2,428/c/ 190 7.83 128 10 7.61 369 34 9.17
- ----------------------------------------------------------------------------------------------------------------------------------
$10,805 $794 7.35% $15,759 $1,123 7.13% $11,092 $972 8.76%
- -------------------------------===================================================================================================
<CAPTION>
Fourth Quarter 1994 Fourth Quarter 1993
-------------------------------------------------------------------------------------
Rate
Rate based on
based on amortized
(dollar amounts in millions) Balance/a/ Interest/b/ fair value/b/ cost/b/ Balance/a/ Interest/b/ Rate/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government agency
securities $ 2,317 $ 31 5.27% 5.17% $ 752 $15 7.78%
Mortgage-backed securities 5,678 98 6.88 6.62 1,797 27 6.09
Other domestic securities 491 6 5.09 5.34 54 1 5.41
Foreign securities 1,907/c/ 47 9.73 8.76 785 19 9.72
- ------------------------------------------------------------------------------------------------------------------------------------
$10,393 $182 6.96% 6.67% $3,388 $62 7.30%
- -----------------------------------------------=====================================================================================
<CAPTION>
Fourth 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>
HELD-TO-MATURITY SECURITIES
U.S. Treasury and other government agency
securities $ 482 $ 9 7.02% $ 3,527 $ 49 5.56%
Mortgage-backed securities 4,782 85 7.11 11,506 198 6.87
State, county, and municipal
securities 461 9 8.14 524 10 7.55
Other domestic securities 196 3 6.96 557 11 7.51
Foreign securities 2,506/c/ 50 7.84 254 5 7.98
- ---------------------------------------------------------------------------------------------------------------------------------
$8,427 $156 7.40% $16,368 $273 6.65%
- ----------------------------------------------------------=======================================================================
=================================================================================================================================
</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 basis adjustments are based on a marginal tax
rate of 35 percent for 1994 and 1993, and 34 percent for 1992.
/c/ Average balances include nonaccrual assets.
/d/ Rates reflect income recognized on call premiums received and unamortized
discounts related to debentures called prior to maturity.
7
<PAGE>
================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES
================================================================================
Carrying Value and Yield by Contractual Maturity Date
================================================================================
<TABLE>
<CAPTION>
Avaiable-For-Sale Securities
-----------------------------------------------------------------
December 31, 1994/a/ December 31, 1993 December 31, 1992
------------------- ----------------- ------------------
(dollar amounts in millions) Amount Yield/b/ Amount Yield/b/ Amount Yield/b/
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY AND OTHER
GOVERNMENT AGENCY
SECURITIES
Due in one year or less $1,127 5.78% $ 51 3.13% $ - -%
Due after one year through
five years 542 7.54 593 7.69 600 8.08
Due after five years
through ten years 241 5.94 101 8.39 100 8.50
Due after ten years 312 11.34 3 8.50 - -
------ ----- ------
2,222 748 700
MORTGAGE-BACKED SECURITIES
Due in one year or less 84 5.74 - - - -
Due after one year through
five years 3 6.88 - - - -
Due after five years
through ten years 214 5.94 7 9.00 25 8.41
Due after ten years 4,972 6.64 1,737 5.62 1,218 6.76
------ ------ ------
5,273 1,744 1,243
STATE, COUNTY, AND
MUNICIPAL
SECURITIES
Due in one year or less - - - - - -
Due after one year through
five years 2 8.09 - - - -
Due after five years
through ten years 1 5.37 - - - -
Due after ten years 6 7.31 - - - -
------ ------ ------
9 - -
OTHER SECURITIES
Due in one year or less 430 6.78 583 5.41 291 6.18
Due after one year through
five years 524 6.52 108 7.46 304 6.98
Due after five years
through ten years 111 6.68 72 8.13 120 7.34
Due after ten years 1,052 6.25 27 4.67 3 5.49
------ ------ ------
2,117 790 718
------ ------ ------
$9,621 $3,282 $2,661
====== ====== ======
<CAPTION>
Held-to-Maturity Securities
------------------------------------------------------------
December 31, 1994 December 31, 1993 December 31, 1992
----------------- ---------------- -----------------
(in millions) Amount Yield/b/ Amount Yield/b/ Amount Yield/b/
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. TREASURY AND OTHER
GOVERNMENT AGENCY
SECURITIES
Due in one year or less $ 203 7.56% $ 1,730 5.43% $ 856 3.36%
Due after one year through
five years 223 6.76 997 6.31 1,883 6.46
Due after five years
through ten years 1 6.29 28 7.74 35 7.45
Due after ten years 3 6.05 694 6.63 - -
------ ------ ------
430 3,449 2,774
MORTGAGE-BACKED SECURITIES
Due in one year or less - - 42 6.03 48 5.82
Due after one year through
five years - - 116 6.69 317 7.05
Due after five years
through ten years 237 7.40 488 6.92 623 6.23
Due after ten years 4,517 7.29 10,671 7.00 7,296 7.68
------ ------- ------
4,754 11,317 8,284
STATE, COUNTY, AND
MUNICIPAL
SECURITIES
Due in one year or less 60 4.99 60 6.55 63 7.39
Due after one year through
five years 140 5.16 173 7.08 191 7.77
Due after five years
through ten years 104 5.36 116 6.99 149 9.50
Due after ten years 174 5.31 167 7.82 195 10.44
------ ------- ------
478 516 598
OTHER SECURITIES
Due in one year or less 987 7.80 515 8.69 237 7.08
Due after one year through
five years 172 7.39 302 7.69 304 7.52
Due after five years
through ten years 77 8.47 157 6.47 273 7.96
Due after ten years 1,269 6.51 159 8.82 123 6.55
------ ------- -------
2,505 1,133 937
------ ------- -------
$8,167 $16,415 $12,593
====== ======= =======
</TABLE>
===============================================================================
/a/These amounts exclude equity securities, which have no contractual
maturities.
/b/Yields on tax-exempt securities have not been computed on a taxable-
equivalent basis.
BAC modified its accounting policies beginning in the third quarter of 1992 to
classify a portion of its securities portfolio as being available for sale.
Information on this modification and the securities portfolios is incorporated
by reference from page 52 of Note 1 and Note 7 on pages 60 and 61 of the 1994
Annual Report to Shareholders. Effective January 1, 1994, BAC adopted Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Additional information regarding
SFAS No. 115 is incorporated by reference from page 52 of Note 1 and Note 7 on
pages 60 and 61 of the 1994 Annual Report to Shareholders.
8
<PAGE>
================================================================================
LOAN PORTFOLIO Loan Outstandings by Type
==========================================================
Information on loan outstandings by type is incorporated
by reference from page 31 of the 1994 Annual Report to
Shareholders.
Maturity Distribution and Interest Rate Sensitivity of
Certain Types of Loans
===========================================================
<TABLE>
<CAPTION>
Remaining Maturities as of December 31, 1994
------------------------------------------------------
Due after One
Due in One Year through Due after
(in millions) Year or Less Five Years Five Years Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MATURITY DISTRIBUTION OF LOANS
Domestic commercial loans:
Secured by real estate $ 3,595 $ 3,250 $3,432 $10,277
Construction and development secured by
real estate 2,150 1,271 195 3,616
Commercial and industrial,
financial institutions,
and agricultural 21,673 10,103 1,750 33,526
Foreign loans 15,032 2,279 3,052 20,363
-----------------------------------------------------------------------------------------------------
$42,450 $16,903 $8,429 $67,782
----------------------------------------------=======================================================
LOANS DUE AFTER ONE YEAR
Predetermined interest rates $ 3,805 $2,676 $ 6,481
Floating or adjustable interest rates 13,098 5,753 18,851
-----------------------------------------------------------------------------------------------------
$16,903 $8,429 $25,332
-------------------------------------------------------------=======================================
</TABLE>
Principal repayments of loans are reported above in the
maturity category in which remaining payments are due under
the contractual terms of the loan. Certain loan agreements
provide rollover options that may extend the contractual
maturity of these loans. However, these extensions are not
reflected in the table above until such time as the option
is exercised.
9
<PAGE>
================================================================================
CROSS-BORDERS OUTSTANDINGS EXCEEDING ONE PERCENT OF
TOTAL ASSETS
========================================================================
<TABLE>
<CAPTION>
Cross-Border
Total Outstandings
(dollar amounts Public Private Cross-Border as a Percentage
in millions)/a/b/c/d/ December 31 Sector/e/ Banks/e/ Sector/e/ Outstandings of Total Assets
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Japan 1994 $ 17 $1,248 $2,292 $3,557 1.65%
1993 10 1,490 2,054 3,554 1.90
1992 6 891 1,953 2,850 1.58
Spain 1994 57 108 1,817 1,982 0.92
1993 56 105 1,941 2,102 1.12
1992 33 39 1,026 1,098 0.61
Hong Kong 1994 - 185 1,203 1,387 0.64
1993 - 110 2,181 2,291 1.23
1992 - 1,008 1,005 2,013 1.11
United Kingdom 1994 256 373 647 1,275 0.59
1993 272 177 815 1,264 0.68
1992 154 176 1,890 2,220 1.23
-------------------------------------------------------------------------------------------------------------------------
</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
that 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 that 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 BAC outside the country.
/b/ At December 31, 1994, total unfunded commitments of the
countries listed above, whose unfunded commitments
exceeded 10 percent of their respective cross-border
outstandings, were as follows: Japan, $903 million; Hong
Kong, $281 million; and the United Kingdom, $1,756
million.
/c/ Included in the cross-border outstandings of the
countries listed are loans and other interest-bearing
assets on nonaccrual status as follows: $18 million,
$16 million, and $14 million for Japan at December 31,
1994, 1993, and 1992, respectively; $3 million, $6
million, and $2 million for Spain at December 31, 1994,
1993, and 1992, respectively; $2 million and $7 million
for Hong Kong at December 31, 1994 and 1993,
respectively; and, $45 million, $52 million, and $72
million for the United Kingdom at December 31, 1994,
1993, and 1992, respectively.
/d/ No country excluded from this table had cross-border
outstandings between 0.75 percent and 1.00 percent for
any of the periods presented except $1,799 million for
South Korea at December 31, 1994.
No other 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.
However, not included in cross-border outstandings with
Mexico were par bonds issued by the government of Mexico
with a face value of $1,341 million at December 31, 1994,
1993, and 1992. The par bonds had a carrying value of
$1,109 million, $1,297 million, and $1,299 million at
December 31, 1994, 1993, and 1992, respectively. At
December 31, 1994, the par bonds had a total fair value
of approximately $765 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 $253 million at December
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
that, at maturity in 2008 and 2019, will have a
redemption value equal to the face value of the par
bonds. At December 31, 1994, this collateral had a fair
value of approximately $210 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
securities of $30 million, $45 million, and $45 million
at December 31, 1994, 1993, and 1992, which are fully
collateralized at maturity by separate zero-coupon U.S.
Treasury securities. Had these par bonds and other
instruments been included, total cross-border
outstandings with Mexico would have exceeded 0.75 percent
of total assets for all periods presented.
/e/ Sector definitions are based on Federal Financial
Institutions Examination Council Instructions for
preparing the Country Exposure Report.
Additional information on cross-border outstandings,
information on countries currently experiencing liquidity
problems, and a discussion of the risks inherent in BAC's
foreign operations are incorporated by reference from
pages 29, 33, and 34 and Note 8 on pages 61 and 62 of the
1994 Annual Report to Shareholders.
10
<PAGE>
================================================================================
Off-Balance-Sheet Credit-Related Financial Instruments
=============================================================
Information on off-balance-sheet credit-related financial
instruments is incorporated by reference from pages 71 and 72
of Note 21 of the 1994 Annual Report to Shareholders.
Nonperforming Assets
=============================================================
Information on nonperforming assests is incorporated by
reference from pages 37 through 39 of the 1994 Annual Report
to Shareholders.
Interest Income Foregone on Nonaccrual Assets
=============================================================
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
(in millions) 1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DOMESTIC
Interest income that would have been recognized had the
assets performed in accordance with their original terms $136 $208 $234
Less: Interest income included in the results of operations 51 55 74
----------------------------------------------------------------------------------------------------
Domestic interest income foregone 85 153 160
FOREIGN
Interest income that would have been recognized had the
assets performed in accordance with their original terms 18 18 55
Less: Interest income included in the results of operations 9 7 46
----------------------------------------------------------------------------------------------------
Foreign interest income foregone 9 11 9
----------------------------------------------------------------------------------------------------
$ 94 $164 $169
------------------------------------------------------------------==================================
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of certain information
related to the above data:
<S> <C> <C> <C>
DOMESTIC
Carrying values related to interest income included
in the results of operations/a/ $435 $879 $1,442
Cash interest payments used to offset principal balance 51 80 213
Carrying values related to cash interest payments used to offset
principal balances/a/ 856 1,098 1,755
FOREIGN
Carrying values related to interest income included
in the results of operations/a/ 127 71 348
Cash interest payments used to offset principal balance 9 7 185
Carrying values related to cash interest payments used to offset
principal balances/a/ 65 124 450
</TABLE>
_____________________________________________________________
/a/At period end.
Information on nonaccrual loan accounting policies and
interest income foregone on restructed loans is incorporated
by reference from page 53 of Note 1 and Notes 8 and 9 on
pages 61 and 62 of the 1994 Annual Report to Shareholders.
Other Interest-Bearing Assets on Nonaccrual Status
=============================================================
Information on other interest-bearing assets on nonaccrual
status is incorporated by reference from pages 37 and 38 of
the 1994 Annual Report to Shareholders.
11
<PAGE>
================================================================================
SUMMARY OF ANNUAL CREDIT LOSS EXPERIENCE
CREDIT LOSS ============================================================
EXPERIENCE Information on annual credit loss experience is incorporated
by reference from pages 34 through 36 of the 1994 Annual
Report to Shareholders.
ALLOWANCE FOR FOREIGN CREDIT LOSSES/a/
============================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $322 $559 $808 $1,665 $2,473
Credit losses 42 36 126 375 548
Credit loss recoveries 124 66 174 54 96
----------------------------------------------------------------------------------------------------
Net credit (losses) recoveries 82 30 48 (321) (452)
Provision for credit losses - - 3 - 262
Losses on the sale or swap of loans
to restructuring countries - (3) (72) (207) (620)
Other net additions (deductions) (13) (264)/ab/ (228)/a/ (329)/a/ 2
----------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $391 $322 $559 $ 808 $1,665
====================================================================================================
</TABLE>
/a/The allocations of the allowance for credit losses
and the provision for credit losses are used to
measure divisional profitability and are based on
management's judgment of potential losses in the
respective portfolios. This allocation process
resulted in reductions in the allowance for foreign
credit losses of $166 million, $212 million, and
$327 million in 1993, 1992, and 1991, respectively.
These reductions primarily related to Latin
America. While management has allocated reserves to
various portfolio segments for purposes of this
table, the allowance is general in nature and is
available for the portfolio in its entirety.
/b/Includes a $36 million addition related to the
consolidation of subsidiaries and operations that
were held for disposition at December 31, 1992 and
a deduction of $128 million related to the transfer
of certain assets net of their related allowance to
other assets, of which $88 million was regulatory-
related allocated transfer risk reserve.
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
================================================
Information on the allocation of the allowance for
credit losses by loan type is incorporated by
reference from page 36 of the 1994 Annual Report to
Shareholders.
_______________________________________________________________________________
DEPOSITS AVERAGE DEPOSIT BALANCES AND AVERAGE RATES
==================================================
Average deposit balances, average rates, and
average foreign deposit liabilities are shown on
pages 4 and 5 of this report.
MATURITY DISTRIBUTION OF DOMESTIC TIME DEPOSITS OF
==================================================
$100,000 OR MORE
================
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------
TIME CERTIFICATES OTHER TIME
OF DEPOSIT DEPOSITS
(in millions) OF $100,000 OR MORE OF $100,000 OR MORE
-------------------------------------------------------------------------------------------------
<S> <C> <C>
TIME REMAINING UNTIL MATURITY
Three months or less $3,479 $396
After three months through six months 1,357 47
After six months through twelve months 1,316 73
After twelve months 3,579 92
-------------------------------------------------------------------------------------------------
$9,731 $608
=================================================================================================
</TABLE>
12
<PAGE>
================================================================================
RETURN ON EQUITY The ratio of average total equity to average total assets,
AND ASSETS the rates of return on average total assets and average
common and total equity, and the dividend payout ratios for
the years ended December 31, 1994, 1993, and 1992 are
incorporated by reference from page 18 of the 1994 Annual
Report to Shareholders.
________________________________________________________________________________
<TABLE>
<CAPTION>
========================================================================================================
SHORT-TERM
BORROWINGS DECEMBER 31 AVERAGE DURING YEAR
-------------------------- --------------------------
MAXIMUM WEIGHTED WEIGHTED
OUTSTANDINGS AVERAGE AVERAGE
(DOLLAR AMOUNTS IN MILLIONS) DURING YEAR OUTSTANDINGS INTEREST RATE OUTSTANDINGS INTEREST RATE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Federal funds purchased/a/ $3,283 $3,283 5.45% $ 611 4.48%
Securities sold under repurchase
agreements/a/ 8,026 5,505 5.90 6,455 5.44
Other short-term borrowings 5,796 5,053 6.58 4,231 6.50
--------------------------------------------------------------------------------------------------------
1993
Federal funds purchased/a/ $1,763 $ 220 2.84% $ 570 2.78%
Securities sold under repurchase
agreements/a/ 4,361 4,229 4.95 2,837 5.58
Other short-term borrowings 3,581 3,523 6.66 3,088 6.52
--------------------------------------------------------------------------------------------------------
1992
Federal funds purchased/a/ $1,469 $ 417 2.57% $ 626 3.24%
Securities sold under repurchase
agreements/a/ 2,542 926 6.28 2,015 5.35
Other short-term borrowings 7,128 2,092 6.81 3,913 6.90
========================================================================================================
</TABLE>
/a/ Federal funds purchased and securities sold under
repurchase agreements mature either overnight or weekly.
________________________________________________________________________________
COMPETITION BAC, both in the United States and internationally, operates
in intensely competitive environments. Domestically, BAC
competes with other banks, financial institutions, and
nonbanking institutions, such as finance companies,
insurance companies, brokerage firms, and investment banking
firms, throughout the United States. In recent years,
competition has also developed from predominantly non-
finance companies that offer credit card and other consumer
finance services. Competition for deposit and loan products
is strong, from both banking and nonbanking firms, and
affects the rates of those products as well as the terms on
which they are offered to customers. Internationally, BAC
primarily competes with major foreign banks, domestic banks
with international operations, and other financial
institutions. Both domestically and internationally, BAC
strives to maintain and improve its competitive position by
providing high quality service and a wide array of products
at competitive prices.
The competitive environment within the United States is
largely defined by federal and state legislation. Banking
laws have had a substantial impact on the structure and
competitive dynamics of financial services markets in the
United States since, among other things, they limit the
types of financial services that a bank can offer and the
geographic boundaries within which it can operate. In
addition, banking laws impact the competitive environment in
domestic markets by subjecting foreign banks to essentially
the same requirements as domestic banks with regard to
branching, reserve requirements, and other regulations.
13
<PAGE>
================================================================================
Technological innovation has also led to greater competition
in domestic and international financial services markets.
Since the advent of automated transfer payment systems,
competition between depository and nondepository
institutions has increased. In addition, retail customers
now expect a choice of several delivery systems and
channels, including telephone, mail, home computers, ATMs,
self-service branches, and supermarket branches. The sources
of competition include savings and loan associations, credit
unions, brokerage firms, money market mutual funds, asset
management groups, finance and insurance companies, mortgage
banking firms, and telecommunications providers. In
addition, both foreign and domestic banks have developed
greater international network capabilities as national
economies have become globally integrated.
The actions and policy directives of the Federal Reserve
Board (FRB) determine, to a significant degree, the cost of
funds obtained from money market sources for lending and
investing. The FRB also exerts substantial influence on
interest rates and credit conditions by varying the discount
rate on member bank borrowings and setting reserve
requirements against deposits.
Legislative changes, along with technological and economic
factors, can be expected to have an ongoing impact on the
competitive environment within the financial services
industry. As a major and active participant in financial
markets, BAC strives to anticipate and adapt to these
changing competitive conditions, but there can be no
assurance as to their impact on the future results of
operations or financial position of BAC.
________________________________________________________________________________
SUPERVISION The Parent and Seafirst are primarily regulated by the Board
AND REGULATION of Governors of the Federal Reserve System. The Bank,
Seattle-First, and the other national-bank subsidiaries of
the Parent are primarily regulated by the Office of the
Comptroller of the Currency (OCC). The state-chartered bank
subsidiaries of the Parent are primarily regulated by the
Federal Deposit Insurance Corporation (FDIC) and state
banking regulators, except for Bank of America Nevada and
Bank of America Illinois, which are primarily regulated by
the FRB and state banking regulators. FSB is subject to the
regulatory authority of the Office of Thrift Supervision
(OTS) and the FRB. In addition, all domestic depository-
institution subsidiaries of the Parent are insured
institutions, and therefore, subject to the authority of the
FDIC.
In 1989, Congress passed the Financial Institution Reform,
Recovery, and Enforcement Act of 1989 (FIRREA). FIRREA
established new regulations to improve regulatory control
over savings and loan institutions by reorganizing
regulatory authority, raising capital requirements and
standards for both banks and savings and loan institutions,
granting additional authority and responsibility to the
FDIC, and expanding the civil enforcement powers of industry
regulators. In addition, FIRREA altered banking regulations
to allow banks and bank holding companies to acquire and
operate savings and loan institutions, even in states where
such banks and bank holding companies had not been operating
previously. FIRREA also created the Resolution Trust
Corporation (RTC) and provided for funding to enable the RTC
to resolve troubled savings and loan institutions. During
1991 and 1992, the Parent, through its subsidiaries, assumed
certain liabilities and acquired selected assets of six
financial institutions in four western states from the RTC.
The primary emphasis of the capital standards required by
FIRREA is to ensure that financial institutions have
sufficient capital to support the risk levels of their
assets and off-balance-sheet commitments. The risk-based
capital ratios and the leverage ratio, as required by
FIRREA, each provide a means to measure financial
institutions' compliance with capital standards.
14
<PAGE>
================================================================================
FIRREA contains a "cross-guarantee" provision that could
result in any insured depository institution owned by the
Parent (i.e., any bank subsidiary) being assessed for losses
incurred by the FDIC in connection with assistance provided
to, or the failure of, any other depository institution
owned by the Parent. Under FRB policy, the Parent is
expected to act as a source of financial strength and to
commit resources to support each subsidiary bank. As a
result of such policy and the legislation described below,
the Parent may be required to commit resources to its
subsidiary banks in circumstances where it might not do so
absent such policy.
During 1991, the United States Congress passed the Federal
Deposit Insurance Corporation Improvement Act of 1991
(FDICIA), which focused primarily on recapitalizing the Bank
Insurance Fund (BIF) and tightening the supervision of banks
and thrifts. FDICIA modifies certain provisions of the
Federal Deposit Insurance Act and makes revisions to several
other banking statutes. FDICIA also requires bank regulators
to set forth numerous new regulations, most of which have
been finalized.
Among other things, FDICIA provides increased funding for
the BIF, primarily by increasing the authority of the FDIC
to borrow from the U.S. Treasury Department, and provides
for expanded regulation of depository institutions and their
affiliates, including bank holding companies. The FDIC has
not yet needed to borrow funds from the U.S Treasury
Department. However, any future borrowings would be repaid
by insurance premiums assessed by the FDIC on BIF members,
including the Parent's banking subsidiaries. In addition,
FDICIA generally mandates that the FDIC achieve a ratio of
BIF reserves to insured deposits of banks of 1.25% by 2006,
which is also to be financed by insurance premiums. The FDIC
expects to achieve this ratio during 1995. The FDIC has also
proposed a significant reduction in insurance premiums for
BIF members to take effect when the ratio of BIF reserves to
insured deposits of BIF members reaches 1.25%, but there can
be no assurance that a reduction will occur until final
regulatory action is taken. FDICIA also provides authority
for special assessments against deposits of all BIF members.
In response to the passage of FDICIA, the FDIC implemented a
regulation to modify deposit insurance premiums beginning in
1993. Under this regulation, the amount of FDIC assessments
paid by individual insured depository institutions is based
on their relative risk as measured by regulatory capital
ratios and certain other factors. Under this new system, in
establishing the insurance premium assessment for each bank,
the FDIC takes into consideration the probability the BIF
will incur a loss with respect to that bank, and charges a
bank with perceived higher inherent risks a higher insurance
premium. The FDIC also considers the different categories
and concentrations of assets and liabilities of the
institution, the likely amount of any such loss, the revenue
needs of the BIF, and any other factors the FDIC deems
relevant. Although the FDIC may establish separate risk-
based assessment systems for large and small members of the
BIF, it has not yet done so. Regardless of the potential
risk to the BIF, FDICIA prohibits assessment rates from
falling below the assessment rate of 23 cents per $100 of
eligible deposits if the FDIC has outstanding borrowings
from the U.S. Treasury Department, or the 1.25% designated
reserve ratio has not been met.
It is BAC's policy to maintain the risk-based capital ratios
of its banking subsidiaries above the "well capitalized"
level, which allows it to avoid certain additional
regulatory requirements that may be imposed under FDICIA in
certain cases. If a bank does not meet any one of the
minimum capital requirements set by its regulators, FDICIA
requires that it submit a capital restoration plan for
improving its capital. A holding company of a bank must
guarantee that the bank will meet its capital restoration
plan, subject to certain limitations. If such a guarantee
were deemed to be a commitment to maintain capital under the
Federal Bankruptcy
15
<PAGE>
================================================================================
Code, a claim under such guarantee in a bankruptcy
proceeding involving the holding company would be entitled
to a priority over third-party creditors of the holding
company. In addition, FDICIA prohibits a bank from making a
capital distribution to its holding company or otherwise if
it fails to meet any capital requirements and from paying
interest on subordinated debt after the bank becomes
"critically undercapitalized" as that term is defined by the
appropriate federal banking agency.
Furthermore, under certain circumstances, a holding company
of a bank that fails to meet certain of its capital
requirements may be prohibited from making capital
distributions. FDICIA also restricts the acceptance of
brokered deposits by insured depository institutions that
are not well capitalized and contains a number of consumer
banking provisions, including disclosure requirements and
substantive contractual limitations with respect to deposit
accounts.
Information related to the final capital regulations issued
by the FRB on the adoption of Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes"
and the 1993 pending regulatory proposal to incorporate
interest rate risk into the risk-based capital framework is
incorporated by reference from page 45 of the 1994 Annual
Report to Shareholders.
The amount of funds available to the Parent from its
subsidiaries is limited by federal and state law. The U.S.
National Bank Act and other federal laws prohibit the
payment of dividends by a national bank under certain
circumstances, and limit the amount a national bank can pay
without prior approval of the OCC. In addition, state-
chartered banking subsidiaries are subject to dividend
limitations imposed by applicable state laws. FSB is subject
to regulatory restrictions by the OTS on its payment of
dividends. Furthermore, the Federal Reserve Act restricts
the amount of loans that bank subsidiaries may extend to
their parent and sets out specific lending terms that must
be followed by the subsidiary and parent in such
transactions. Specific information related to restrictions
on funds available to the Parent is incorporated by
reference from Note 24 on pages 80 through 82 of the 1994
Annual Report to Shareholders.
The banking and financial services businesses in which BAC
engages are highly regulated. The laws and regulations
affecting such businesses are constantly under review by
Congress, regulatory agencies, and state legislatures, and
may be changed dramatically in the future. Such changes
could affect the ability of bank holding companies to engage
in nationwide banking and in nonbanking businesses, such as
securities underwriting and insurance, in which they have
been allowed to engage only on a limited basis.
With the enactment of the Riegle-Neal Interstate Banking and
Branching and Efficiency Act of 1994, banks will be allowed
to create interstate branching networks beginning June 1,
1997 in states that do not opt out of the interstate
legislation. Interstate branching networks may be created
earlier in states that specifically permit interstate
branching prior to June 1, 1997. The enactment of this bill
will enable BAC to consolidate its branching operations if
it so chooses, thereby potentially reducing operating
expenses and enhancing customer service. In addition, there
is currently congressional support for the reform of the
Glass-Steagall Act, which could cause a significant change
in the makeup of the financial services industry.
16
<PAGE>
================================================================================
Changes to banking laws and regulations may also affect the
amount of capital that banks and bank holding companies are
required to maintain, the premiums paid for or the
availability of deposit insurance, or other matters directly
affecting earnings. It is not certain what changes will
occur, if any, or the effect of such changes on the
profitability of BAC, its ability to compete effectively, or
its ability to take advantage of new opportunities.
Because BAC is not involved with the manufacture or
transport of chemicals or toxins that might have an adverse
effect on the environment, its primary exposure to
environmental legislation is through its lending and trust
activities. BAC's lending and trust procedures include steps
designed to identify and monitor this exposure to avoid any
significant loss or liability related to environmental
regulations.
________________________________________________________________________________
EMPLOYEES In December 1994, the actual number of persons employed by
BAC was 98,556. On a full-time-equivalent basis, BAC's staff
level was 82,065 at December 31, 1994.
ITEM 3. LEGAL PROCEEDINGS
________________________________________________________________________________
Due to the nature of its business, BAC is subject to various
threatened or filed legal actions. Although the amount of
the ultimate exposure, if any, cannot be determined at this
time, BAC, based upon the advice of counsel, does not expect
the final outcome of threatened or filed suits to have a
material adverse effect on its financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
________________________________________________________________________________
None.
17
<PAGE>
PART II
================================================================================
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
________________________________________________________________________________
Information on dividend restrictions, dividend payments, the
principal market for and trading price of the Parent's
common stock, and the number of holders of such stock is
incorporated by reference from pages 18, 19, and 44, Note 24
on pages 80 through 82, and Note 26 on page 84 of the 1994
Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
________________________________________________________________________________
Selected financial data is incorporated by reference from
pages 18 and 19 of the 1994 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
________________________________________________________________________________
Management's Discussion and Analysis of Financial Condition
and Results of Operations is incorporated by reference from
pages 18 through 45 of the 1994 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
________________________________________________________________________________
The Report of Independent Auditors and the consolidated
financial statements of BAC are incorporated by reference
from pages 47 through 84 of the 1994 Annual Report to
Shareholders. See Item 14 of this report for information
concerning financial statements and schedules filed with
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
________________________________________________________________________________
None.
18
<PAGE>
PART III
================================================================================
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
________________________________________________________________________________
Reference is made to the text under the captions, "Executive
Compensation, Benefits and Related Matters" (excluding the
material under the headings "Report of Executive Personnel
and Compensation Committee" and "Shareholder Return
Performance Graph" therein) and "Item No. 1--Election of
Directors" in the Proxy Statement for the May 25, 1995
Annual Meeting of Shareholders of the Parent for
incorporation of information concerning directors and
persons nominated to become directors. Information
concerning executive officers of the Parent as of March 1,
1995 is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH REGISTRANT
<S> <C> <C>
Richard M. Rosenberg 64 Chairman, Chief Executive Officer,
and President
Lewis W. Coleman 53 Vice Chairman of the Board and Chief
Financial Officer
Kathleen J. Burke 43 Vice Chairman and Personnel Relations Officer
David A. Coulter 47 Vice Chairman
Luke S. Helms 51 Vice Chairman
Jack L. Meyers 52 Vice Chairman
Thomas E. Peterson 59 Vice Chairman
Michael E. Rossi 50 Vice Chairman
Martin A. Stein 54 Vice Chairman
</TABLE>
RICHARD M. ROSENBERG was appointed Chairman and Chief
Executive Officer of the Parent and the Bank on May 24,
1990, in addition to his title as President. He was
appointed President of the Parent and the Bank on February
5, 1990. On April 22, 1992, Mr. Rosenberg relinquished his
title as President, but was reappointed President on October
5, 1992. Previously, Mr. Rosenberg was Vice Chairman of the
Board of the Parent and the Bank from 1987 to 1990.
LEWIS W. COLEMAN was appointed Chief Financial Officer of
the Parent and the Bank on February 1, 1993, in addition to
his title of Vice Chairman of the Board. He was appointed
Vice Chairman of the Board of the Parent and the Bank on
February 5, 1990. Previously, he was Vice Chairman of the
Parent and the Bank from 1988 to 1990.
KATHLEEN J. BURKE was appointed Vice Chairman of the Parent
and the Bank on March 14, 1994, in addition to her title as
Public Relations Officer of the Parent. She was appointed
Executive Vice President and Personnel Relations Officer of
the Parent and Executive Vice President of the Bank on April
22, 1992 and Group Executive Vice President of the Bank on
April 27, 1992. From 1989 to 1992, Ms. Burke served as an
Executive Vice President of SPC and SPNB. She also served as
Executive Vice President and Secretary of SPC and its
principal subsidiary, Security Pacific National Bank.
19
<PAGE>
================================================================================
DAVID A. COULTER was appointed Vice Chairman of the Parent
and the Bank on February 1, 1993. Previously, he was Group
Executive Vice President of the Bank and head of the Bank's
U.S. Division from 1992 to February 1993. From 1990 to 1992,
he was Executive Vice President of the Bank and head of the
Bank's U.S. Division. From 1989 to 1990, he was Executive
Vice President and head of the Bank's Capital Markets
Division.
LUKE S. HELMS was appointed Vice Chairman of the Parent and
the Bank on August 2, 1993. Previously, he was Chairman and
Chief Executive Officer of Seafirst and Seattle-First. He
was appointed President of Seafirst and Seattle-First in
1987.
JACK L. MEYERS was appointed Vice Chairman of
the Parent and the Bank on October 4, 1993. He was appointed
Chief Credit Officer of the Bank on September 3, 1993. He
was Group Executive Vice President responsible for the
Bank's Commercial Business Group from 1991 to 1993. He was
named head of the Commercial Banking Division in September
1990. He was Executive Vice President of the California
Commercial Banking Group from 1989 to 1990.
THOMAS E. PETERSON was appointed Vice Chairman of the Parent
and the Bank on February 5, 1990. Previously, he was
appointed Executive Vice President of the Bank and head of
the Retail Banking Division in 1987.
MICHAEL E. ROSSI was appointed Vice Chairman of the Parent
and the Bank on October 7, 1991. He was appointed Executive
Vice President of the Parent on December 3, 1990, when he
was also designated to be the head of Credit Policy for the
Bank. He was Executive Vice President of the Commercial
Banking Division-Commercial Markets Group of the Bank from
1988 to 1990.
MARTIN A. STEIN was appointed Vice Chairman of the Parent
and the Bank on April 27, 1992. He was appointed Executive
Vice President of the Parent and the Bank on June 25, 1990.
At the same time, he was appointed head of the BankAmerica
Systems Engineering Group of the Bank. Prior to joining the
Bank, he was Executive Vice President, Director of National
Operations, and Chief Information Officer for PaineWebber,
Inc., a securities brokerage and investment banking firm,
from 1985 to 1990.
The present term of office for the officers named
above will expire on May 25, 1995 or on their earlier
retirement, resignation, or removal. There is no family
relationship between any such officers.
20
<PAGE>
================================================================================
ITEM 11. EXECUTIVE COMPENSATION
________________________________________________________________________________
Information concerning executive compensation is
incorporated by reference from the text under the captions,
"Corporate Governance-Director Remuneration, Retirement
Policy and Attendance" and "Executive Compensation, Benefits
and Related Matters" (excluding the material under the
headings "Report of the Executive Personnel and Compensation
Committee" and "Shareholder Return Performance Graph"
therein) in the Proxy Statement for the May 25, 1995 Annual
Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
________________________________________________________________________________
Information concerning ownership of equity stock of the
Parent by certain beneficial owners and management is
incorporated by reference from the text under the caption,
"Security Ownership of Certain Beneficial Owners" in the
Proxy Statement for the May 25, 1995 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
________________________________________________________________________________
Information concerning certain relationships and related
transactions with officers and directors is incorporated by
reference from the text under the caption, "Executive
Compensation, Benefits and Related Matters" (excluding the
material under the headings "Report of the Executive
Personnel and Compensation Committee" and "Shareholder
Return Performance Graph" therein) in the Proxy Statement
for the May 25, 1995 Annual Meeting of Shareholders.
21
<PAGE>
PART IV
================================================================================
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
________________________________________________________________________________
(A)(1) FINANCIAL The report of independent auditors and the following
STATEMENTS consolidated financial statements of BAC are incorporated
herein by reference from the 1994 Annual Report to
Shareholders; page number references are to the 1994 Annual
Report to Shareholders.
<TABLE>
<CAPTION>
Page
BankAmerica Corporation:
<S> <C>
Report of Independent Auditors................................................................... 47
Consolidated Statement of Operations--
Years Ended December 31, 1994, 1993, and 1992.................................................. 48
Consolidated Balance Sheet--December 31, 1994 and 1993........................................... 49
Consolidated Statement of Cash Flows--Years Ended December 31, 1994,
1993, and 1992................................................................................. 50
Consolidated Statement of Changes in Stockholders' Equity--
Years Ended December 31, 1994, 1993, and 1992.................................................. 51
Notes to Consolidated Financial Statements....................................................... 52
</TABLE>
_____________________________________________________________________________
(A)(2) FINANCIAL Schedules to the consolidated financial statements
STATEMENT (Nos. I and II of Rule 9-07) for which provision is made
SCHEDULES in the applicable accounting regulation of the Securities
and Exchange Commission (Regulation S-X) are inapplicable
and therefore, are not included.
Financial statements and summarized financial information of
unconsolidated subsidiaries or 50% or less owned persons
accounted for by the equity method are not included as such
subsidiaries do not, either individually or in the
aggregate, constitute a significant subsidiary.
_____________________________________________________________________________
(A)(3) EXHIBITS
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
-----------------------------------
Report on Form
----------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
3.a. BankAmerica Corporation Certificate of
Incorporation, as amended. Exhibit 3(a) for the
Parent's Form 8-A Amendment No. 1, filed August 25,
1994 (File No. 33-55225) incorporated herein by reference.
3.b. BankAmerica Corporation By-laws, as amended.
Exhibit 3(b) for the Parent's Form S-4 Registration
Statement, filed January 12, 1994
(File No. 33-51333) incorporated herein by reference.
</TABLE>
22
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
-------------------------------------
Report on Form
---------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
4.a. The Parent and certain of its consolidated
subsidiaries have outstanding certain long-term
debt. See Notes 13 and 14 on pages 63 and 64 of the
1994 Annual Report to Shareholders. None of such
debt exceeds 10% of the total assets of BAC;
therefore, copies of constituent instruments
defining the rights of holders of such debt are not
included as exhibits. The Parent agrees to furnish
copies of such instruments to the Securities and
Exchange Commission upon request.
4.b. Rights Agreement dated as of April 11, 1988, X
between the Parent and Manufacturers Hanover Trust
Company of California, as Rights Agent, as amended.
10.a. BankAmerica Corporation Retirement Plan for 12/31/91 10(j)
Nonofficer Directors./a/ 9/30/94 10
10.b. BankAmerica Corporation Deferred Compensation 12/31/92 10(b)
Plan for Directors./a/ 3/31/93 10
10.c. BankAmerica Corporation Deferred Compensation 12/31/93 10(c)
Plan./a/
10.d. BankAmerica Corporation Senior Management 12/31/93 10(d)
Incentive Plan (formerly the "Annual Management
Incentive Plan")./a/
10.e. Supplemental CareerAccounts Plan./a/ 3/31/92 10(a)
10.f. BankAmerica Corporation Executive Compensation X
Program - Benefits/Perquisites Summary./a/
10.g. BankAmerica Corporation 1987 Management Stock 12/31/91 10(f)
Plan./a/
10.h. Management Incentive Stock Plan./a/ 12/31/91 10(g)
10.i. 1992 Management Stock Plan; amendment X 12/31/91 10(h)
filed herewith./a/
10.j. BankAmerica Corporation 1991 Stock Appreciation 6/30/92 10(a)
Rights Plan./a/
10.k. Employment agreement dated April 30, 1987 12/31/92 10(k)
between R.M. Rosenberg and the Parent and the
Bank, and Supplemental Benefits Agreement dated
as of November 21, 1985 between R.M. Rosenberg
and Seafirst and Seattle-First./a/
10.l. Security Pacific Corporation Stock-Based Incentive 3/31/92 10(e)
Award Plan./a/
10.m. Security Pacific Corporation Stock Option Plan./a/ 3/31/92 10(f)
</TABLE>
____________________________________________________
/a/Management contract or compensatory plan, contract, or
arrangement.
23
<PAGE>
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
------------------------------------
Report on Form
------------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
11. Computation of Earnings Per Common Share. X
12.a. Ratios of Earnings to Fixed Charges and Ratios of X
Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
12.b. Historical and Pro Forma Combined Ratios of X
Earnings to Fixed Charges and Ratios of Earnings
to Combined Fixed Charges and Preferred Stock
Dividends.
13. 1994 Annual Report to Shareholders. Portions not X
incorporated by reference are furnished for
informational purposes and are not filed herewith.
21. BankAmerica Corporation Subsidiaries. X
23. Consent of Ernst & Young LLP. X
24. Powers of Attorney. X
27. Financial Data Schedule. X
</TABLE>
_______________________________________________________________________________
(B)REPORTS ON During the fourth quarter of 1994, the Parent filed a
FORM 8-K report on Form 8-K dated October 19, 1994. The October 19,
1994 report filed, pursuant to Items 5 and 7 of the report,
a copy of the Parent's press release titled "BankAmerica
Third Quarter Earnings." After the fourth quarter of 1994,
the Parent filed reports on Form 8-K dated January 6, 1995,
January 18, 1995, January 23, 1995, and February 6, 1995.
The January 6, 1995 report filed, pursuant to Items 5 and 7
of the report, a copy of the joint press release from the
Parent and Arbor National Holdings, Inc. titled "Arbor
National Holdings/BankAmerica Merger -- Regulatory
Approvals." The January 18, 1995 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 23, 1995 report filed, pursuant to Items 5 and 7 of
the report, a tax opinion and related consent in connection
with offerings of the Parent's debt securities relating to
the shelf registration for such debt securities. The
February 6, 1995 report filed, pursuant to Items 5 and 7 of
the report, a copy of the Parent's press release titled
"BankAmerica Board Increases Common Stock Dividend and
Approves Stock Repurchase Program."
24
<PAGE>
SIGNATURES
================================================================================
Pursuant to the requirements of Section 13 or 15(d) 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.
March 17, 1995 BANKAMERICA CORPORATION
By /s/ JAMES H. WILLIAMS
-------------------------
(James H. Williams,
Executive Vice President
and Chief Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
Principal Executive Officer
and Director:
/s/ RICHARD M. ROSENBERG Chairman and Chief Executive
----------------------------- Officer
(Richard M. Rosenberg)
Principal Financial Officer
and Director:
/s/ LEWIS W. COLEMAN Vice Chairman of the Board and
----------------------------- Chief Financial Officer
(Lewis W. Coleman)
Principal Accounting Officer:
/s/ JAMES H. WILLIAMS Executive Vice President
----------------------------- and Chief Accounting Officer
(James H. Williams)
Directors:
</TABLE>
<TABLE>
<S> <C> <C> <C>
JOSEPH F. ALIBRANDI* Director PHILIP M. HAWLEY* Director
JILL E. BARAD* Director FRANK L. HOPE, JR.* Director
PETER B. BEDFORD* Director IGNACIO E. LOZANO, JR.* Director
ANDREW F. BRIMMER* Director CORNELL C. MAIER* Director
RICHARD A. CLARKE* Director WALTER E. MASSEY* Director
TIMM F. CRULL* Director JOHN M. RICHMAN* Director
KATHLEEN FELDSTEIN* Director A. MICHAEL SPENCE* Director
DONALD E. GUINN* Director
</TABLE>
A majority of the members of the Board of Directors.
*By /s/ CHERYL SOROKIN
------------------------------------------
(Cheryl Sorokin, Attorney-in-Fact)
Dated: March 17, 1995
25
<PAGE>
Other information about
BankAmerica Corporation may
be found in its quarterly Analytical
Review and Form 10-Q and its
Annual Report to Shareholders.
These reports, as well as additional
copies of this Form 10-K, may be
obtained from:
Corporate Public Relations #3124
Bank of America
P.O. Box 37000
San Francisco, CA 94137
================================================================================
[BANKAMERICA CORPORATION LOGO APPEARS HERE]
BANKAMERICA
________________________________________________________________________________
NL-9 2-95 [RECYCLED PAPER LOGO APPEARS HERE] RECYCLED PAPER
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
-----------------------------------
Report on Form
----------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
3.a. BankAmerica Corporation Certificate of
Incorporation, as amended. Exhibit 3(a) for the
Parent's Form 8-A Amendment No. 1, filed August 25,
1994 (File No. 33-55225) incorporated
herein by reference.
3.b. BankAmerica Corporation By-laws, as amended.
Exhibit 3(b) for the Parent's Form S-4 Registration
Statement, filed January 12, 1994
(File No. 33-51333) incorporated herein by
reference.
4.a. The Parent and certain of its consolidated
subsidiaries have outstanding certain long-term
debt. See Notes 13 and 14 on pages 63 and 64 of the
1994 Annual Report to Shareholders. None of such
debt exceeds 10% of the total assets of BAC;
therefore, copies of constituent instruments
defining the rights of holders of such debt are not
included as exhibits. The Parent agrees to furnish
copies of such instruments to the Securities and
Exchange Commission upon request.
4.b. Rights Agreement dated as of April 11, 1988, X
between the Parent and Manufacturers Hanover Trust
Company of California, as Rights Agent, as amended.
10.a. BankAmerica Corporation Retirement Plan for 12/31/91 10(j)
Nonofficer Directors./a/ 9/30/94 10
10.b. BankAmerica Corporation Deferred Compensation 12/31/92 10(b)
Plan for Directors./a/ 3/31/93 10
10.c. BankAmerica Corporation Deferred Compensation 12/31/93 10(c)
Plan./a/
10.d. BankAmerica Corporation Senior Management 12/31/93 10(d)
Incentive Plan (formerly the "Annual Management
Incentive Plan")./a/
10.e. Supplemental CareerAccounts Plan./a/ 3/31/92 10(a)
10.f. BankAmerica Corporation Executive Compensation X
Program - Benefits/Perquisites Summary./a/
10.g. BankAmerica Corporation 1987 Management Stock 12/31/91 10(f)
Plan./a/
10.h. Management Incentive Stock Plan./a/ 12/31/91 10(g)
10.i. 1992 Management Stock Plan; amendment X 12/31/91 10(h)
filed herewith./a/
10.j. BankAmerica Corporation 1991 Stock Appreciation 6/30/92 10(a)
Rights Plan./a/
10.k. Employment agreement dated April 30, 1987 12/31/92 10(k)
between R.M. Rosenberg and the Parent and the
Bank, and Supplemental Benefits Agreement dated
as of November 21, 1985 between R.M. Rosenberg
and Seafirst and Seattle-First./a/
10.l. Security Pacific Corporation Stock-Based Incentive 3/31/92 10(e)
Award Plan./a/
10.m. Security Pacific Corporation Stock Option Plan./a/ 3/31/92 10(f)
_______________________________________________________
/a/Management contract or compensatory plan, contract, or
arrangement.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
-----------------------------------
Report on Form
----------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
11. Computation of Earnings Per Common Share. X
12.a. Ratios of Earnings to Fixed Charges and Ratios of X
Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
12.b. Historical and Pro Forma Combined Ratios of X
Earnings to Fixed Charges and Ratios of Earnings
to Combined Fixed Charges and Preferred Stock
Dividends.
13. 1994 Annual Report to Shareholders. Portions not X
incorporated by reference are furnished for
informational purposes and are not filed herewith.
21. BankAmerica Corporation Subsidiaries. X
23. Consent of Ernst & Young LLP. X
24. Powers of Attorney. X
27. Financial Data Schedule. X
</TABLE>
<PAGE>
Exhibit 4.b
================================================================================
BANKAMERICA CORPORATION
and
MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA
Rights Agent
Rights Agreement
Dated as of April 11, 1988
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
<TABLE>
<S> <C> <C>
Section 1. Certain Definitions............................... 1
Section 2. Appointment of Rights Agent....................... 9
Section 3. Issue of Right Certificates....................... 9
Section 4. Form of Right Certificates........................ 12
Section 5. Countersignature and Registration................. 13
Section 6. Transfer, Split Up, Combination and Exchange of
Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates......................... 14
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.................................... 16
Section 8. Cancellation and Destruction of Right
Certificates...................................... 19
Section 9. Availability of Preferred Shares.................. 19
Section 10. Preferred Shares Record Date...................... 20
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights.................................. 21
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares......................................... 36
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power........................... 36
Section 14. Fractional Rights and Fractional Shares........... 38
Section 15. Rights of Action.................................. 41
Section 16. Agreement of Right Holders........................ 42
Section 17. Right Certificate Holder Not Deemed a
Stockholder....................................... 42
Section 18. Concerning the Rights Agent....................... 43
Section 19. Merger or Consolidation or Change of Name of
Rights Agent...................................... 44
Section 20. Duties of Rights Agent............................ 46
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 21. Change of Rights Agent............................ 49
Section 22. Issuance of New Right Certificates................ 51
Section 23. Redemption........................................ 52
Section 24. Exchange.......................................... 56
Section 25. Notice of Certain Events.......................... 59
Section 26. Notices........................................... 61
Section 27. Supplements and Amendments........................ 62
Section 28. Successors........................................ 63
Section 29. Benefits of this Agreement........................ 63
Section 30. Severability...................................... 63
Section 31. Governing Law..................................... 63
Section 32. Counterparts...................................... 64
Section 33. Descriptive Headings.............................. 64
Signatures .........................................................
Exhibit A - Form of Certificate of Designation of
Cumulative Participating Preferred Stock,
Series E, of BankAmerica Corporation
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares
</TABLE>
ii
<PAGE>
RIGHTS AGREEMENT
----------------
Agreement, dated as of April 11, 1988, between BankAmerica
Corporation, a Delaware corporation (the "Company"), and Manufacturers Hanover
Trust Company of California (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as herein after defined) of the Company outstanding on April 22, 1988 (the
"Record Date"), each Right representing the right to purchase one one-hundredth
of a Preferred Share (as herein after defined), upon the terms and subject to
the conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
1
<PAGE>
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 20% or more
of the Common Shares of the Company then outstanding, but shall not include
the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares of the Company for or pursuant
to the terms of any such plan. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person" as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially
owned by such Person to 20% or more of the Common Shares of the Company
then outstanding; provided, however, that if a Person shall become the
-------- -------
Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after
such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed
to be an "Acquiring Person".
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities
2
<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however,
-------- -------
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote, whether pursuant
to
3
<PAGE>
any agreement, arrangement or understanding or otherwise; provided,
--------
however, that a Person shall not be deemed the Beneficial Owner of, or
-------
to beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial
4
<PAGE>
Ownership of securities of the Company, shall mean the number of such securities
then issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of California
or the State of New York are authorized or obligated by law or executive
order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M., San
Francisco time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., San Francisco time, on the next
succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $1.5625 per share, of the
Company. "Common Shares" when used with reference to any Person other than
the Company shall mean the class of capital stock (or equity interest) with
the greatest voting power in an election of directors or similar governing
body of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such first-
mentioned Person.
5
<PAGE>
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(i) An "Offer" shall mean a written proposal delivered to the Company
by any Person (an "Offeror") who both beneficially owns 1% or less of the
outstanding Common Shares as of the date such proposal is delivered and has
not within one year prior to the delivery of such written proposal
beneficially owned in excess of 1% of the then-outstanding Common Shares of
the Company and (at a time when such Person beneficially owned such greater
than 1% stake) disclosed, or caused the disclosure of, any intention which
relates to or would result in the acquisition, or influence of control, of
the Company, and which proposal:
(i) provides for the acquisition of all of the outstanding
shares of Voting Stock (as hereinafter defined) held by any Person
other than the Offeror and its Affiliates and Associates for cash at
the same price;
(ii) is accompanied by a written opinion of a nationally
recognized investment banking firm which is addressed to the holders
of shares of Voting Stock
6
<PAGE>
other than the Offeror and its Affiliates and Associates and states
that the price to be paid to such holders pursuant to the Offer is
fair to such holders;
(iii) states that the Offeror has obtained written financing
commitments from recognized financing sources, and/or has on hand cash
or cash equivalents, for the full amount of all financing necessary to
consummate the Offer; and
(iv) requests the Company to call a special meeting of the
holders of Voting Stock for the purpose of voting on a resolution
requesting the Board of Directors to accept such Offer and contains a
written agreement of the Offeror to pay (or share with any other
Offeror) at least one-half of the Company's costs of such special
meeting (exclusive of the Company's costs of preparing and mailing
proxy material for its own solicitation).
(j) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(k) "Preferred Shares" shall mean shares of Series E Cumulative
Participating Preferred Stock, without par value, of the Company having the
rights and preferences set forth
7
<PAGE>
in the form of Certificate of Designations attached to this Agreement as
Exhibit A.
(l) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(m) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person
has become such.
(n) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
(o) "Voting Stock" shall mean (i) the Common Shares of the Company and
(ii) any other shares of capital stock of the Company entitled to vote
generally in the election of directors or entitled to vote together with
the Common Shares in respect of any merger, consolidation, sale of all or
substantially all of the Company's assets, liquidation, dissolution or
winding up. Whenever any provision of this Agreement requires a
determination of whether a number of shares of Voting Stock comprising a
specified percentage of such Voting Stock has been voted, tendered,
acquired, sold or other wise disposed of, or a determination of whether a
Person has offered or proposed to acquire a number of shares
8
<PAGE>
of Voting Stock comprising such specified percentage, the number of shares
of Voting Stock comprising such specified percentage of Voting Stock shall
in every such case be deemed to be the number of shares of Voting Stock
comprising the specified percentage of the Company's entire voting power
then entitled to vote generally in the election of directors or then
entitled to vote together with the Common Shares in respect of any merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation, dissolution or winding up.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
---------------------------
the tenth day after the Shares Acquisition Date or (ii) the tenth business day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any Person holding Common Shares for or pursuant to the terms of any
such plan) of,
9
<PAGE>
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any Person holding Common Shares
for or pursuant to the terms of any such plan) to commence, a tender or exchange
offer the consummation of which would result in any Person becoming the
Beneficial Owner of Common Shares of the Company aggregating 20% or more of the
then outstanding Common Shares of the Company (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
give the Rights Agent written notice thereof and will prepare and execute, the
Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certif-
10
<PAGE>
icate"), evidencing one Right for each Common Share so held. As of and after
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-
class, postage-prepaid mail, to each record holder of Common Shares as of the
close of business on the Record Date, at the address of such holder shown on the
records of the Company. With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution Date the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(c) The Company will cause certificates for Common Shares which become
outstanding (including, without limitation, reacquired Common Shares referred to
in the last sentence of this paragraph (c)) after the Record Date but prior to
the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date to have impressed on, printed on, written on or
11
<PAGE>
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between BankAmerica
Corporation and Manufacturers Hanover Trust Company of California,
dated as of April 11, 1988 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of BankAmerica
Corporation. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. BankAmerica
Corporation will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. As described in the Rights Agreement, Rights issued to any
Person who becomes an Acquiring Person (as defined in the Rights
Agreement) shall become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and
--------------------------
the forms of election to purchase Preferred
12
<PAGE>
Shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 22
hereof, the Right Certificates shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein at the price per one one-hundredth of a Preferred Share set forth
therein (the "Purchase Price"), but the number of such one one-hundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Chairmen of the Board,
any of its Vice Chairmen, its Chief Financial Officer, or any of its Executive
Vice Presidents, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights
13
<PAGE>
Agent and shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
- ---------------------------------------------------------------------
to the provisions of Section
14
<PAGE>
14 hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the earlier of the Redemption Date or
the Final Expiration Date, any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring so to transfer, split up, combine or exchange any
Right Certificate or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested, registered in such name
or names as may be designated by the registered holder. The Company may require
payment by the registered holder of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates. Following receipt of written
notice from the Company of any such requirement, the Rights Agent shall promptly
forward any such sum collected from the registered holder to the
15
<PAGE>
Company or to such Persons as the Company shall specify in such notice.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will issue, execute and deliver
a new Right Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
----------------------------------- ------------------
Rights. (a) The registered holder of any Right Certificate may exercise the
- ------
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on April 22, 1998 (the "Final Expiration
16
<PAGE>
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $50.00, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check, bank draft or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from any depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case the Company will
17
<PAGE>
cause certificates for the Preferred Shares represented by such receipts to be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares or any
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights in
accordance with this Section 7.
18
<PAGE>
Section 8. Cancellation and Destruction of Right Certificates. All
------------------------------------- ------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if delivered or surrendered to the Rights Agent, shall be cancelled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants
--------------------------------
and agrees that it will take all such action as may be necessary to ensure that
all Preferred Shares delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such Preferred Shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.
19
<PAGE>
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name
----------------------------
any certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered
with the election form duly executed and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
-------- -------
surrender and payment
20
<PAGE>
is a date upon which the Preferred Shares transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Shares transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
--------------------------------------------------------
of Rights. The Purchase Price, the number of Preferred Shares covered by each
- ---------
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is
21
<PAGE>
the continuing or surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Shares transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
-------- -------
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event (A) any
Person shall become an Acquiring Person (other than through an acquisition
described in subparagraph (iii) of this paragraph (a)) or (B) during such time
as there is an Acquiring Person, there shall be any reclassification of
securities (including any reverse stock split), or recapitalization or
reorganization of the Company which has the effect, directly or indirectly, of
increasing by more than 1% the proportionate share of the outstanding shares of
any class of equity securities of the Company or any of its subsidiaries
beneficially owned by any
22
<PAGE>
Acquiring Person or any Affiliate or Associate thereof, each holder of a Right
shall thereafter have a right to receive, upon exercise thereof at a price equal
to the then current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of the Company as shall equal the result obtained
by (x) multiplying the then current Purchase Price by the number of one one-
hundredth of a Preferred Share for which a Right is then exercisable and
dividing that product by (y) 50% of the then current per share market price of
the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the
date such Person became an Acquiring Person. In the event that any Person shall
become an Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any action which would eliminate or diminish the benefits
intended to be afforded by the Rights.
From and after the occurrence of either of the events described in
clauses (A) or (B) above, any Rights that are or were acquired or beneficially
owned by such Acquiring Person (or any Associate or Affiliate of such Acquiring
Person) shall be void and any holder of such Rights shall thereafter have no
right to exercise such Rights under any provision of this Agreement. No Right
Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person (or any Associate or Affiliate
thereof) whose Rights would be void pursuant to the preceding sentence; no Right
Certificate shall be
23
<PAGE>
issued at any time upon the transfer of any Rights to an Acquiring Person (or
any Associate or Affiliate thereof) whose Rights would be void pursuant to the
preceding sentence or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person (or any Associate or Affiliate thereof) or nominee whose
Rights would be void pursuant to the preceding sentence shall be cancelled. The
Company shall be entitled to give the Rights Agent written notice of the
identity of any Acquiring Person, Affiliate or Associate of any Acquiring
Person, or nominee of any of the foregoing, and the Rights Agent may rely on
such notice in carrying out its duties under this Agreement.
(iii) The right to buy Common Shares of the Company pursuant to
subparagraph (ii) of this paragraph (a) shall not arise as a result of any
Person becoming an Acquiring Person through a purchase of Common Shares pursuant
to a tender offer made in the manner prescribed by Section 14(d) of the Exchange
Act and the rules and regulations promulgated thereunder; provided, however,
-------- -------
that (A) such tender offer shall provide for the acquisition of all of the
outstanding Common Shares held by any Person other than such Person and its
Affiliates and Associates for cash and (B) such purchase shall cause such
Person, together with all Affiliates and Associates of such Person, to be the
Beneficial Owner of 80% or more of the Common Shares then outstanding.
24
<PAGE>
(iv) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred
25
<PAGE>
shares so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
-------- -------
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustments
shall be made by the Company successively whenever such a record date is fixed;
and in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares
26
<PAGE>
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price of the Preferred Shares on such record date, less the fair market value
(as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one Preferred Share and
the denominator of which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall the consideration to
-------- -------
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively by the Company whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
27
<PAGE>
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to
such date; provided, however, that in the event that the current per share
-------- -------
market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price
per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading
on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New
28
<PAGE>
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Security is listed or admitted to
trading or, if the Security is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other system then in use,
or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by
the Board of Directors of the Company. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the
29
<PAGE>
current per share market price of the Common Shares as determined pursuant
to Section 11(d)(i) (appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
-------- -------
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
30
<PAGE>
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i)
31
<PAGE>
multiplying (x) the number of one one-hundredths of a share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public
32
<PAGE>
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and delivered by the Company, and countersigned and delivered by the Rights
Agent, in the manner provided for herein and shall be registered in the names of
the holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
33
<PAGE>
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those
34
<PAGE>
adjustments expressly required by this Section 11, as and to the extent that it
in its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than the current market price, issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares payable
in Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (i) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (ii)
35
<PAGE>
each Common Share outstanding immediately after such event shall have issued
with respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively by the Company
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13
- ------
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. In the event, directly or indirectly, (a) the Company shall
- -------------
consolidate with, or merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any
36
<PAGE>
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power, respectively, of the Company and its Subsidiaries (taken as a
whole) to any other Person other than the Company or one or more of its wholly-
owned Subsidiaries, then, and in each such case, proper provision shall be made
so that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such
37
<PAGE>
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
---------------------------------------
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the
38
<PAGE>
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Right are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
39
<PAGE>
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
--------
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes
of this Section 14(b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights
40
<PAGE>
or any fractional shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action against the
----------------
Company in respect of this Agreement, excepting the rights of action given to
the Rights Agent under Section 18 hereof, are vested in the respective
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Shares); and any registered holder of
any Right Certificate (or, prior to the Distribution Date, of the Common
Shares), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Shares),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Right Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement by the
Company and will be entitled to specific performance of its obligations, and
injunctive relief against actual or threatened violations of its obligations,
under this Agreement.
41
<PAGE>
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
------------------------------------- -----------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any
42
<PAGE>
purpose the holder of the Preferred Shares or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the
43
<PAGE>
costs and expenses of defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its exercise of its rights and performance of its duties under this Agreement in
reliance upon any Right Certificate or certificate for the Preferred Shares or
Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
rights agent business of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
44
<PAGE>
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent, in the case of
succession by merger or consolidation, or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
45
<PAGE>
Section 20. Duties of Rights Agent. The Rights Agent undertakes to
----------------------
perform only the duties and obligations expressly imposed by this Agreement upon
the following terms and conditions, by all of which the Company and the holders
of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, any Vice Chairman of the Board, any Vice Chairman, the
President, the Chief Financial Officer, any Executive Vice President or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
46
<PAGE>
(c) The Rights Agent shall be liable hereunder to the Company only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
written notice that such change or adjustment is required); nor
47
<PAGE>
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares to be issued
pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, any Vice
Chairman of the Board, any Vice Chairman, the President, the Chief Financial
Officer, any Executive Vice President or the Secretary of the Company, and to
apply to any of such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or omitted or suffered
by it in good faith to be taken or omitted in accordance with written
instructions of any such officer or for any delay in acting while waiting for
those instructions.
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<PAGE>
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself (through
its directors, officers and employees) or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and continued employment
thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
known to the Rights Agent of the Common Shares or Preferred Shares by registered
or certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the
49
<PAGE>
Rights Agent or any successor Rights Agent upon 30 days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a successor Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the State
of New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of New York), in good standing, having an office in the State of New York, which
is authorized under such laws to exercise corporate trust or stock transfer
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million or (b) an
50
<PAGE>
affiliate of a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
51
<PAGE>
Section 23. Redemption. (a) The Rights may be redeemed by action of
----------
the Board of Directors pursuant to subsection (b) of this Section 23 or by
stockholder action pursuant to subsection (c) of this Section 23 and shall not
be redeemed in any other manner.
(b) The Board of Directors of the Company may, at its option, at any
time prior to such time as any Person becomes an Acquiring Person, redeem all
but not less than all the then outstanding Rights at a redemption price of $.001
per Right (rounded upward for each holder to the nearest $.01), appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(c) (i) In the event the Company receives an Offer from any Offeror,
the Board of Directors of the Company shall call a special meeting of
stockholders (the "Special Meeting") for the purpose of voting on a precatory
resolution requesting the Board of Directors to accept such Offer, as such Offer
may be amended or revised by the Offeror from time to time to increase the price
per share in cash to be paid to holders of shares of Voting Stock (the
"Resolution"). The Special Meeting shall be held on a date
52
<PAGE>
selected by the Board of Directors, which date shall be not less than 90 and not
more than 120 days after the later of (A) the date such Offer is received by the
Company (the "Offer Date") and (B) the date of any meeting of stock holders
already scheduled as of the Offer Date; provided, however, that if (x) such
-------- -------
other meeting shall have been called for the purpose of voting on a precatory
resolution with respect to another Offer and (y) the Offer Date shall be not
later than fifteen days after the date such other Offer was received by the
Company, then both the Resolution and such other resolution shall be voted on at
such meeting and such meeting shall be deemed to be the Special Meeting. The
Board of Directors shall set a date for determining the stockholders of record
entitled to notice of and to vote at the Special Meeting in accordance with the
Company's Certificate of Incorporation and Bylaws and with applicable law. At
the Offeror's request, the Company shall include in any proxy soliciting
material prepared by it in connection with the Special Meeting proxy soliciting
material submitted by the Offeror; provided, however, that the Offeror shall by
-------- -------
written agreement with the Company contained in or delivered with such request
have indemnified the Company against any and all liabilities resulting from any
misstatements, misleading statements and omissions contained in the Offeror's
proxy soliciting material and have agreed to pay the Company's incremental costs
incurred as a result of including such material in the Company's proxy
soliciting material. Notwithstanding the foregoing, no Special Meeting shall be
held from and after such time as any Person
53
<PAGE>
becomes an Acquiring Person, and any Special Meeting scheduled prior to such
time and not theretofore held shall be cancelled.
(ii) If at the Special Meeting the Resolution receives the affirmative
vote of a majority of the shares of Voting Stock outstanding as of the record
date of the Special Meeting, then all of the Rights shall be redeemed by such
stockholder action at the Redemption Price, effective immediately prior to the
consummation of any tender offer (provided that such tender offer is consummated
prior to 60 days after the date of the Special Meeting) pursuant to which any
Person offers to purchase all of the shares of Voting Stock held by Persons
other than such Person and its Affiliates and Associates at a price per share in
cash equal to or greater than the price contained in the Resolution approved at
the Special Meeting; provided, however, that the Rights shall not be redeemed at
-------- -------
any time from and after such time as any Person becomes an Acquiring Person.
(iii) Nothing contained in this subsection (c) shall be deemed to be
in derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any Offer, or to recommend that holders of shares of
Voting Stock reject any tender offer, or to take any other action (including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation and the
54
<PAGE>
submission of additional or alternative Offers or other proposals to the Special
Meeting) with respect to any Offer or any tender offer that the Board of
Directors believes is necessary or appropriate in the exercise of such fiduciary
duty.
(iv) Nothing in this subsection (c) shall be construed as limiting or
prohibiting the Company or any Offeror from proposing or engaging, at any time,
in any acquisition, disposition or other transfer of any securities of the
Company, any merger or consolidation involving the Company, any sale or other
transfer of assets of the Company, any liquidation, dissolution or winding-up of
the Company, or any other business combination or other transaction, or any
other action by the Company or such Offeror; provided, however, that the holders
-------- -------
of Rights shall have the rights set forth in this Agreement with respect to any
such acquisition, disposition, transfer, merger, consolidation, sale,
liquidation, dissolution, winding-up, business combination, transaction or
action.
(d) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to subsection (b) of this
Section 23, or upon the effectiveness of the redemption of the Rights pursuant
to subsection (c) of this Section 23, and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall
55
<PAGE>
promptly give public notice of any such redemption; provided, however, that the
-------- -------
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights pursuant to subsection (b) or the
effectiveness of the redemption of the Rights pursuant to subsection (c), as the
case may be, the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or purchase
for value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may,
--------
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio
56
<PAGE>
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- -------
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein
57
<PAGE>
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 11(a)(ii) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b) hereof) for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of
each Common Share shall have at a minimum the same voting rights as one Common
Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional Common Shares or Preferred Shares for issuance upon
58
<PAGE>
exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
in lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this subsection (e), the current market value of a whole Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
after the public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall
------------------------
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any
59
<PAGE>
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, (v) to effect the liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the Common Shares payable in Common
Shares or to effect a subdivision, combination or consolidation of the Common
Shares (by reclassification or otherwise than by payment of dividends in Common
Shares), then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
60
<PAGE>
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
BankAmerica Corporation
Bank of America Center
P.O. Box 37000
San Francisco, California 94137
Attention: Office of the
Corporate Secretary (3018)
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Manufacturers Hanover Trust
Company of California
50 California Street
10th Floor
San Francisco, California 94111
Attention: Lynn Loveall
Vice President
61
<PAGE>
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to
--------------------------
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, and, upon receipt of a
certificate by the Company to such effect, any such supplement or amendment
shall be signed by the Rights Agent; provided, however, that from and after such
-------- -------
time as any Person becomes an Acquiring Person, this Agreement shall not be
amended in any manner which would adversely affect the interests of the holders
of Rights. Without limiting the foregoing, the Company may at any time prior to
such time as any Person becomes an Acquiring Person amend this Agreement to
lower the thresholds set forth in Sections 1(a) and 3(a) hereof from 20% to any
percentage not less than the greater of (i) any percentage greater than the
largest percentage of the outstanding Common Shares then known by the Company to
be beneficially owned by any Person (other than the Company, any Subsidiary of
the
62
<PAGE>
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to the terms of any
such plan) and (ii) 10%.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a
63
<PAGE>
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
BANKAMERICA CORPORATION
Attest:
By: /s/ Marlene Sharland By: /s/ Kevin B. Ferrell
--------------------------- ----------------------------
Title: Assistant Secretary Title: Senior Vice President
--------------------- ----------------------
MANUFACTURERS HANOVER TRUST
COMPANY OF CALIFORNIA
Attest:
By: /s/ Patrick D. Fleck By: /s/ L.E. Loveall
--------------------------- ----------------------------
Title: AVP & Controller Title: Vice President
--------------------- ----------------------
64
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATION
of
CUMULATIVE PARTICIPATING PREFERRED STOCK, SERIES E
of
BANKAMERICA CORPORATION
BANKAMERICA CORPORATION, a corporation organized and existing under the
laws of the State of Delaware (herein referred to as the "Corporation"), in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, does hereby CERTIFY:
1. The Certificate of Incorporation, as amended, of the Corporation
fixes the total number of shares of all classes of capital stock which the
Corporation shall have the authority to issue at three hundred fifty million
(350,000,000) shares, of which fifty million (50,000,000) shares shall be shares
of preferred stock, without par value, and three hundred million (300,000,000)
shares shall be common stock, of the par value of $1.5625 per share.
2. The Certificate of Incorporation, as amended, of the Corporation,
expressly grants to the Board of Directors of the Corporation authority to
provide for the issuance of the preferred stock in one or more series, with such
voting powers, full or limited, or without voting powers, and with such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the Certificate of Incorporation or any amendment
thereto, or in the resolution or resolutions providing for the issue of such
stock adopted by the Board of Directors.
3. Pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation, as amended, of the Corporation, the Board
of Directors, (i) by action duly taken on October 22, 1982, authorized the
issuance of six million (6,000,000) shares of Cumulative Adjustable Preferred
Stock, Series A, without par value, (ii) by action duly taken on February 11,
1983, authorized the issuance of four million (4,000,000) shares of Cumulative
Adjustable Preferred Stock, Series B, without par value, (iii) by action duly
taken on June 6, 1983, authorized the issuance of five million two hundred
thousand (5,200,000) shares of Cumulative Preferred Stock, Special Series,
without par value, and (iv) by action duly taken on October 5, 1987, authorized
the issuance of one hundred thousand (100,000) shares of 9 1/2% Cumulative
Convertible Preferred Stock, Series D, without par value.
<PAGE>
4. Pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation, as amended, of the Corporation, the Board of
Directors, by action duly taken on April 11, 1988, adopted the following
resolution providing for an additional series of the preferred stock:
"RESOLVED, that an issue of a series of the preferred stock, without
par value, of the Corporation (such preferred stock being herein referred to as
"Preferred Stock", which term shall include any additional shares of preferred
stock of the same class heretofore or hereafter authorized to be issued by the
Corporation), consisting of three million (3,000,000) shares is hereby provided
for, and the voting power, designation, preference and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, are fixed hereby as follows:
1. Designation. The designation of such series shall be "Cumulative
-----------
Participating Preferred Stock, Series E" (hereinafter referred to as the "Series
E Preferred Stock") and the number of shares constituting such series is three
million (3,000,000). Such number of shares may be increased or decreased by
resolution of the Board of Directors or the Executive Committee of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
--------
Series E Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series E
Preferred Stock.
2. Dividends. The holders of shares of Series E Preferred Stock, in
---------
preference to the holders of Common Stock, par value $1.5625 per share (the
"Common Stock"), of the Corporation, and of any other stock of the Corporation
ranking as to dividends or distribution of assets junior to the Series E
Preferred Stock (the Common Stock and any such other stock being herein referred
to as "Junior Stock"), shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on February 28, May 31, August 31 and November 30 of
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series E Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends plus 100
times the fair market value (as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Secretary of the Corporation and with each transfer
agent for the Series E Preferred Stock, and a brief summary of which shall be
mailed to each holder of Series E
A-2
---
<PAGE>
Preferred Stock) in cash of the aggregate per share amount of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series E Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series E Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
The Corporation shall declare a dividend or distribution on the Series
E Preferred Stock as provided in the preceding paragraph of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall ave been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series E Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
Dividends shall begin to accrue and be cumulative on outstanding shares
of Series E Preferred Stock from the quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series E Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Each dividend shall be paid to the holders of record of shares of
Series E Preferred Stock as they appear on the stock register of the Corporation
on such record date, not exceeding 30 days preceding the payment date thereof,
as shall be fixed by the Board of Directors of the Corporation. Dividends on
account of arrears for any past Quarterly Dividend Payment Date may be declared
and paid at any
A-3
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<PAGE>
time, without reference to any regular dividend payment date, to holders of
record on such date, not exceeding 45 days preceding the payment date thereof,
as may be fixed by the Board of Directors of the Corporation. If there shall be
outstanding shares of any other series of Preferred Stock ranking on a parity as
to dividends with the Series E Preferred Stock, the Corporation, in making any
dividend payment on account of arrears on the Series E Preferred Stock or such
other series of Preferred Stock, shall make payments ratably upon all
outstanding shares of Series E Preferred Stock and such other series of
Preferred Stock in proportion to the respective amounts of dividends in arrears
upon all such outstanding shares of Series E Preferred Stock and such other
series of Preferred Stock to the date of such dividend payment. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments which may be in arrears.
3. Redemption. The Corporation, at its option, may redeem shares of
----------
the Series E Preferred Stock, as a whole or in part, at any time or from time to
time, at a per share redemption price equal to the sum of (a) all accrued and
unpaid dividends thereon to the date fixed for redemption and (b) the higher of
(i) 100 times the Purchase Price (as such term is defined in he Rights
Agreement, dated as of April 11, 1988, between the Corporation and Manufacturers
Hanover Trust Company of California (the "Rights Agreement") and as may be
adjusted from time to time pursuant thereto) of one-hundredth of a share of
Series E Preferred Stock in effect on the date of the notice of such redemption
referred to below, and (ii) he product of the current per share market price of
the Common Stock (as computed pursuant to Section 11(d)(i) of the Rights
Agreement) and the number of votes per share of Series E Preferred Stock that a
holder thereof is then entitled to on all matters submitted to a vote of the
stockholders of the Corporation, in each case as of the date of the notice of
such redemption referred to below.
If the Corporation shall redeem shares of Series E Preferred Stock,
notice of such redemption shall be given by (i) publication (not less than 30
nor more than 60 days prior to the redemption date) at least once in a newspaper
printed in the English language and of general circulation in the City and
County of San Francisco, State of California (upon any secular day of the week)
and (ii) first class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
register of the Corporation. The failure to mail such notice to any particular
holder or any defect in such mailing shall not invalidate the redemption of any
shares the holders of which received notice as provided above. Each such notice
shall state: (1) the redemption date; (2) the number of shares of Series E
Preferred Stock to be redeemed and, if less than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (3) the redemption price;
A-4
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<PAGE>
(4) the place or places where certificates for such shares are to be surrendered
for payment of the redemption price; and (5) that dividends on the shares to be
redeemed will cease to accrue on such redemption date. Notice having been
mailed as aforesaid, from and after the redemption date (unless default shall be
made by the Corporation in providing money for the payment of the redemption
price) dividends on the shares of the Series E Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the redemption
price) shall cease. Upon surrender in accordance with said notice of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. If less than all the outstanding shares of Series E
Preferred Stock are to be redeemed, shares to be redeemed shall be selected by
the Corporation from outstanding shares of Series E Preferred Stock not
previously called for redemption by lot or pro rata (as nearly as may be) in any
method determined by the Corporation in its sole discretion to be equitable.
In no event shall the Corporation redeem less than all the outstanding
shares of Series E Preferred Stock pursuant to the first paragraph of this
Section 3 unless full cumulative dividends shall have been paid or declared and
set apart for payment upon all outstanding shares of Series E Preferred Stock
for all past Quarterly Dividend Payment Dates, and unless all matured
obligations of the Corporation with respect to all sinking funds, retirement
funds or purchase funds for all series of Preferred Stock then outstanding have
been met.
4. Shares to be Retired. All shares of Series E Preferred Stock
--------------------
redeemed by the Corporation shall be retired and cancelled and shall, upon the
making of all necessary filings with the Secretary of State of Delaware, be
restored - the status of authorized but unissued shares of Preferred Stock,
without designation as to series, and may thereafter be issued.
5. Conversion or Exchange. Subject to Section 8 below, the holders
----------------------
of shares of Series E Preferred Stock shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
6. Voting. Subject to the provision for adjustment hereinafter set
------
forth, each share of Series E Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock,
A-5
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<PAGE>
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to which
holders of shares of Series E Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Except as otherwise provided herein, in the Certificate of
Incorporation, in any other Certificate of Designation creating a series of
Preferred Stock or any similar stock, or by law, the holders of shares of Series
E Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as a single class on all matters submitted to a vote of stockholders of
the Corporation.
In addition to the foregoing, whenever and as often as dividends
payable on any share or shares of the Preferred Stock at the time outstanding
shall be accumulated and unpaid in an amount equivalent to or exceeding six
quarterly dividends (whether or not declared and whether or not consecutive),
the holders of record of the Preferred Stock of all series shall thereafter have
the right, as a single class, to elect two directors, and, subject to the terms
of any outstanding series of Preferred Stock, the holders of record of the
Common Stock and the Series E Preferred Stock, as a single class, shall have the
right to elect the remaining authorized number of Directors. In any election by
the holders of record of the Preferred Stock of all series as a single class,
the holders of shares of Series E Preferred Stock shall be entitled to cast one
vote per share.
Upon the happening of the six dividend defaults hereinabove set forth,
a special meeting of stockholders of the Corporation then entitled to vote shall
be called by the Chairman of the Board or the President or the Secretary of the
Corporation, if requested in writing by the holders of record of not less than
ten percent of the Preferred Stock then outstanding. At such special meeting,
or, if no such special meeting shall have been called, then at the next annual
meeting of stockholders, the stockholders of the Corporation then entitled to
vote shall elect, voting as above provided, an entirely new Board of Directors,
and the term of office of the Directors in office at the time of such election
shall expire upon the election of their successors at such meeting; provided,
however, that nothing herein contained shall be construed to be a bar to the re-
election of any Director at such meeting. At all meetings of stockholders at
which holders of Preferred Stock shall be entitled to vote for Directors as a
single class, the holders of a majority of the outstanding shares of each class
or
A-6
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<PAGE>
series of capital stock of the Corporation having the right to vote as a single
class shall be necessary to constitute a quorum, whether present in person or by
proxy, for the election by that class or series of its designated Directors. In
order to validate an election of Directors by stockholders voting as a class,
such Directors shall be elected by the vote of at least a plurality of shares
held by such stockholders present or represented at the meeting. At any such
meeting, the election of Directors by stockholders voting as a class shall be
valid notwithstanding that a quorum of other stockholders voting as one or more
classes may not be present or represented at such meeting, and if any
stockholders voting as a class shall elect Directors, the Directors so elected
shall be deemed to be Directors of the Corporation unless and until the other
stockholders entitled to vote as one or more classes shall elect their
Directors.
While class voting is in effect with respect to the Preferred Stock,
any Director elected by holders of Preferred Stock voting as a class may be
removed at any annual or special meeting, by vote of a majority of the
stockholders voting as a class who elected such Director, for any cause deemed
sufficient by such stockholders present at such meeting. In case any vacancy
shall occur among the Directors elected by such stockholders voting as a class,
such vacancy may be filled by the remaining Director so elected, or his
successor then in office, and the Director so elected to fill such vacancy shall
serve until the next meeting of stockholders for the election of Directors.
Such voting rights of the holders of Preferred Stock as a single class,
once effective, shall continue only until all arrears in dividends (whether or
not declared) on the Preferred Stock shall have been paid or declared and set
apart for payment at which time the right of the Preferred Stock to vote as a
single class for the election of Directors, as hereinabove set forth, shall
terminate. Upon such termination, a special meeting of the stockholders of the
Corporation then entitled to vote may be called by the Chairman of the Board or
the President, and shall be called by the Chairman of the Board or the President
or the Secretary of the Corporation if requested in writing by the holders of
record of not less than one percent of the Common Stock then outstanding, and at
such special meeting, or if no such special meeting hall have been called then
at the next annual meeting of the stockholders, the stockholders of the
Corporation then entitled to vote shall elect an entirely new Board of Directors
and the term of office of the Directors in office at the time of such election
shall expire upon the election of their successors at such meeting; provided,
however, that nothing herein contained shall be construed to be a bar to the re-
election of any such Director at such meeting.
A-7
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<PAGE>
The consent of the holders of at least two-thirds of the number of
shares of Preferred Stock at the time outstanding, given in person or by proxy,
either in writing or at a meeting of stockholders at which the holders of the
Preferred Stock shall vote separately as a class without regard to series, the
holders of shares of Series E Preferred Stock being entitled to cast one vote
per share hereon shall be necessary for effecting or validating:
(a) any change in the Certificate of Incorporation or certificate
supplemental thereto or Bylaws of the Corporation which would
materially and adversely alter or change the preferences, privileges,
rights or powers given to the holders of the Preferred Stock,
provided, that if one or more but not all series of Preferred Stock at
the time outstanding are so affected, only the consent of the holders
of at least two-thirds of each series so affected, voting separately
as a class, shall be required; or
(b) the issuance of any shares of any other class of stock of the
Corporation ranking prior to the Preferred Stock.
The term "ranking prior to the Preferred Stock" shall mean and include
all shares of stock of the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as to distributions in the
event of a voluntary or an involuntary liquidation, dissolution or winding up of
the Corporation, are given preference over the rights of the holders of the
Preferred Stock.
7. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution or winding up of the Corporation, voluntary or involuntary, the
holders of all shares of Series E Preferred Stock shall be entitled to be paid
in full out of the assets of the Corporation available for distribution to
stockholders, before any distribution of assets shall be made to the holders of
Common Stock or of any other shares of stock of the Corporation ranking as to
such distribution junior to the Series E Preferred Stock, an amount equal to the
greater of (a) $100.00 per share plus an amount equal to any accrued and unpaid
dividends thereon to the date fixed for payment of such distribution, and (b) an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series E Preferred Stock were entitled
A-8
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<PAGE>
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the amounts payable with respect to the Series E
Preferred Stock and any other shares of stock of the Corporation ranking as to
any such distribution on a parity with the Series E Preferred Stock are not paid
in full, the holders of the Series E Preferred Stock and of such other shares
shall share ratably in any such distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled.
Consolidation or merger of the Corporation with or into another
corporation or corporations, or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation, shall not be deemed or construed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this paragraph 7.
8. Consolidation, Merger, etc. In case the Corporation shall enter
---------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series E Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series E Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
9. Limitation on Dividends on Junior Ranking Stock. So long as any
----------------------------------------- -----
Series E Preferred Stock shall be outstanding, the Corporation shall not declare
any dividends on Junior Stock, or make any payment on account of, or set apart
money for, a sinking or other analogous fund for the purchase, redemption or
other
A-9
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<PAGE>
retirement of any shares of Junior Stock, or make any distribution in respect
thereof, whether in cash or property or in obligations or stock of the
Corporation, other than Junior Stock (such dividends, payments, setting apart
and distributions being herein called "Junior Stock Payments"), unless all of
the conditions set forth in the following subsections A and B shall exist at the
date of such declaration in the case of any such dividend, or the date of such
setting apart in the case of any such fund, or the date of such payment or
distribution in the case of any other Junior Stock Payment:
A. Full cumulative dividends shall have been paid or declared and
set apart for payment upon all outstanding shares of Preferred Stock other than
Junior Stock.
B. The Corporation shall not be in default or in arrears with
respect to any sinking or other analogous fund or any call for tenders
obligation or other agreement for the purchase, redemption or other retirement
of any shares of Preferred Stock other than Junior Stock.
A-10
<PAGE>
Exhibit B
---------
Form of Right Certificate
Certificate No. R-__________ ________ Rights
NOT EXERCISABLE AFTER APRIL 22, 1998 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
BANKAMERICA CORPORATION
This certifies that ____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of April 11, 1988 (the "Rights Agreement"), between
BankAmerica Corporation, a Delaware corporation (the "Company"), and
Manufacturers Hanover Trust Company of California (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., San Francisco time,
on April 22, 1998 at the principal office of the Rights Agent, or at the office
of its successor as Rights Agent, one one-hundredth of a fully paid non-
assessable share of Series E Cumulative Participating Preferred Stock, without
par value (the "Preferred Shares"), of the Company, at a purchase price of
$50.00 per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of April 22, 1988, based on
the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
B-1
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<PAGE>
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.001 per Right (rounded upward for each holder to the nearest $.01) or (ii) may
be exchanged in whole or in part for Preferred Shares or shares of the Company's
Common Stock, par value $1.5625 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
B-2
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<PAGE>
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ________________, 19___
ATTEST: BANKAMERICA CORPORATION
______________________________ By:___________________________
Countersigned:
MANUFACTURERS HANOVER TRUST
COMPANY OF CALIFORNIA
______________________________
Authorized Signature
B-3
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<PAGE>
Form of Reverse side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ___________________________________________________
______________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________________________
Attorney, to transfer the within Right Certificate on the books of the within-
named Company, with full power of substitution.
Dated:____________________, 19___
______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
______________________________
Signature
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
B-4
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<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To BANKAMERICA CORPORATION:
The undersigned hereby irrevocably elects to exercise
__________________________________________________ Rights represented by this
Right Certificate to purchase the Preferred Shares issuable upon the exercise of
such Rights and requests that certificates for such Preferred Shares be issued
in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:____________________, 19___
______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
B-5
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<PAGE>
Form of Reverse Side of Right Certificate -- continued
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
______________________________
Signature
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
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<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On April 11, 1988, the Board of Directors of BankAmerica Corporation (the
"Company") declared a dividend of one preferred share purchase right (a "Right )
for each outstanding share of common stock, par value $1.5625 per share (the
"Common Shares"), of the Company. The dividend is payable on April 22, 1988 (the
"Record Date") to the shareholders of record on that date. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a share
of Cumulative Participating Preferred Stock Series E, without par value (the
"Preferred Shares"), of the Company, at a price of $50 per one one-hundredth of
a Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the Rights
Agreement") between the Company and Manufacturers Hanover Trust Company of
California, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 20% or more of the outstanding
Common Shares or (ii) 10 business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any Person becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 20% or more of such
outstanding Common Shares (the earlier of such dates being called the
"Distribution Date ), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificate for
Common Shares, outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right
C-1
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<PAGE>
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on April 22, 1988 (the Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by he
Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe to or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will be redeemable
by the Company at a formula price. Each Preferred Share will be entitled to a
minimum preferential quarterly dividend payment of $1.00 per share, but will be
entitled to an aggregate dividend of 100 times the dividend declared per Common
Share. In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share, plus
accrued and unpaid dividends, but will be entitled to an aggregate payment of
100 times the payment made per Common Share. Each Preferred Share will have 100
votes, voting together with the Common Shares. Finally, in the event of any
merger, consolidation or other transaction in which Common Shares are exchanged,
each Preferred Share will be entitled to receive 100 times the amount received
per Common Share. These rights are protected by customary antidilution
provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
C-2
---
<PAGE>
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that
any person or group of affiliated or associated persons acquires beneficial
ownership of 20% or more of the outstanding Common Shares (unless such person
increased its beneficial ownership from less than 20% to 80% or more of the
outstanding Common Shares by a purchase pursuant to a tender offer for all of
the Common Shares for cash), proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by such person or group of
affiliated or associated persons (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Shares and prior to the acquisition by such person or group of 50% or
more of the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preferred Share (or of a share of a class or series of
the Company's preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
transactions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (rounded upward for each
holder to the nearest $.01 ) (the Redemption Price"). The redemption of the
Rights may be made effective at such time on such basis and with such conditions
as the Board of Directors in its sole discretion may establish. In addition, if
a bidder who does not beneficially own more than 1% of the Common Shares (and
who has not within the past year owned in excess of 1% of the Common
C-3
---
<PAGE>
Shares and, at a time the bidder held such greater than 1% stake, disclosed, or
caused the disclosure of, an intention which relates to or would result in the
acquisition or influence of control of the Company) proposes to acquire all of
the Common Shares (and all other shares of capital stock of the Company entitled
to vote with the Common Shares in the election of Directors or on mergers,
consolidations, sales of all or substantially all of the Company's assets,
liquidations, dissolutions or windings up) for cash at a price which a
nationally recognized investment banker selected by such bidder states in
writing is fair, and such bidder has obtained full written financing commitments
(or otherwise has full financing) and complies with certain procedural
requirements, then the Company, upon the request of the bidder, will hold a
special stockholders meeting to vote on a resolution requesting the Board of
Directors to accept the bidder's proposal. If a majority of the outstanding
shares entitled to vote on the proposal vote in favor of such resolution, then
for a period of 60 days after such meeting the Rights will he automatically
redeemed at the Redemption Price immediately prior to the consummation of any
tender offer for all of such shares at a price per share in cash equal to or
greater than the price offered by such bidder; provided, however, that no
redemption will be permitted or required after the acquisition by any person or
group of affiliated or associated persons of beneficial ownership of 20% or more
of the outstanding Common Shares. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower the threshold for exercisability of the Rights from 20% to any
percentage not less than the greater of (i) in excess of the largest percentage
of the outstanding Common Shares then known to the Company to be beneficially
owned by any person or group of affiliated or associated persons and (ii) 10%,
except that from and after such time as any person becomes an Acquiring Person
no such amendment may adversely affect the interest of the holders of the
Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 13, 1988. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.
C-4
---
<PAGE>
AMENDMENT NO.1
AMENDMENT No. 1 dated as of August 11, 1991 (the
"Amendment"), to the Rights Agreement, dated as of April 11, 1988
(the "Rights Agreement"), between BankAmerica Corporation, a
Delaware corporation (the "Company"), and Manufacturers Hanover
Trust Company of California (the "Rights Agent").
The Company and the Rights Agent desire to amend the Rights Agreement,
pursuant to and in accordance with Section 27 thereof, as set forth herein.
Capitalized terms used but not defined herein shall have the meanings assigned
thereto in the Rights Agreement.
Accordingly, the parties hereto agree as follows:
1. Section 1(a) of the Rights Agreement is amended to add the
following sentence at the end of such Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither SPC nor any Subsidiary of SPC shall be deemed to be an Acquiring
Person by virtue of the approval, execution or delivery of the Merger
Agreement or the Merger Agreement or the BAC Stock Option Agreement (as
defined in the Merger Agreement), or by the consummation of the Merger (as
defined in the Merger Agreement) pursuant to the Merger Agreement or the
acquisition of shares of Common Stock by SPC or any subsidiary of SPC
pursuant to the BAC Stock Option Agreement; provided, however, that in the
-------- -------
event SPC or any Subsidiary of SPC becomes the Beneficial Owner of any
shares of Common Stock other than pursuant to the Merger Agreement or the
BAC Stock Option Agreement, the provisions of this sentence (other than
this proviso) shall not be applicable".
2. Section 1(c)(iii) of the Rights Agreement is amended to add the
following proviso at the end of such Section:
"; provided further, however, that notwithstanding anything in this
---------------- -------
paragraph (c) to the contrary, neither SPC nor any Subsidiary of SPC shall
be deemed to be the `Beneficial Owner' of, or to `beneficially own', shares
of
1-1
<PAGE>
Common Stock which are held by SPC or any Subsidiary of SPC as trust
account shares (as defined in the Merger Agreement) or shares of Common
Stock owned by SPC or any Subsidiary of SPC on the date hereof".
Notwithstanding anything in this Rights Agreement to the contrary, the
immediately preceding proviso shall not apply in the event SPC or any
subsidiary of SPC becomes the Beneficial Owner of any shares of Common
Stock other than pursuant to the Merger Agreement or the BAC Stock Option
Agreement.
3. The following Section 1(h)(i) is added to the Rights Agreement
between Sections 1(h) and 1(i) of such Agreement:
"(h)(i) `Merger Agreement' shall mean the Agreement and Plan of Merger
dated as of August 12,1991, by and among the Company and SPC, as amended
from time to time".
4. Section 1(m) of the Rights Agreement is amended to add the
following sentence to the end of such Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither (i) the approval, execution or delivery of the BAC Stock Option
Agreement (as defined in the Merger Agreement) or the Merger Agreement nor
(ii) the consummation of the Merger (as defined in the Merger Agreement)
pursuant to the Merger Agreement or the acquisition of shares of common
Stock by SPC or any Subsidiary of SPC pursuant to the BAC Stock Option
Agreement shall be deemed to cause a Shares Acquisition Date to occur;
provided, however, that the in the event SPC or any Subsidiary of SPC
-------- -------
becomes the Beneficial Owner of any shares of Common Stock other than
pursuant to the Merger Agreement or the BAC Stock Option Agreement, the
provisions of this sentence (other than this proviso) shall not be
applicable".
5. The following Section 1(l)(i) is added to the Rights Agreement
between Sections 1(l) and 1(m) of such Agreement:
"(l)(i) `SPC' shall mean Security Pacific Corporation, a Delaware
corporation".
6. Section 3(a) of the Rights Agreement is amended to add the
following proviso at the end of the first sentence of such Section:
1-2
<PAGE>
; provided, however, that notwithstanding anything in this Rights
-------- -------
Agreement to the contrary, neither (i) the approval, execution or delivery
of the BAC Stock Option Agreement (as defined in the Merger Agreement) or
the Merger Agreement nor (ii) the consummation of the Merger (as defined in
the Merger Agreement) pursuant to the Merger Agreement or the acquisition
of shares of Common Stock by SPC or any Subsidiary of SPC pursuant to the
BAC Stock Option Agreement shall be deemed to cause a Distribution Date to
occur; provided, however, that in the event SPC or any Subsidiary of SPC
-------- -------
becomes the Beneficial Owner of any shares of Common Stock other than
pursuant to the Merger Agreement or the BAC Stock Option Agreement, the
provisions of this sentence (other than this proviso) shall not be
applicable".
7. Section 11(a)(ii) of the Rights Agreement is amended to add the
following sentence at the end of the first paragraph of such Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
the provisions of this Section 11(a)(ii) (other than the proviso contained
in this sentence) shall not apply to (i) the approval, execution or
delivery of the BAC Stock Option Agreement (as defined in the Merger
Agreement) or of the Merger Agreement, or (ii) the consummation of the
Merger (as defined in the Merger Agreement) pursuant to the Merger
Agreement or the acquisition of shares of Common Stock by SPC or any
Subsidiary of SPC pursuant to the BAC Stock Option Agreement; provided,
--------
however, that in the event SPC or any Subsidiary of SPC becomes the
-------
Beneficial Owner of any shares of Common Stock other than pursuant to the
Merger Agreement or the BAC Stock Option Agreement, the provisions of this
Section 11(a)(ii) shall be applicable.
8. Section 13 of the Rights Agreement is amended to add the
following sentence at the end of such Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
this Section 13 (other than the proviso contained in this sentence) shall
not apply to (i) the approval, execution or delivery of the BAC Stock
Option Agreement (as defined in the Merger Agreement) or the Merger
Agreement, or (ii) the consummation of the Merger (as defined in the Merger
Agreement) pursuant to the Merger Agreement or the acquisition of shares of
Common Stock by SPC or any Subsidiary of SPC pursuant to the BAC Stock
Option Agreement; provided, however, that in the event any transaction
-------- -------
described in the first sentence of this Section 13 shall occur between the
Company and SPC or any Subsidiary of SPC other than pursuant to the BAC
Stock Option Agreement or the Merger Agreement, the provisions of this
Section 13 shall apply to such transaction".
1-3
<PAGE>
9. Section 25(a) of the Rights Agreement is amended to add the
following sentence at the end of such Section:
"Notwithstanding anything in this Rights Agreement to the contrary,
the provisions of this Section 25(a) shall not apply to (i) the approval,
execution or delivery of the BAC Stock Option Agreement (as defined in the
Merger Agreement) or the Merger Agreement, or (ii) the consummation of the
Merger (as defined in the Merger Agreement) pursuant to the Merger
Agreement or the acquisition of shares of Common Stock by SPC or any
Subsidiary of SPC pursuant to the BAC Stock Option Agreement; provided,
--------
however, that in the event any transaction described in the first sentence
-------
of this Section 25(a) shall occur between the Company and SPC or any
Subsidiary of SPC other than pursuant to the BAC Stock Option Agreement or
the Merger Agreement, the provisions of this Section 25(a) shall apply to
such transaction".
10. This Amendment shall be effective as of August 11,1991, and,
except as set forth herein, the Rights Agreement shall remain in full force and
effect and shall be otherwise unaffected hereby.
11. This Amendment shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
12. This Amendment may be executed in two or three counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
1-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
BANKAMERICA CORPORATION,
By /s/ Frank N. Newman
__________________________________
Name: Frank N. Newman
Title: Vice Chairman of the Board &
CFO
MANUFACTURERS HANOVER TRUST COMPANY OF
CALIFORNIA, as Rights Agent
By /s/ Daniel W. Spengel
__________________________________
Name: Daniel W. Spengel
Title: Assistant Trust Officer
1-5
<PAGE>
Exhibit 10.f
------------
EXECUTIVE COMPENSATION PROGRAM
Benefits/Perquisites Summary
Impact Level 1
================================================================================
Benefits/Perquisites Program Description
- --------------------------------------------------------------------------------
Auto Parking Company paid parking is provided at a facility
near the executive's office location.
- --------------------------------------------------------------------------------
Business Travel Executives may travel business class if the flight
is greater than three hours. If business class is
not available, the executive must travel coach.
First class travel is not permitted.
- --------------------------------------------------------------------------------
Chauffeur Service Pool drivers are available for business purposes
only.
- --------------------------------------------------------------------------------
Club Memberships Available to executives on a business need basis.
Company pays all initiation fees for luncheon and
country clubs in addition to 100% of the monthly
luncheon club dues and 50% of the monthly country
club dues.
Note: The Company will not maintain a membership
in any club that discriminates in its membership
or guest policies on the basis of race, religion,
sex, age, national origin, sexual orientation,
handicap, or veteran status.
- --------------------------------------------------------------------------------
Executive Financial Option A: Utilizing a financial planner of their
Counseling choice, executives are eligible for a one-time
comprehensive initial financial plan of $6,000 and
an annual allowance of $2,500 for follow-up
services for personal income tax preparation,
investment and estate planning, as well as other
related financial planning services as appropriate.
Option B: Each executive is assigned their own
financial planner from The Ayco
Corporation--providing an all-encompassing
financial counseling program to include income tax
planning and preparation, investment planning,
estate planning, etc. A one time $3,000 allowance
will also be provided for estate planning
documentation, e.g., preparation of a will.
Company paid cost of the program is $15,000 per
participant for the first year and approximately
$9,000 each year thereafter.
With both options, all reimbursed costs will be
considered imputed income for purposes of W-2
earnings and will be grossed up to help compensate
for associated income taxes.
- --------------------------------------------------------------------------------
Vacation Executives do not have accrued annual vacation
entitlement. They may schedule paid time off as
appropriate.
================================================================================
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
Benefits/Perquisites Summary
Impact Level 1, continued
================================================================================
Benefits/Perquisites Program Description
- --------------------------------------------------------------------------------
Senior Management Incentive Annual discretionary bonus program. Total cash
Plan (SMIP) compensation targets are pre-established and
awards are drawn from an incentive award pool
based upon the Corporation's overall
performance. Bonus is based upon 50% corporate
performance and 50% business/individual results.
- --------------------------------------------------------------------------------
1992 Management Stock Plan Provides for discretionary grants of stock
options and restricted stock--to recognize
current contribution and future potential
contribution to the Bank.
- --------------------------------------------------------------------------------
Health/Life/Long Term The Company contributes toward the cost of
Disability medical, dental, employee life insurance,
accidental death and dismemberment insurance,
and long term disability coverage.
- --------------------------------------------------------------------------------
RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
BankAmeraccount Defined benefit (cash balance) pension plan.
---------------
- --------------------------------------------------------------------------------
BankAmerishare 401(k) plan with matching employer
-------------- contributions.
- --------------------------------------------------------------------------------
Supplemental Plan Provides for Company match and pension accruals
----------------- on qualified earnings in excess of IRS limits
($150,000).
- --------------------------------------------------------------------------------
BAC Deferred Compensation Option to defer from 5% - 75% of base salary
------------------------- and 0% - 100% of bonus. Deferred amounts are
Plan not subject to income tax withholding, but are
---- subject to applicable employment taxes (FICA,
(Not available to Medicare, SDI, etc.)
International Assignees)
================================================================================
This chart is a brief summary of the perquisites and benefits currently made
available to executives. The Company reserves the right to change or end any
perquisite or benefit at any time. Please contact your Human Resource Officer
for additional information on the above perquisites described above. Also, see
Your Employee Handbook and any appendices for further information about health,
- ----------------------
life insurance, Long Term Disability and the Retirement Program.
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
Benefits/Perquisites Summary
Impact Levels 2 & 3
================================================================================
Benefits/Perquisites Program Description
- --------------------------------------------------------------------------------
Auto Parking (Prerequisite: SVP+ title) Company paid parking
is provided at a facility near the executive's
office location.
- --------------------------------------------------------------------------------
Business Travel (Prerequisite: SVP+ title) Executives may travel
business class if the flight is greater than three
hours. If business class is not available, the
executive must travel coach. First class travel
is not permitted.
- --------------------------------------------------------------------------------
Chauffeur Service Pool drivers are available for business purposes
only.
- --------------------------------------------------------------------------------
Club Memberships Available to executives on a business need basis.
Company pays all initiation fees for luncheon and
country clubs in addition to 100% of the monthly
luncheon club dues and 50% of the monthly country
club dues.
Note: The Company will not maintain a membership
in any club that discriminates in its membership
or guest policies on the basis of race, religion,
sex, age, national origin, sexual orientation,
handicap, or veteran status.
- --------------------------------------------------------------------------------
Executive Financial (Prerequisite: Age 55+) Utilizing a financial
Counseling planner of their choice, executives are eligible
for a one-time comprehensive initial financial
plan ($6,000) and an annual allowance of $2,500
for personal income tax preparation, investment
and estate planning, as well as other related
financial planning services as appropriate.
- --------------------------------------------------------------------------------
Vacation Executives do not have an accrued annual vacation
entitlement. They may schedule paid time off as
appropriate.
- --------------------------------------------------------------------------------
Incentive Plan (Bonus) IL2 executives may participate in either the
Senior Management Incentive Program (SMIP) or a
business specific plan, if appropriate. IL3
executives participate in the Annual Management
Incentive Program (AMIP) or in a business-specific
plan. SMIP and AMIP participants may have, at the
discretion of the Vice Chair, a portion of their
annual bonus tied to corporate performance.
- --------------------------------------------------------------------------------
1992 Management Stock Plan Provides for discretionary grants of stock options
and restricted stock--to recognize current
contribution and future potential contribution to
the Bank.
================================================================================
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
Benefits/Perquisites Summary
Impact Levels 2 & 3, continued
================================================================================
Benefits/Perquisites Program Description
- --------------------------------------------------------------------------------
Health/Life/Long Term The Company contributes toward the cost of
Disability medical, dental, employee life insurance,
accidental death and dismemberment insurance,
and long term disability coverage.
- --------------------------------------------------------------------------------
RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
BankAmeraccount Defined benefit (cash balance) pension plan.
- ----------------
- --------------------------------------------------------------------------------
BankAmerishare 401(k) plan with matching employer
- --------------- contributions.
- --------------------------------------------------------------------------------
Supplemental Plan Provides for Company match and pension accruals
- ------------------ on qualified earnings in excess of IRS limits
($150,000).
- --------------------------------------------------------------------------------
Deferred Compensation Program Option to defer from 5% - 75% of base salary
- ------------------------------ and 0% - 100% of bonus. Deferred amounts not
subject to income tax withholding, but are
subject to employment taxes.
================================================================================
This chart is a brief summary of the perquisites and benefits currently made
available to executives. The Company reserves the right to change or end any
perquisite or benefit at any time. Please contact your Human Resource Officer
for additional information on the above perquisites described above. Also, see
Your Employee Handbook and any appendices for further information about health,
- ----------------------
life insurance, Long Term Disability and the Retirement Program.
<PAGE>
Exhibit 10.i
------------
Board of Directors
BankAmerica Corporation November 7, 1994
RESOLUTION ADOPTING AMENDMENTS TO THE
BANKAMERICA CORPORATION 1992 MANAGEMENT STOCK PLAN
--------------------------------------------------
The Board of Directors of BankAmerica Corporation ("BAC") authorized and
determined on November 7, 1994 the amendments to the BankAmerica Corporation
1992 Management Stock Plan (the "1992 MSP") as set forth in Exhibits 1, 2 and 3
hereto.
<PAGE>
EXHIBIT 1
Section 6.8 of the BankAmerica Corporation 1992 Management Stock Plan is
amended to read in its entirety as follows:
"6.8 Non-Assignability. Except as provided below, no Participant
shall have the right to alienate, assign, encumber, hypothecate or pledge
his or her interest in any Award under the Plan, voluntarily or
involuntarily, and any attempt to so dispose of any such interest prior to
payment thereof shall be void.
Any Participant who is an Executive Officer (as defined below) shall
have the right, subject to the conditions specified in the following
paragraph, to irrevocably transfer to Immediate Family Members (as defined
below) Options granted at any time under the Plan to any such Participant
("Executive Officer Participant"). As used in the Plan and the related
Award Agreements, the following terms, when written with initial capital
letters, shall have the meanings stated below:
(a) The term Executive Officer means an Executive Officer designated
by the Board for federal securities law purposes, provided such
officer is also a member of the Managing Committee of Bank of America
NT&SA.
(b) The term Immediate Family Members means (i) the children,
grandchildren or spouse of an Executive Officer Participant or (ii) a
trust for the benefit of such family members.
As conditions to such transferability of any Options, (i) the
Executive Officer Participant may not receive any consideration for the
transfer; (ii) the Award Agreements pursuant to which such Options are
granted, or amendments to the Award Agreements with respect to previously
granted Options, in each case approved by the Committee, must specify the
actual extent to which such Options may be transferred, all in accordance
with the terms of the Plan; and (iii) the Options so transferred must
continue to be subject to the same terms and conditions that were
applicable to such Options prior to their transfer.
The transferee of any Options transferred in accordance with the terms
and conditions of the Plan shall have the right to exercise such Options
and to have the shares of Common Stock covered by such Options registered
in the name of such transferee, as though such transferee were the Optionee
for purposes of Section 2.7 of the Plan.
Notwithstanding anything contained in this Section 6.8, the
Company shall have the right to offset from any unpaid or deferred Award
any amounts due and owing from the Participant
<PAGE>
to the extent permitted by law; provided, however, that with respect to any
-------- -------
Options that are transferred in accordance with the terms and conditions of
the Plan, such right shall cease upon the transfer."
<PAGE>
EXHIBIT 2
The first sentence of Section 5.1 of the BankAmerica Corporation 1992
Management Stock Plan is amended to read in its entirety as follows:
"The Committee is hereby authorized to grant to Participants such
awards that are denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, shares of Common Stock
(including, without limitation, securities convertible into shares of
Common Stock) as are deemed by the Committee to be consistent with the
purposes of the Plan; provided, however, that such grants must comply with
-------- -------
Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, and applicable law, except
that Options may be transferable to the extent permitted by, and in
accordance with the provisions of, Section 6.8 of the Plan."
<PAGE>
EXHIBIT 3
Section 1.3(n) of the BankAmerica Corporation 1992 Management Stock
Plan is amended to read in its entirety as follows:
"(n) Other Stock-Based Award means an Award granted pursuant to
Section 5.1 of the Plan."
<PAGE>
Exhibit 11
----------
BANKAMERICA CORPORATION
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Year Ended December 31
(Dollar amounts in millions, except ----------------------------------------
per share data) 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Income before extraordinary credit $ 2,176 $ 1,954 $ 1,492
Extraordinary credit - - -
------------ ------------ ------------
Net income 2,176 1,954 1,492
Less: Preferred stock dividends 248 241 169
------------ ------------ ------------
Net Income Applicable to Common Stock $ 1,928 $ 1,713 $ 1,323
------------ ------------ ------------
Average number of common shares
outstanding 357,312,433 355,106,722 308,190,534
Average number of common and common
equivalent shares outstanding 359,793,169 357,679,670 312,218,182
Average number of common shares
outstanding assuming full dilution 365,273,824 363,243,993 317,855,736
Earnings per common and common
equivalent share $ 5.36 $ 4.79 $ 4.24
Earnings per common share-
assuming full dilution $ 5.33 $ 4.76 $ 4.21
</TABLE>
Earnings per common and common equivalent share are computed by dividing net
income applicable to common stock by the total of the average number of common
shares outstanding and the additional dilutive effect of stock options and
warrants outstanding during the respective period. The dilutive effect of stock
options and warrants is computed using the average market price of BankAmerica
Corporation's common stock for the period.
Earnings per common share, assuming full dilution, are computed based on the
average number of common shares outstanding during the period, and the
additional dilutive effect of stock options and warrants outstanding during the
period. The dilutive effect of outstanding stock options and warrants is
computed using the greater of the closing market price or the average market
price of BankAmerica Corporation's common stock for the period. Earnings per
common share, assuming full dilution, also includes the dilution which would
result if BankAmerica Corporation's 6 1/2% Cumulative Convertible Preferred
Stock, Series G (Convertible Preferred Stock), outstanding during the period had
been converted at the beginning of the period. Net income applicable to common
stock is adjusted for dividends declared on the Convertible Preferred Stock of
$16 million during the years ended December 31, 1994, 1993 and 1992.
<PAGE>
Exhibit 12(a)
----------
Page 1 of 3
-----------
BANKAMERICA CORPORATION
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
(dollar amounts in millions) 1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Excluding Interest On Deposits
Fixed charges:
Interest expense (other
than interest on deposits) $1,505 $1,215 $1,126 $ 743 $ 912
Interest factor in rent expense 109 112 95 82 85
Other 3 2 1 1 1
------ ------ ------ ------ ------
$1,617 $1,329 $1,222 $ 826 $ 998
------ ------ ------ ------ ------
Earnings:
Income from operations $2,176 $1,954 $1,492 $1,124 $1,115
Applicable income taxes 1,541 1,474 1,190 749 284
Fixed charges 1,617 1,329 1,222 826 998
Other (55) (39) (14) (15) (16)
------ ------ ------ ------ ------
$5,279 $4,718 $3,890 $2,684 $2,381
------ ------ ------ ------ ------
Ratio of earnings to fixed charges,
excluding interest on deposits 3.26 3.55 3.18 3.25 2.39
Including Interest On Deposits
Fixed charges:
Interest expense $4,842 $4,186 $4,895 $5,388 $6,097
Interest factor in rent expense 109 112 95 82 85
Other 3 2 1 1 1
------ ------ ------ ------ ------
$4,954 $4,300 $4,991 $5,471 $6,183
------ ------ ------ ------ ------
Earnings:
Income from operations $2,176 $1,954 $1,492 $1,124 $1,115
Applicable income taxes 1,541 1,474 1,190 749 284
Fixed charges 4,954 4,300 4,991 5,471 6,183
Other (55) (39) (14) (15) (16)
------ ------ ------ ------ ------
$8,616 $7,689 $7,659 $7,329 $7,566
------ ------ ------ ------ ------
Ratio of earnings to fixed charges,
including interest on deposits 1.74 1.79 1.53 1.34 1.22
</TABLE>
<PAGE>
Exhibit 12(a)
----------
Page 2 of 3
-----------
BANKAMERICA CORPORATION
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
(dollar amounts in millions) 1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Excluding Interest On Deposits
Fixed charges and preferred
dividends
Interest expense (other
than interest on deposits) $1,505 $1,215 $1,126 $ 743 $ 912
Interest factor in rent expense 109 112 95 82 85
Preferred dividend
requirements/a/ 424 423 304 102 58
Other 3 2 1 1 1
------ ------ ------ ------ ------
$2,041 $1,752 $1,526 $ 928 $1,056
------ ------ ------ ------ ------
Earnings:
Income from operations $2,176 $1,954 $1,492 $1,124 $1,115
Applicable income taxes 1,541 1,474 1,190 749 284
Fixed charges, excluding
preferred dividend
requirements 1,617 1,329 1,222 826 998
Other (55) (39) (14) (15) (16)
------ ------ ------ ------ ------
$5,279 $4,718 $3,890 $2,684 $2,381
------ ------ ------ ------ ------
Ratio of earnings to fixed
charges, and preferred
dividends, excluding
interest on deposits 2.59 2.69 2.55 2.89 2.25
Including Interest On Deposits
Fixed charges and preferred
dividends
Interest expense $4,842 $4,186 $4,895 $5,388 $6,097
Interest factor in rent expense 109 112 95 82 85
Preferred dividend requirement/a/ 424 423 304 102 58
Other 3 2 1 1 1
------ ------ ------ ------ ------
$5,378 $4,723 $5,295 $5,573 $6,241
------ ------ ------ ------ ------
Earnings:
Income from operations $2,176 $1,954 $1,492 $1,124 $1,115
Applicable income taxes 1,541 1,474 1,190 749 284
Fixed charges, excluding
preferred dividend
requirements 4,954 4,300 4,991 5,471 6,183
Other (55) (39) (14) (15) (16)
------ ------ ------ ------ ------
$8,616 $7,689 $7,659 $7,329 $7,566
------ ------ ------ ------ ------
Ratio of earnings to fixed charges,
and preferred dividends, including
interest on deposits 1.60 1.63 1.45 1.32 1.21
</TABLE>
See notes on page 3 of this exhibit
<PAGE>
Exhibit 12(a)
----------
Page 3 of 3
-----------
BANKAMERICA CORPORATION
Notes to
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends
/a/ Preferred stock dividend requirements represent pretax earnings necessary
to cover preferred stock dividends declared during the years ended December
31, 1994, 1993, 1992, 1991, and 1990 of $248 million, $241 million, $169
million, $61 million, and $46 million, respectively.
<PAGE>
Exhibit 12(b)
-------------
Page 1 of 2
-----------
BankAmerica Corporation
Historical and Pro Forma Combined Ratio of Earnings
to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. The ratio of earnings to combined fixed charges and preferred
stock dividends is computed by dividing earnings by the sum of fixed charges and
preferred stock dividend requirements. Earnings consist primarily of income
(loss) before income taxes adjusted for fixed charges. Fixed charges consist
primarily of interest expense on short- and long-term borrowings and one-third
(the portion deemed representative of the interest factor) of net rents under
long-term leases.
The following table sets forth (i) the historical ratios of earnings to
fixed charges and the ratios of earnings to combined fixed charges and preferred
stock dividends for the year ended December 31, 1992 for BankAmerica Corporation
and its consolidated subsidiaries (BAC) and for Security Pacific Corporation and
its consolidated subsidiaries (SPC) and (ii) the pro forma combined ratios of
earnings to fixed charges and ratios of earnings to combined fixed charges and
preferred stock dividends for the year ended December 31, 1992, giving effect to
the April 22, 1992 merger between BAC and SPC (the Merger) as if it had been
consummated on January 1, 1991. The pro forma combined ratio has been calculated
using the pro forma combined financial information for the year ended December
31, 1992, and should be read in conjunction with and is qualified in its
entirety by such pro forma combined information included in the 1994 Annual
Report to Shareholders. Pro forma adjustments made to arrive at the pro forma
combined ratio are based on the purchase method of accounting and are based upon
actual amounts recorded by BAC subsequent to the effective time of the Merger.
<PAGE>
Exhibit 12(b)
-------------
Page 2 of 2
-----------
<TABLE>
<CAPTION>
Year Ended
December 31, 1992
---------------------------------
Historical Pro Forma
---------------- ---------
BAC/a/ SPC Combined
------ --- ---------
<S> <C> <C> <C>
Ratio of Earnings to Fixed Charges
Excluding interest on deposits 3.18 /b/ 2.05
Including interest on deposits 1.53 /b/ 1.27
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends
Excluding interest on deposits 2.55 /b/ 1.87
Including interest on deposits 1.45 /b/ 1.26
- --------------------------------------------------------------------------
</TABLE>
/a/ This financial information reflects the effects of the Merger subsequent to
the Merger's consummation on April 22, 1992.
/b/ Because the Merger was consummated on April 22, 1992, there is no year-to-
date data for SPC.
These pro forma combined ratios are intended for informational purposes and
are not necessarily indicative of the future ratios of earnings to fixed charges
and ratios of earnings to combined fixed charges and preferred stock dividends
of the combined company or the ratios of earnings to fixed charges and ratios of
earnings to combined fixed charges and preferred stock dividends of the combined
company that would have actually occurred had the Merger been effective on
January 1, 1991.
<PAGE>
Exhibit 13
----------
BANKAMERICA CORPORATION ANNUAL REPORT
[BANKAMERICA CORPORATION LOGO APPEARS HERE]
1994 BANKAMERICA CORPORATION
ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
BankAmerica Today
- --------------------------------------------------------------------------------
BankAmerica Corporation and its consolidated subsidiaries provide diverse
financial products and services to individuals, businesses, government
agencies, and financial institutions throughout the world. BankAmerica
Corporation is the second-largest bank holding company in the United States,
based on total assets at December 31, 1994.
BankAmerica's principal banking subsidiaries operate full-service branches in
California, Washington, Texas, Arizona, Oregon, Nevada, New Mexico, Hawaii,
Idaho, and Alaska, as well as corporate banking and business credit offices
in major U.S. cities, and branches, corporate offices, and representative
offices in 36 countries. Bank of America Illinois, created as a result of
BankAmerica's 1994 acquisition of Continental Bank Corporation, provides a
full range of financial services to business and private banking clients in
the Midwest. Large corporate clients are served through Bank of America's
U.S. Corporate Group, which, since the acquisition of Continental, has been
headquartered in Chicago.
- --------------------------------------------------------------------------------
Note: The following abbreviations, among others, appear in the text of this
report: BankAmerica Corporation and its consolidated subsidiaries (BankAmerica,
BAC), BankAmerica Corporation (the parent), Bank of America NT&SA (Bank of
America, BofA, the bank), Continental Bank Corporation (Continental), Seafirst
Corporation (Seafirst), and Seattle-First National Bank (Seattle-First).
Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Chairman's Letter to Shareholders 2
Review of Major Business Sectors 8
- --------------------------------------------------------------------------------
Overview 18
Ratio and Stock Data 18
Selected Financial Data 19
Business Sectors 19
Results of Operations 22
Net Interest Income 22
Noninterest Income 22
Noninterest Expense 24
Income Taxes 25
Comparison of 1993 Versus 1992 25
Balance Sheet Review 26
Off-Balance-Sheet Financial Instruments 28
Credit-Related Financial Instruments 28
Foreign Exchange and Derivatives Contracts 28
Risk Management 28
Credit Risk Management 29
Overview 29
Off-Balance-Sheet Credit Risk 30
Loan Portfolio Management 30
Allowance for Credit Losses 34
Nonperforming Assets 37
Market Risk Management 39
Overview 39
Off-Balance-Sheet Market Risk 39
Interest Rate Risk Management 40
Liquidity Risk Management 42
Overview 42
Liquidity Review 43
Operational and Settlement Risk Management 43
Capital Management 44
- --------------------------------------------------------------------------------
Report of Management 46
Report of Independent Auditors 47
Consolidated Financial Statements 48
Notes to Consolidated Financial Statements 52
- --------------------------------------------------------------------------------
Boards of Directors/BankAmerica Corporation
and Bank of America NT&SA 85
Honorary Directors/BankAmerica Corporation
and Bank of America NT&SA (nonvoting) 85
Principal Officers/BankAmerica Corporation 86
Advisor/BankAmerica Corporation 86
Chairmen/Presidents/Other Subsidiary Banks 86
Senior Management Council/
Bank of America NT&SA 87
BankAmerica Corporate Governance Principles 88
</TABLE>
<PAGE>
Strategy: Combine superior quality, locally
managed sales and service capabilities with
large-scale, cost-efficient processing. Offer
customers a wide variety of distribution
choices so that they can access the bank
when, where, and how they wish.
Consumer Banking provides a full array of deposit and loan products to
individuals and small businesses through branches, ATMs, phone, and other
delivery channels throughout ten western states. It also provides credit
card, home mortgage, manufactured housing financing, and consumer finance
products throughout the United States, and consumer banking in Hong Kong,
India, and the Philippines. We report the results of our western states banks
other than those in California and Washington separately, as "Non-California
Banks."
Consumer Banking
- --------------------------------------------------------------------------------
Our consumer banking operations serve the largest customer base of any bank
in the western United States - about 10 million households in 1994. In the
ten western states in which we operate, we offer the largest full-service
branch network - nearly 2,000 branches. Our proprietary network of more than
5,500 ATMs is by far the nation's largest.
Still, customers today require an even greater range of choices. For example,
in California, we now conduct two telephone and ATM transactions for every
teller transaction in a traditional branch. And demand for new delivery
channels continues to grow. To keep pace with our customers' changing
expectations, we have implemented a variety of options, including 133
supermarket and other in-store branches operating with extended hours in nine
states. These branches save customers time and help us to control our costs.
We expect to open more during 1995.
8
<PAGE>
<TABLE>
<CAPTION>
Consumer Banking Net Income (Pie chart in non-EDGAR version)
- --------------------------------------------------------------------------------
Consumer ($ millions) 1994
------
<S> <C>
Retail Deposits $ 383
Credit Card $ 237
Consumer & Residential Loans $ 153
Other $ 109
Non-California Banks ($ millions) 1994
------
Arizona $ 45
Nevada $ 36
Oregon $ 21
Texas $ (37)
Other $ (14)
</TABLE>
- --------------------------------------------------------------------------------
We also have opened self-service branches in Washington, New Mexico, and Alaska
that can handle nearly all transactions that can be done in a traditional branch
via ATM and interactive video. In addition, we have invested significantly in
two core products - mortgages and credit cards - that can be distributed through
our branch system, as well as nationally through other channels.
Our current efforts to broaden our delivery and product capabilities are not
focused primarily on further acquisitions, particularly branch bank
acquisitions, where we believe that prices recently have been generally too high
to enable us to create value for our shareholders. Instead, we are focused on
three major challenges: improving the profitability of our newer banks by
continuing to integrate operations and improving the customer/product/delivery
channel mix; managing the transition in the branch system to a configuration in
which the number of traditional branches declines gradually, but the total
number of ways we reach our customers increases dramatically; and increasing
shareholder value by making our full range of consumer products and delivery
systems available in combinations and at prices that are profitable.
<TABLE>
<CAPTION>
Consumer Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 5,907 $ 6,158
Expense 3,657 3,887
Provision for Credit Losses 679 875
Net Income 882 781
Average Loans 58,253 56,847
Average Deposits 76,702 78,121
Average Common Equity 4,952 4,779
Return on Average Common Equity 16.1% 14.5%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Non-California Banks Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 1,212 $ 1,120
Expense 1,123 1,148
Provision for Credit Losses (4) (25)
Net Income (Loss) 51 (12)
Average Loans 12,591 11,246
Average Deposits 23,628 24,754
Average Common Equity 1,470 1,391
Return on Average Common Equity 1.8% -
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Strategy: Be the most important provider of
financial services to customers in our markets
by developing deep relationships based on our
breadth of high quality financial products and
services and our global capabilities.
U.S. Corporate and International Banking provides credit, trade finance, cash
management, investment banking and capital-raising services, capital markets
products, and financial advisory services to large domestic and foreign
institutions that are part of the global economy and affected by global
financial flows. With the acquisition of Continental, BankAmerica's U.S.
Corporate Group has become the largest corporate banker in the United States.
BankAmerica has relationships with more than 85 percent of the Fortune 500
corporations, including virtually all of the 100 largest U.S. corporations,
and the ability to serve the needs of institutional clients anywhere in the
world.
U.S. Corporate and
International Banking
- --------------------------------------------------------------------------------
Corporate banking is for us a relationship business. The most profitable
relationships tend to be those in which we are a top-tier provider - either the
lead bank or the second most important banking company used by a given client.
In the United States, independent surveys indicate that BankAmerica is the
nation's largest corporate banking company in terms of key relationships. Our
focus is on these profitable relationships and on products and services that
tend to have less volatile income.
In addition to global reach, our ability to provide clients access to capital
and to help them manage their risk and lower their funding costs are key
elements in enabling us to deepen our relationships. Both capital-raising and
credit products form the foundation of many strong relationships.
BankAmerica is the largest bank-affiliated commercial paper dealer in the
country, the third-largest syndication agent/co-agent, and a world-class
competitor in leasing.
10
<PAGE>
<TABLE>
<CAPTION>
U.S. Corporate and International Banking Net Income
(Pie chart in non-EDGAR version)
- --------------------------------------------------------------------------------
U.S. Corporate and International ($ millions) 1994
<S> <C>
U.S. Corporate Group $ 247
Latin America/Canada $ 115
Asia Wholesale $ 111
Europe, Middle East & Africa $ 64
Other $ 114
</TABLE>
- --------------------------------------------------------------------------------
We also are among the leading providers of cash management services both
domestically and internationally, with a reputation for high quality service and
a strong technological edge in offshore markets.
Quality of service is another important factor. BankAmerica's quality has
been borne out in independent surveys that rate our foreign exchange business
the best in the country in terms of overall quality. Further, much of our
trading is customer-driven, so our trading income tends to be less volatile than
some of our competitors.
The acquisition of Continental, in addition to expanding our U.S. corporate
customer base, has linked us with a company whose corporate culture strongly
emphasized quality of service and whose reputation as a quality provider is
widely known in the business world.
We have focused our international network to emphasize the Pacific Rim, which
capitalizes on our unique position as the only west coast-based corporate
bank. Thus, in the last decade, we have reduced our foreign office presence
from 80 countries to 36, while expanding our presence in key Asian and Latin
American countries. Through these efforts, we have controlled our costs even
while building expertise, by sizing our corporate banking activities to
market needs.
Going forward, we need to continue to enhance our cash management
capabilities. We also need to build our capital-raising and capital markets
capabilities, including the origination, distribution, and trading of
corporate debt. The rapid growth and globalization of these markets is
expected to continue.
<TABLE>
<CAPTION>
U.S. Corporate and International Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 2,614 $ 2,445
Expense 1,537 1,360
Provision for Credit Losses 14 (158)
Net Income 651 776
Average Loans 32,186 30,681
Average Deposits 25,889 19,448
Average Common Equity 4,976 4,123
Return on Average Common Equity 11.4% 17.0%
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Strategy: Build broad financial service
relationships with a select group of real
estate customers. Additionally, use our
knowledge of the real estate business to
provide selected transactional products
and services.
The Commercial Real Estate group provides credit and other financial services
to a variety of real estate market segments, including developers, investors,
pension fund advisors, real estate investment trusts, and property managers.
Local clients are served through offices across California and in ten other
states. National clients, such as publicly traded corporations and
institutional-quality private entities, are served through offices in
California and Chicago.
Commercial Real Estate
- --------------------------------------------------------------------------------
The commercial real estate group provides a range of financial services to
several distinct customer groups. The traditional core of this business has
been to maintain full-service relationships with two corporate groups:
established national or large regional real estate developers, and smaller
local firms. We serve these groups through our banks in western states and
Illinois.
Credit often has been a foundation of these relationships. As conditions in
real estate markets that we serve began to stabilize in 1994, we experienced
renewed growth in new on-balance-sheet lending. To our real estate customers
we also provide convenient access to other financial services, including a
vast array of deposit, cash management, and investment products through their
relationship managers.
The real estate business has changed significantly in recent years, however,
and BankAmerica has changed with it. Most significantly, the capital markets
have
12
<PAGE>
<TABLE>
<CAPTION>
Commercial Real Estate Net Income (Pie chart in non-EDGAR version)
- --------------------------------------------------------------------------------
1994
------
<S> <C>
Commercial Real Estate $ 329 million
</TABLE>
become an increasingly important source of commercial real estate financing.
Pension funds and other investors have supplemented banks and insurance
companies as sources of both construction and permanent mortgage financing, and
new competitors have emerged, notably investment banks.
BankAmerica, therefore, has expanded its product offerings to encompass a full
range of capital markets activities. For example, in addition to our long-
standing capabilities to privately place customers' debt, we have established a
specialized unit to handle real estate syndications to broaden our customers'
access to debt financing sources. Further responding to the growth of the
commercial real estate securities market, we recently entered into a
relationship that enables us to originate loans for sale into the secondary
market.
The growing importance of these capital markets-based funding sources also has
led to growth in the demand for specialized services apart from the funding
itself. We have responded by revitalizing our program for the servicing of whole
loans and collateral for commercial mortgage-backed securities originated by
others.
Thus, in this changing environment, we believe we offer the best financing
available to our real estate customers and the best operating services available
to other providers of funding.
<TABLE>
<CAPTION>
Commercial Real Estate Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 474 $ 485
Expense 127 168
Provision for Credit Losses (214) 87
Net Income 329 135
Average Loans 9,590 11,611
Average Deposits 1,756 2,431
Average Common Equity 1,025 979
Return on Average Common Equity 30.4% 12.0%
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Strategy: Become the most important provider
of diversified financial services to our customers
based on strong relationships with companies,
their ownership, and management.
Middle-Market Banking provides a full range of banking products and services
to companies with annual revenues between $5 million and $250 million.
BankAmerica serves middle-market customers throughout the West and, since the
acquisition of Continental, in the Midwest. Financial results for this sector
include California, Washington, and Illinois only; middle-market banking
results in other states are included in Non-California Banks.
Middle-Market Banking
- --------------------------------------------------------------------------------
The financial needs of middle-market companies are becoming increasingly
sophisticated. This makes access to a breadth of high quality cash management,
capital markets, trade finance, and other financial services increasingly
important. In addition, many middle-market companies are privately owned, making
the connection between the businesses and the individuals who own them very
strong. Providing preferred banking services to the owners personally can be a
key element in gaining and retaining relationships.
For these reasons, middle-market banking is still first and foremost a
relationship business at BankAmerica. We seek to develop a complete financial
relationship with the company, its owners, and its management. Efficiently
providing a wide array of products needed by each of our customers is key to
developing relationships that create value for both those customers and for
our shareholders.
We consolidate certain administrative and operational functions regionally,
in order to achieve economies of
14
<PAGE>
<TABLE>
<CAPTION>
Middle-market Banking Net Income (Pie chart in non-EDGAR version)
- --------------------------------------------------------------------------------
1994
------
<S> <C>
Middle-market $ 234 million
</TABLE>
- --------------------------------------------------------------------------------
scale in a variety of transaction, cash management, and other non-credit
products. BAC also centrally manages credit policies, credit examination, credit
training, and the overall credit portfolio throughout the business in order to
keep our policies and procedures consistent and control credit risk. Credit
approval, however, is decentralized, in order to be responsive to local market
conditions. Similarly, sales and marketing efforts vary by region, with the
objective of encouraging account officers to focus on the specific needs of
local markets.
This combination of centralized operations and local management of customer
relationships has given us an ability to be both efficient and responsive. It
has also given us significant, profitable market share positions in California,
Illinois, Washington, Nevada, and Arizona.
Going forward, we expect to bring to bear the same multi-product delivery
capabilities to build this business in the rest of our western states network.
We also plan to further improve this business by emphasizing the most profitable
relationships and by seeking ways to improve the profitability of all our
relationships.
We include in this sector financial results from BankAmerica Business Credit,
an asset-based lending operation doing business in 40 states through offices
in 14 states. BankAmerica Business Credit makes loans and provides other
financial services to mid-sized and large companies whose credit and other
specialized needs might not be met by traditional banks.
<TABLE>
<CAPTION>
Middle-Market Banking Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 727 $ 690
Expense 387 385
Provision for Credit Losses (56) 17
Net Income 234 168
Average Loans 12,261 11,511
Average Deposits 6,834 6,563
Average Common Equity 751 696
Return on Average Common Equity 29.4% 22.3%
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
Strategy: Use our extensive domestic and
international distribution systems to offer an
array of products and services designed to meet
the needs of individuals who are building or
preserving wealth.
Private Banking provides a broad range of banking, personal trust, and
investment services to clients worldwide who require specialized personal
services. Investment Services provides a broad range of investment products,
including mutual funds, fixed-income securities, annuities, and equities.
Private Banking
and Investment Services
- --------------------------------------------------------------------------------
The accumulation of wealth by an aging population, the transfer of wealth
between generations, and the growing globalization of investment opportunities
are creating new customers and increasing the need for sophisticated expertise
in these businesses. Moreover, the opportunity to better serve the customers
that we already have creates additional growth potential. For example, we are
dedicated to meeting the investment, customized credit, transactional, and
estate-planning needs of the estimated 100,000 existing Bank of America
households in California that have the financial characteristics that warrant
the services of The Private Bank. We are investing in management, technology,
and investment talent in order to increase our capabilities and to tap that
potential.
Through our investment centers in San Francisco, Los Angeles, Chicago, and
Seattle, Investment Services brings together a range of investment and risk
management specialists with the objective of providing our
16
<PAGE>
<TABLE>
<CAPTION>
Private Banking and Investment Services Net Income
(Pie chart in non-EDGAR version)
- --------------------------------------------------------------------------------
Private Banking and Investment Services ($ millions) 1994
------
<S> <C>
Private Banking $ 50
Investment Services (excluding capital contribution) $ (7)
Capital Contribution (after tax) $ (49)
Other $ 7
</TABLE>
- --------------------------------------------------------------------------------
customers with the best investment opportunities available. We supplement our
own skills by offering investment products provided by others.
We decentralize distribution, however, to deliver our global capabilities on
a local level. We use our domestic network of nearly 2,000 branches, more
than 400 securities brokers, offices in 36 countries, and correspondent
relationships with more than 2,000 banks throughout the world, to address the
wealth management needs of customers ranging from the very wealthy to the
middle class saving for retirement.
Our focus is on customers who need financial advice. Private bankers, trust
officers, and brokers provide access to the complete capabilities of Bank of
America and selected other providers, in order to tailor solutions to meet
the financial needs and goals of their clients.
We believe that this combination of centralized asset management expertise
and decentralized distribution will allow us both to grow and to increase
profitability in these businesses, while serving the needs of our clients. We
are investing in technology and products to improve our capabilities.
<TABLE>
<CAPTION>
Private Banking and Investment Services
Financial Highlights
($ millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 414 $ 407
Expense 414* 313
Provision for Credit Losses - (6)
Net Income 1 59
Average Loans 2,794 2,233
Average Deposits 4,810 4,884
Average Common Equity 319 264
Return on Average Common Equity - 20.5%
- --------------------------------------------------------------------------------
</TABLE>
*Includes $83 million capital contribution to mutual funds
17
<PAGE>
- --------------------------------------------------------------------------------
Financial Review
- --------------------------------------------------------------------------------
Overview
BankAmerica Corporation and subsidiaries (BAC) reported earnings per share in
1994 of $5.36, an increase of 12 percent from $4.79 in 1993. Net income in 1994
was $2,176 million, up 11 percent from $1,954 million in 1993. Return on average
common equity was 13.20 percent in 1994, up from 12.88 percent in 1993.
During the year, BAC continued to diversify and expand its revenue sources.
In the third quarter, BAC completed its merger with Continental Bank Corporation
(Continental), improving its access to wholesale and middle market customers,
particularly in the Midwest. BAC designated Chicago as the headquarters of its
U.S. corporate banking business and renamed Continental Bank as Bank of America
Illinois, which is now responsible for private banking and middle-market
services in the midwestern United States. The 1994 results include the effects
of the merger with Continental subsequent to its consummation on August 31,
1994.
BAC also expanded its mortgage banking business with the acquisitions of
United Mortgage Holding Company in Minnesota and the Virginia processing
operations of Margaretten Mortgage. On February 1, 1995, BAC completed the
acquisition of Arbor National Holdings, Inc., based in New York.
The increase in 1994 earnings over 1993 is primarily attributable to
substantial improvement in credit quality and increased net interest income. The
provision for credit losses in 1994 was $460 million, down $343 million, or 43
percent, from the same period a year ago. Net credit losses for 1994 decreased
$645 million, or 58 percent, from the amount reported in 1993. Total nonaccrual
assets declined by $806 million, or 28 percent, from $2,886 million at year-end
1993 to $2,080 million at year-end 1994. As a result, BAC's ratio of nonaccrual
loans to total loans declined to 1.48 percent at year-end 1994 from 2.28 percent
at December 31, 1993.
Net interest income was $7,542 million in 1994, up $101 million from $7,441
million in 1993. BAC's net interest margin was 4.50 percent for 1994, down 19
basis points from 4.69 percent for 1993.
Noninterest income decreased $126 million, or 3 percent, from $4,273
million in 1993 to $4,147 million in 1994. Noninterest expense was $7,512
million in 1994, up $29 million from $7,483 million in 1993.
Total loans at December 31, 1994 were $140.9 billion, up $14.3 billion, or
11 percent, from $126.6 billion at year-end 1993. The allowance for credit
losses at December 31, 1994 was $3,690 million, representing 2.62 percent of
loan outstandings, compared with $3,508 million, or 2.77 percent, at December
31, 1993.
Ratio and Stock Data
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Selected Financial Ratios
Rate of return (based on net income) on:
Average common equity 13.20% 12.88% 12.65%
Average total equity 12.30 12.00 11.84
Average total assets 1.08 1.05 0.90
Ratio of common equity to total assets 7.34 7.58 6.92
Ratio of total equity to total assets 8.77 9.17 8.57
Ratio of average total equity to average total assets 8.76 8.79 7.60
Dividend payout ratio 29.63 28.99 30.30
Stock Data
Book value per common share at year end $42.63 $39.58 $35.88
Closing common stock price 39 1/2 46 3/8 46 1/2
Number of common shares outstanding at year end/a/ 371,182,004 357,912,170 348,602,976
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/There were 162,281 common stockholders of record at January 31, 1995.
Note: Information included in the text and tables of the Financial Review
reflects the effects of the Continental merger subsequent to its consummation on
August 31, 1994 and the effects of the Security Pacific Corporation (SPC) merger
subsequent to its consummation on April 22, 1992.
18
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
(dollar amounts in millions, except per share data) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results
Interest income $ 12,384 $ 11,627 $ 11,613 $ 9,860 $ 10,249
Interest expense 4,842 4,186 4,895 5,388 6,097
-------------------------------------------------------------------------
Net interest income 7,542 7,441 6,718 4,472 4,152
Provision for credit losses 460 803 1,009 805 905
Noninterest income 4,147 4,273 3,649 2,408 2,074
Noninterest expense 7,512 7,483 6,676 4,202 3,922
-------------------------------------------------------------------------
Income before income taxes and extraordinary credit 3,717 3,428 2,682 1,873 1,399
Provision for income taxes 1,541 1,474 1,190 749 522
-------------------------------------------------------------------------
Income before extraordinary credit 2,176 1,954 1,492 1,124 877
Extraordinary credit resulting from previously
unrecognized tax benefits -- -- -- -- 238
-------------------------------------------------------------------------
Net Income $ 2,176 $ 1,954 $ 1,492 $ 1,124 $ 1,115
Per Share Data
Earnings per Common and Common Equivalent Share:
Income before extraordinary credit $ 5.36 $ 4.79 $ 4.24 $ 4.81 $ 3.85
Net income 5.36 4.79 4.24 4.81 4.95
Earnings per Common Share -- Assuming Full Dilution:
Income before extraordinary credit 5.33 4.76 4.21 4.78 3.84
Net income 5.33 4.76 4.21 4.78 4.94
Dividends declared per common share 1.60 1.40 1.30 1.20 1.00
Balance Sheet Data at Year End
Loans $140,912 $126,556 $126,611 $ 86,634 $ 85,815
Total assets 215,475 186,933 180,646 115,509 110,728
Deposits 154,394 141,618 137,883 94,067 92,321
Long-term debt and subordinated capital notes 15,428 14,115 16,395 4,378 3,931
Common equity 15,823 14,165 12,509 6,737 5,806
Total equity 18,891 17,144 15,488 8,063 6,419
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Business Sectors
BAC internally segregates its operations into business sectors. However, since
BAC's operations are highly integrated, certain non-sector-specific income,
expenses, assets, and liabilities must be allocated to the appropriate customer
and market sectors. Domestic sources of funds, overhead, and federal and state
taxes are allocated in this process. Furthermore, for internal business sector
monitoring, the unallocated allowance for credit losses and related provision
for credit losses are allocated to the business sectors. Equity is assigned on a
risk-adjusted basis. The information set forth in the table on pages 20-21
reflects the condensed income statements and selected average balance sheet
components and financial ratios by business sectors. The information presented
does not represent the business sectors' financial condition and results of
operations as if they were managed as independent entities.
For a detailed discussion of the composition of each business sector, refer
to pages 8-17.
Consumer Banking
Net income for Consumer Banking was up $101 million, or 13 percent, from the
amount for 1993, largely reflecting improved results in BAC's retail deposit and
credit card businesses. Noninterest expense decreased primarily due to lower
personnel expense and operating losses in 1994. The decrease in the provision
for credit losses was due to improved credit quality in 1994, particularly in
the credit card business. During 1994, average loan outstandings grew $1.4
billion, reflecting an increase in residential first mortgages. Average deposits
declined slightly primarily due to a drop in time deposits. The expense to
revenue ratio for this sector improved from 58.5 percent in 1993 to 57.7 percent
in 1994.
19
<PAGE>
Selected Business Sector Data
<TABLE>
<CAPTION>
Year Ended December 31, 1994/a/
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.
Corporate and Middle Private Banking Non-
Consumer International Commercial Market and Investment California
(dollar amounts in millions) Total Banking Banking Real Estate Banking Services Banks/b/ Other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Net interest income $7,542 $4,254 $1,050 $408 $578 $131 $ 871 $250
Provision for credit losses 460 679 14 (214) (56) -- (4) 41
Noninterest income 4,147 1,653 1,564 66 149 283 341 91
Noninterest expense 7,512 3,657 1,537 127 387 414 1,123 267
----------------------------------------------------------------------------------------------------
Income before income taxes 3,717 1,571 1,063 561 396 -- 93 33
Provision for (benefit from)
income taxes 1,541 689 412 232 162 (1) 42 5
----------------------------------------------------------------------------------------------------
Net Income (Loss) 2,176 882 651 329 234 1 51 28
Preferred stock dividends 248 84 84 17 13 5 25 20
----------------------------------------------------------------------------------------------------
Net income (loss)
attributable to
common equity $1,928 $ 798 $ 567 $312 $221 $ (4) $ 26 $ 8
(dollar amounts in millions)
Selected Average
Balance Sheet Components
Loans $128,421 $58,253 $32,186 $9,590 $12,261 $2,794 $12,591 $ 746
Earning assets 168,222 58,910 52,306 9,590 12,261 2,847 20,918 11,390
Total assets 202,068 65,187 67,729 9,441 14,004 3,293 23,957 18,457
Deposits 145,296 76,702 25,889 1,756 6,834 4,810 23,628 5,677
Common equity 14,606 4,952 4,976 1,025 751 319 1,470 1,113
Selected Financial Ratios
Return on average common equity 13.2% 16.1% 11.4% 30.4% 29.4% --% 1.8% 0.7%
Expense to revenue/c/ 60.5 57.7 57.7 28.4 51.3 97.9 84.3 64.7
</TABLE>
U.S. Corporate and International Banking
U.S. Corporate and International Banking's net income in 1994 decreased $125
million, or 16 percent, from the amount for 1993. This change was primarily due
to an increase in the provision for credit losses from ($158) million in 1993 to
$14 million in 1994. Despite declines in trading-related income, noninterest
income increased in 1994 largely due to sales of certain assets. The increase in
noninterest expense was attributable to post-merger Continental operations and
to investments supporting and expanding BAC's global capital markets
operations. The higher levels of noninterest expense, including merger-related
expenses, pushed up the expense to revenue ratio to 57.7 percent in 1994 from
54.3 percent in 1993. After adjusting for $2.5 billion of foreign loans
reclassified during 1994 to the securities portfolios, as discussed on page 27,
average loans increased $4.0 billion, or 13 percent, reflecting the Continental
merger and growth in foreign and commercial and industrial loans.
Commercial Real Estate
Commercial Real Estate's net income for 1994 increased $194 million, or 144
percent, from the amount for 1993. This increase can be attributed to a decrease
in the provision for credit losses from $87 million in 1993 to ($214) million in
1994 and to lower net other real estate owned (OREO) expense. The provision for
credit losses was down due to a lower level of problem assets and improved
market conditions. Net interest income was up in 1994 due to lower nonperforming
assets and increased interest collections. Noninterest income declined during
1994 due to fewer asset sales, resulting in lower gains on assets sold.
Noninterest expense decreased due to lower operating costs associated with
problem asset resolution. The expense to revenue ratio declined from 36.7
percent in 1993 to 28.4 percent in 1994.
Middle Market Banking
Middle Market Banking's net income in 1994 grew $66 million, or 39 percent, from
1993. This increase was primarily due to a decrease in the provision for credit
losses in 1993 from $17 million to ($56) million in 1994. The increase in net
20
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993/a/
------------------------------------------------------------------------------------------------
U.S.
Corporate and Middle Private Banking Non-
Consumer International Commercial Market and Investment California
(dollar amounts in millions) Total Banking Banking Real Estate Banking Services Banks/b/ Other
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Net interest income $7,441 $4,389 $ 967 $364 $545 $117 $ 784 $275
Provision for credit losses 803 875 (158) 87 17 (6) (25) 13
Noninterest income 4,273 1,769 1,478 121 145 290 336 134
Noninterest expense 7,483 3,887 1,360 168 385 313 1,148 222
------------------------------------------------------------------------------------------------
Income before income taxes 3,428 1,396 1,243 230 288 100 (3) 174
Provision for (benefit from)
income taxes 1,474 615 467 95 120 41 9 127
------------------------------------------------------------------------------------------------
Net Income (Loss) 1,954 781 776 135 168 59 (12) 47
Preferred stock dividends 241 87 75 18 13 5 25 18
------------------------------------------------------------------------------------------------
Net income (loss)
attributable to
common equity $1,713 $ 694 $ 701 $117 $155 $ 54 $ (37) $ 29
(dollar amounts in millions)
Selected Average
Balance Sheet Components
Loans $125,114 $56,847 $30,681 $11,611 $11,511 $2,233 $11,246 $ 985
Earning assets 159,008 57,519 41,231 11,612 11,511 2,320 20,250 14,565
Total assets 185,326 63,832 49,483 11,762 13,163 2,707 23,760 20,619
Deposits 140,229 78,121 19,448 2,431 6,563 4,884 24,754 4,028
Common equity 13,306 4,779 4,123 979 696 264 1,391 1,074
Selected Financial Ratios
Return on average common equity 12.9% 14.5% 17.0% 12.0% 22.3% 20.5% -- % 2.7%
Expense to revenue/c/ 59.5 58.5 54.3 36.7 52.5 74.8 91.8 42.4
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ For comparability purposes, both 1994 and 1993 amounts reflect BAC's
business-sector allocation methodologies at December 31, 1994.
/b/ Excludes Seafirst and Bank of America Illinois, which are reflected
within the applicable business sectors.
/c/ Excludes net other real estate owned expense and amortization of
intangibles.
interest income was primarily attributable to post-merger Continental
operations. Noninterest expense in 1994 was essentially unchanged from 1993,
even after the inclusion of post-merger Continental operations in this sector.
During 1994, average loan outstandings grew $0.8 billion and average deposits
grew $0.3 billion. These increases can primarily be attributed to loans and
deposits obtained in connection with the Continental merger.
Private Banking and Investment Services
Net income for Private Banking and Investment Services in 1994 decreased $58
million from net income in 1993. This decline was primarily due to $83 million
of capital additions to the Pacific Horizon mutual funds, as discussed on page
25. 1994 results for private banking and personal trust benefited from the
Continental merger and lower operating costs.
Non-California Banks
In 1994, net income for Non-California Banks (excluding Seafirst and Bank of
America Illinois) was $51 million, compared with a net loss of $12 million in
1993. Nearly all of the non-California banks experienced improved financial
results in 1994, particularly Texas, Nevada, and Arizona. Net interest income
was higher in 1994 due to loan portfolio growth and an improved mix of earning
assets and deposits. Noninterest expense for this sector declined slightly in
1994, reflecting benefits from the centralization of some support functions and
other operational efficiencies. During 1994, average loan outstandings for this
sector increased $1.3 billion, primarily due to growth in residential first
mortgages. Average deposits for this sector declined largely because high-rate
time deposits were allowed to run off. The expense to revenue ratio improved
from 91.8 percent in 1993 to 84.3 percent in 1994.
Other
Other amounts are primarily associated with BAC's institutional trust and
securities services, asset and liability management activities, and various
other services.
21
<PAGE>
Results Of Operations
Average Balances and Rates
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
1994 1993 1992
---------------------- ----------------------- -----------------------
(dollar amounts in millions) Balance/a/ Rate Balance/a/ Rate Balance/a/ Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-bearing deposits in banks $ 4,912 6.62% $ 2,642/b/ 7.36% $ 4,055/b/ 6.97%
Federal funds sold 1,318 4.13 1,131 3.12 1,617 3.76
Securities purchased under resale agreements 6,378 5.51 3,903 4.46 4,400 3.70
Trading account assets 6,713 7.09 6,341 5.91 4,234 7.08
Available-for-sale securities/c/ 9,675/b/ 6.13 4,118 6.79 1,401 8.79
Held-to-maturity securities/c/ 10,805 7.35 15,759 7.13 11,092 8.76
Domestic loans:
Consumer--residential first mortgages 32,012 5.97 29,548 6.29 25,577 7.72
Consumer--credit card 7,280 15.65 7,499 16.26 7,963 16.70
Other consumer 25,043 8.89 24,659 9.04 23,149 9.82
Commercial and industrial 23,643 7.04 20,580 6.32 19,640 6.25
Commercial loans secured by real estate 9,407 8.04 9,707 7.51 8,735 7.98
Construction and development loans secured by
real estate 3,948 7.78 5,718 5.17 6,700 5.21
Financial institutions 2,142 5.06 1,948 3.48 1,821 3.85
Agricultural 1,641 7.87 1,605 7.62 1,554 7.81
Lease financing 1,675 7.70 1,773 12.36 1,669 14.40
Loans for purchasing or carrying securities 1,814 5.06 1,447 4.05 1,049 4.38
Other 1,244 6.10 1,099 5.03 830 5.10
------------------------------------------------------------------------
Total domestic loans 109,849 7.77 105,583 7.73 98,687 8.48
Foreign loans 18,572 6.86 19,531 6.72 17,492 7.80
------------------------------------------------------------------------
Total loans/b/ 128,421 7.64 125,114 7.57 116,179 8.38
------------------------------------------------------------------------
Total earning assets 168,222 7.38 159,008 7.32 142,978 8.13
Nonearning assets 37,366 30,144 26,638
Less: Allowance for credit losses 3,520 3,826 3,764
------------------------------------------------------------------------
Total Assets $202,068 $185,326 $165,852
</TABLE>
Net Interest Income
Net interest income is the difference between interest earned on assets and
interest paid on liabilities. Interest income and expense are affected by
changes in the volume and mix of average interest-earning assets and interest-
bearing deposits and other liabilities, as well as fluctuations in interest
rates.
On a taxable-equivalent basis, net interest income amounted to $7,566
million in 1994, up $103 million, or 1 percent, from the amount reported in
1993. The main factor contributing to this increase was loan growth, which
included the effects of the Continental merger.
BAC's net interest margin for 1994 was 4.50 percent, a decrease of 19 basis
points from the margin in 1993. However, since short-term interest rates began
to increase in the first quarter of 1994, BAC has maintained a relatively
constant net interest margin.
BAC's net interest income includes the results of hedging with certain on-
and off-balance-sheet financial instruments. During 1994, BAC's net interest
income included approximately $390 million attributable to hedging with
derivative instruments, compared with approximately $685 million in 1993. The
derivative hedging amounts for 1994 and 1993 accounted for approximately 25
basis points and 45 basis points, respectively, of the net interest margins for
those periods.
Noninterest Income
Noninterest income for 1994, which included the effects of the Continental
merger, decreased $126 million, or 3 percent, from the amount reported in 1993.
22
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------
1994 1993 1992
------------------------ --------------------- -----------------------
(dollar amounts in millions) Balance/a/ Rate Balance/a/ Rate Balance/a/ Rate
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Domestic interest-bearing deposits:
Transaction $ 13,761 1.16% $ 13,469 1.34% $ 11,368 1.95%
Savings 14,427 2.04 13,977 2.23 13,454 2.96
Money market 32,625 2.51 34,182 2.49 27,504 3.26
Time 28,259 3.06 30,939 2.50 31,925 3.79
------------------------------------------------------------------------
Total domestic interest-bearing deposits 89,072 2.40 92,567 2.29 84,251 3.24
Foreign interest-bearing deposits:
Banks located in foreign countries 6,771 6.23 3,346 6.88 3,440 7.83
Governments and official institutions 4,646 4.67 1,927 4.08 1,931 4.86
Time, savings, and other 11,371 4.95 10,276 5.32 10,173 6.68
-------------------------------------------------------------------------
Total foreign interest-bearing deposits 22,788 5.27 15,549 5.50 15,544 6.71
-------------------------------------------------------------------------
Total interest-bearing deposits 111,860 2.98 108,116 2.75 99,795 3.78
Federal funds purchased 611 4.48 570 2.78 626 3.24
Securities sold under repurchase agreements 6,455 5.44 2,837 5.58 2,015 5.35
Other short-term borrowings 4,231 6.50 3,088 6.52 3,913 6.90
Long-term debt 13,920 5.82 14,090 5.16 10,158 6.04
Subordinated capital notes 606 6.84 1,499 7.52 1,836 6.22
-------------------------------------------------------------------------
Total interest-bearing liabilities 137,683 3.52 130,200 3.22 118,343 4.14
Domestic noninterest-bearing deposits 31,938 30,688 26,029
Foreign noninterest-bearing deposits 1,498 1,425 1,521
Other noninterest-bearing liabilities 13,258 6,728 7,360
-------------------------------------------------------------------------
Total liabilities 184,377 169,041 153,253
Stockholders' equity 17,691 16,285 12,599
-------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $202,068 $185,326 $165,852
Interest income as a percentage of average
earning assets 7.38% 7.32% 8.13%
Interest expense as a percentage of average
earning assets (2.88) (2.63) (3.42)
-------------------------------------------------------------------------
Net Interest Margin 4.50% 4.69% 4.71%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Average balances include nonaccrual assets.
/c/ Refer to the table on page 27 of the Balance Sheet Review for more detail on
available-for-sale and held-to-maturity securities.
<TABLE>
<CAPTION>
Noninterest Income (Stacked block graphs in non-EDGAR version)
(in millions of dollars) 1994 1993
-----------------
<S> <C> <C>
Total Noninterest Income $ 4,147 $ 4,273
=================
Other Noninterest Income $ 850 $ 775
Trading Income $ 357 $ 569
Fees and Commissions $ 2,940 $ 2,929
</TABLE>
Fees and commissions, the largest component of noninterest income,
increased $11 million from the amount reported in 1993. This increase was
primarily attributable to post-merger Continental operations, partially offset
by declines in various categories of fees and commissions. The more significant
decreases occurred in commercial deposit account fees and credit card membership
fees. Commercial account fees declined primarily due to concession pricing in a
competitive market. Credit card membership fees declined in 1994 primarily due
to fee waivers granted to certain customers. In addition, excluding post-
merger Continental contributions, personal and other trust fees declined in 1994
due to a decrease in trust assets held under custody.
23
<PAGE>
Trading income also decreased $212 million from the amount reported in
1993. This decrease was primarily attributable to less favorable market
conditions throughout 1994. In particular, BAC experienced declines related to
foreign debt instruments and currencies associated with certain foreign markets.
For more information on the functional components of trading income, refer to
Note 21 of the Notes to Consolidated Financial Statements on pages 71-77.
<TABLE>
<CAPTION>
Noninterest Income
Year Ended December 31
(in millions) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fees and commissions
Deposit account fees:
Retail $ 841 $ 815 $ 715
Commercial 360 383 334
Credit card fees:
Membership 79 95 99
Merchant 264 259 251
Trust fees:
Corporate and employee benefit 70 79 33
Personal and other 215 215 189
Other fees and commissions:
Loan fees and charges 296 313 260
Off-balance-sheet credit-related
instrument fees 282 250 227
Mutual fund and annuity commissions 89 99 24
Other 444 421 411
------ ------ ------
2,940 2,929 2,543
Trading income
Net trading account related 120 244 163
Foreign exchange trading related 237 325 300
------ ------ ------
357 569 463
Other noninterest income
Income from assets pending disposition 166 171 60
Net gain on sales of assets/a/ 126 106 117
Venture capital activities 136 129 26
Net gain on sales of subsidiaries
and operations 85 -- 155
Net securities gains 24 61 11
Other income 313 308 274
------ ------ ------
850 775 643
------ ------ ------
$4,147 $4,273 $3,649
- --------------------------------------------------------------------------------
</TABLE>
/a/ Net gain on sales of assets includes gains and losses from the disposition
of loans, premises and equipment, and certain other assets.
Other noninterest income for 1994 was up $75 million, or 10 percent, from
$775 million in 1993. The increases in net gain on sales of assets and net gain
on sales of subsidiaries and operations were largely due to the sales of an
equity interest in Burns-Fry Holdings Corporation and two foreign branches, one
in Malaysia and one in Thailand. These sales resulted in gains of $36 million,
$34 million, and $15 million, respectively. These increases were offset by a
decline in net securities gains. Other noninterest income for 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.
Noninterest Expense
Noninterest expense for 1994 was essentially unchanged from the amount reported
in 1993. Noninterest expense in 1994 included amounts related to post-merger
Continental operations, as well as an additional $50 million of merger-related
expenses recorded in connection with the Continental merger.
Personnel expense (salaries and employee benefits), the largest component
of noninterest expense, totaled $3,639 million in 1994, up $180 million from the
amount reported for 1993. Personnel expense for 1993 included a nonrecurring
charge of $26 million for a special recognition award given to employees. In
addition, severance-related benefits for 1994 increased $61 million over the
amount reported in 1993.
<TABLE>
<CAPTION>
Noninterest Expense (Stacked block graphs in non-EDGAR version)
(in millions of dollars) 1994 1993
----------------
<S> <C> <C>
Total Noninterest Expense $ 7,512 $ 7,483
================
Other Noninterest Expense $ 2,183 $ 2,309
Amortization of Intangibles $ 411 $ 421
Occupancy and Equipment Expense $ 1,279 $ 1,294
Personnel Expense $ 3,639 $ 3,459
</TABLE>
24
<PAGE>
BAC's staff level on a full-time-equivalent (FTE) basis was approximately
82,100 at December 31, 1994, up from 79,200 at December 31, 1993. FTE is a
measurement equal to one full-time employee working a standard day. BAC had
approximately 98,600 employees at December 31, 1994, up from 96,400 employees at
this same time a year earlier. These amounts include both full-time and part-
time employees. In 1994, various positions were eliminated in line with BAC's
fourth-quarter 1993 reduction announcement. However, these decreases were offset
by increases in employees due to the Continental merger and other 1994
acquisitions.
<TABLE>
<CAPTION>
Staff Levels (Plot point graph in non-EDGAR version)
December 31
-----------------------------------------
(in thousands) 1990/a/ 1991/a/ 1992 1993 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Number of employees 65.2 62.6 99.2 96.4 98.6
Full-time-equivalent staff 56.3 54.4 83.2 79.2 82.1
=====================================================================
</TABLE>
/a/ BankAmerica Corporation's pre-merger staff levels do not reflect the effects
of the merger with Security Pacific Corporation on April 22, 1992.
Merger-related expenses recorded in 1994 reflect management's best estimate
of separation and benefit costs related to pre-merger BAC employees, employment
assistance costs for separated employees of BAC, and other expenses of BAC
associated with the Continental merger.
Net OREO expense decreased $93 million, or 73 percent, from year-end 1993.
This decrease was due to declines in writedowns of foreclosed properties of $111
million and increased gains of $26 million on sales of OREO, partially offset by
a decline of $44 million in OREO-related income.
Other expense for 1994 was essentially unchanged from the amount reported
in 1993. Other expense in 1994 included $83 million of capital additions to two
of the Pacific Horizon money market mutual funds, for which Bank of America
NT&SA (the bank) serves as investment advisor. Other expense for 1993 included
a nonrecurring charge of $90 million related to the accrual of various
restructuring expenses. Of these 1993 restructuring expenses, approximately 75
percent were related to salaries and employee benefits in connection with staff
reductions, approximately 20 percent were related to various systems, equipment,
and other expenses, and approximately 5 percent were related to occupancy
expense. Substantially all of these restructuring expenses were paid during
1994.
<TABLE>
<CAPTION>
Noninterest Expense
Year Ended December 31
---------------------------------
(in millions) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries $2,936 $2,886 $2,557
Employee benefits 703 573 491
Occupancy 690 684 561
Equipment 589 610 523
Amortization of intangibles 411 421 248
Communications 323 330 305
Regulatory fees and related expenses 290 309 265
Professional services 225 268 201
Merger-related expenses 50 9 449
Net other real estate owned expense 34 127 64
Other expense 1,261 1,266 1,012
---------------------------------
$7,512 $7,483 $6,676
</TABLE>
Income Taxes
BAC's effective income tax rate was 41.5 percent in 1994, compared with 43.0
percent in 1993. This decrease was primarily due to reductions in the state
effective tax rate and the effective tax rate applied to leveraged lease income.
For further information concerning the provisions for federal, state, and
foreign income taxes, refer to Note 18 of the Notes to Consolidated Financial
Statements on pages 66-67.
Comparison of 1993 versus 1992
In the majority of BAC's income and expense categories, the largest increases in
the amounts reported for 1993 compared with the amounts reported in 1992
resulted from 1993 being the first full year of post-SPC merger operations. The
merger of BAC and SPC was consummated on April 22, 1992.
25
<PAGE>
Taxable-equivalent net interest income for 1993 was $723 million higher
than the amount reported for 1992, primarily due to an 11 percent increase in
average earning assets. The net interest margin for 1993 was 4.69 percent,
which was essentially unchanged from 4.71 percent in 1992.
Noninterest income for 1993 increased $624 million over the amount reported
for 1992, primarily reflecting higher fees and commissions, as well as higher
trading and other income.
Fees and commissions for 1993 increased $386 million over the amount
reported for 1992. Loan fees and charges and mutual fund and annuity commissions
increased $53 million and $75 million, respectively, due to the SPC merger and
subsequent expansion of those activities. In addition, trust fees increased $72
million due to corporate and personal trust operations added as a result of the
SPC merger.
Trading income for 1993 increased $106 million over the amount reported for
1992, primarily due to an expansion of BAC's customer base in selected global
markets, which allowed it to capitalize on periods of increased trading activity
and volatility.
Other noninterest income increased $132 million in 1993 from the amount
reported in 1992. This increase is attributable to higher income from assets
pending disposition, venture capital gains, and net securities gains.
However, these increases were partially offset by a decrease in net gain on
sales of subsidiaries and operations.
Noninterest expense for 1993 was up $807 million from the amount reported
in 1992. This increase was primarily the result of post-SPC merger expense
levels for the full year of 1993, while 1992 noninterest expense reflected these
expense levels only subsequent to the consummation date of the SPC merger.
In 1992, noninterest expense included a nonrecurring charge of $449 million
to restructure pre-SPC merger operations of BAC. Also included in 1992
noninterest expense were other charges totaling $84 million for non-SPC-merger-
related restructuring expense and net additions to operating loss reserves,
primarily related to legal matters.
Other expense in 1993 increased $254 million from the amount reported in
1992. This increase primarily reflected higher expenses resulting from the
SPC merger and other 1992 acquisitions for a full year, as well as
incremental operating expenses related to the 1993 acquisition of First
Gibraltar Bank, FSB (First Gibraltar).
BAC's effective income tax rate for 1993 decreased to 43.0 percent from
44.4 percent in 1992. This decrease was primarily due to the adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," partially offset by the effects of tax legislation signed into
law in August 1993.
Balance Sheet Review
The Asset, Liability, and Financial Management Committee (ALFI) determines
the nature and extent of BAC's on- and off-balance-sheet activities and
products. ALFI seeks to balance BAC's sources and uses of funds while
minimizing market exposure. In this capacity, ALFI places limits on the level
of investments in various assets and off-balance-sheet instruments, as well
as on funding levels for wholesale and other deposits.
During 1994, BAC's total assets grew by $28.5 billion, or 15 percent,
including $20.5 billion of assets obtained in connection with the Continental
merger. At acquisition, the Continental merger increased loans by $11.2
billion, cash and
<TABLE>
<CAPTION>
Composition of Interest-Earning Assets (Pie charts in non-EDGAR version)
12/31/94 12/31/93
-----------------------
<S> <C> <C>
Loans 73.5% 73.5%
Liquid Assets 22.2% 17.0%
Held-to-Maturity Securities 4.3% 9.5%
-----------------------
Total 100% 100%
=======================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Available-for-Sale and Held-to-Maturity Securities - Average Balances and Average Rates
Year Ended December 31
-------------------------------------------------------------------------------------
1994 1993 1992
------------------------------------ ---------------------- -----------------------
Rate based Rate based
on fair on amortized
(dollar amounts in millions) Balance/a/ value cost Balance/a/ Rate Balance/a/ Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale securities
U.S. Treasury and other government
agency securities $3,029 5.42% 5.41% $1,646 5.20% $ 360 7.11%
Mortgage-backed securities 4,410 5.96 5.88 1,606 7.35 671 9.09
Other domestic securities 427 4.78 5.00 39 7.19 17 10.13
Foreign securities 1,809/b/ 8.05 7.09 827 8.83 353 9.87
-------------------------------------------------------------------------------------
$9,675 6.13% 5.95% $4,118 6.79% $1,401 8.79%
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------
1994 1993 1992
--------------------- ---------------------- ------------------------
(dollar amounts in millions) Balance/a/ Rate Balance/a/ Rate Balance/a/ Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Held-to-maturity securities
U.S. Treasury and other government agency securities $ 689 6.72% $ 3,554 5.28% $ 3,036 6.06%
Mortgage-backed securities 6,985 7.20 10,784 7.28 6,341 9.27
State, county, and municipal securities 479 8.12 553 7.93 549 8.34
Other domestic securities 224 7.11 740 13.01/c/ 797 15.13/c/
Foreign securities 2,428 7.83 128 7.61 369 9.17
-------------------------------------------------------------------------
$10,805 7.35% $15,759 7.13% $11,092 8.76%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Average balances include nonaccrual assets.
/c/ Rates reflect income recognized on call premiums received and unamortized
discounts related to debentures called prior to maturity.
due from banks and interest-bearing deposits in banks by a
combined $2.6 billion, available-for-sale securities by $1.2 billion, trading
account assets by $0.8 billion, securities purchased under resale agreements
by $0.6 billion, and other assets by $3.2 billion. With respect to funding
sources, the Continental merger contributed $11.9 billion to total deposits,
$2.2 billion to short-term borrowings, $1.3 billion to long-term debt, and
$0.5 billion to securities sold under repurchase agreements. In addition,
$0.7 billion in goodwill and identifiable intangibles was recorded in
connection with the Continental merger.
The remaining increase in total assets between December 31, 1993 and
December 31, 1994 was primarily due to the adoption of Financial Accounting
Standards Board Interpretation No. 39 (FIN 39), "Offsetting of Amounts Related
to Certain Contracts." For further information concerning the adoption of FIN
39, refer to Note 1 of the Notes to Consolidated Financial Statements on pages
52-56.
In connection with the adoption of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," $5.6 billion of securities were
transferred from held-to-maturity to available-for-sale and $2.5 billion of
certain debt-restructuring par bonds and other instruments issued by foreign
governments were reclassified from loans to the securities portfolios. In
connection with the Continental merger, $2.5 billion of BAC's
held-to-maturity securities were transferred to available-for-sale, enabling
BAC to maintain its pre-Continental merger interest rate risk position.
During 1994, unrealized losses on available-for-sale securities increased
$311 million, net of income taxes, primarily due to valuation declines in
mortgage-backed securities and restructuring-country-related bonds.
During 1994, total deposits increased $12.8 billion over the amount
recorded at year-end 1993. Excluding Continental, domestic deposits decreased
$3.4 billion and foreign deposits increased $4.3 billion. The increase in
foreign deposits was due to continued expansion in global markets and a need to
shift from domestic to foreign funding sources to support corporate balance
sheet growth.
For further information related to BAC's management of assets and
liabilities, as well as information on BAC's liquidity and capital, refer to
the Risk Management section and Liquidity and Capital Management sections
that follow.
27
<PAGE>
Off-Balance-Sheet Financial Instruments
Credit-Related Financial Instruments
On an ongoing basis, BAC makes commitments to extend credit to a wide range
of customers. Additionally, BAC issues financial guarantees and letters of
credit to ensure performance of customer financial obligations. Generally,
these agreements are entered into for two purposes: to offer a means of
short-term financing and to facilitate foreign and domestic trade
transactions for customers.
Foreign Exchange and Derivatives Contracts
BAC uses foreign exchange and derivatives contracts in both its trading and
its asset and liability management activities. Foreign exchange and
derivatives contracts include futures, forwards, swaps, and option contracts,
all of which derive their value from underlying interest rates, foreign
exchange rates, commodity values, or equity instruments. Certain transactions
involve standardized contracts executed on organized exchanges, while other
transactions are negotiated over-the-counter (OTC), with the terms tailored
to meet the needs of BAC and its clients.
BAC earns trading revenue by executing transactions to support customers'
risk management needs, by efficiently managing the positions that result from
these transactions, and by making markets in a wide variety of trading
products.
Using its expertise and global presence, BAC is able to execute
transactions to aid its customers in managing their risk exposures to interest
rates, exchange rates, prices of securities, and financial or commodity indices.
For example, a multinational consumer products company may choose to hedge
against the currency risks within the foreign countries it operates. BAC will
transact cross currency swaps or foreign exchange contracts with the customer to
meet this need. In essence, BAC meets the needs of its customers by providing
the tools to help solve their risk management problems.
Counterparties to BAC's foreign exchange and derivative transactions
generally include U.S. and foreign banks, nonbank financial institutions,
corporations, governments, and asset managers.
Similar to on-balance-sheet financial instruments such as loans and
investment securities, off-balance-sheet financial instruments are subject to
various types of risk. These risks include credit risk (the risk that a loss
may occur from the failure of a customer to perform according to the terms of
the contract), market risk (the sensitivity of future earnings to price or
rate changes), liquidity risk (the risk of BAC being unable to meet its
funding requirements or execute a transaction at a reasonable price), and
operational risk (the risk that inadequate internal controls, procedures,
human error, system failure, or fraud can result in unexpected losses).
In its foreign exchange and derivatives-related trading activities, BAC
assumes market risk. BAC limits this market risk by executing offsetting
transactions with other counterparties. BAC may also leave its market risk
temporarily open in an effort to profit by correctly anticipating future
market conditions and by taking advantage of price differentials in the
various markets in which it operates. Such open positions are subject to
defined risk limits and controls, which are discussed on pages 39-40.
BAC as an end-user employs foreign exchange and derivatives contracts in
connection with its own asset and liability management, primarily hedging
activities. More specifically, BAC primarily uses interest rate derivatives
instruments to manage the interest rate risk associated with its assets and
liabilities, including fixed-rate and adjustable-rate residential mortgages,
long-term debt, and deposits.
In its trading activities, BAC primarily employs traditional or
"plain-vanilla" products such as spot and forward foreign exchange contracts,
exchange-traded futures contracts, and conventional interest rate swaps.
These instruments are designed to be used by a wide variety of market
participants. Such products accounted for approximately 95 percent of all
foreign exchange and derivatives contracts outstanding at December 31, 1994.
The remaining 5 percent involved nontraditional products or transactions and
were transacted primarily to meet unique client needs. In the future, BAC's
dealings in nontraditional derivative financial instruments are likely to
increase to take greater advantage of its market and industry expertise in
meeting customer demand.
BAC uses various strategies to control the off-balance-sheet risks to which
it is exposed. These strategies include quantitative risk measurement systems,
defined credit and market risk limits and controls, requirements for timely
reports to line and senior management, and segregation of critical operational
and control processes.
For a detailed discussion of BAC's hedging objectives and the strategies
and financial instruments used to achieve such objectives, refer to Note 21 of
the Notes to Consolidated Financial Statements on pages 71-77.
Risk Management
The active management of risk is an integral part of BAC's operations and a
key determinant in its overall financial performance. BAC employs various
strategies to diversify and mitigate the major risks to which it is exposed,
namely credit, market, and liquidity risk. In addition to managing and
limiting these risks, which are discussed in the following sections, BAC
strives to actively manage other types of risk, such as settlement risk and
operating risk.
28
<PAGE>
Credit Risk Management
Overview
Credit risk, which is the possibility of loss in the event that a borrower or
other counterparty fails to perform under the terms of a contract, arises
primarily from BAC's lending activities, as well as from transactions
involving certain off-balance-sheet instruments. Credit risk associated with
BAC's cross-border lending activities also includes risks inherent in doing
business outside the United States. Such activities often involve lending
funds to borrowers in currencies other than the borrower's own, most commonly
in U.S. dollars, resulting in transfer risk. Transfer risk represents the
possibility that a country's foreign exchange reserves may be insufficient to
permit borrowers domiciled in that country to make payments in the loaned
currency, even if the borrowers possess a sufficient equivalent of local
currency to do so.
The Credit Policy Committee (CPC), which oversees all of BAC's credit-
related activities, is responsible for establishing credit standards and
guidelines to define, quantify, and monitor the credit risk that results from
BAC's business activities. To mitigate individual counterparty credit risk and
manage BAC's overall credit exposure, the CPC oversees compliance with
established credit limits and conducts reviews of industry, geographic region or
country, product, and individual borrower exposures, together with reviews of
problem credits and credit losses. The adherence of line officers to the CPC's
established limits and exposure levels is monitored on an ongoing basis by BAC's
credit examination officers and is ultimately overseen by senior credit
management. Line officers receive support in making credit decisions from credit
specialists within BAC who have expertise in specific areas, including
specialized industries, geographic regions, or types of products. In addition, a
substantial investment continues to be made in credit risk training for all
credit officers to ensure continuing competencies and to better serve BAC's
customers' changing needs.
The banking industry and, in turn, BAC's credit portfolio are affected by
business and economic cycles, both upturns and downturns. To mitigate the
potential financial impact of these cycles, the CPC maintains a set of early
warning benchmarks to enable proactive attention to emerging issues that may
affect the portfolio. In light of certain economic, political, and social
factors, these benchmarks are incorporated in the periodic CPC reviews of
industries and countries and include sensitivity to changes in interest
rates, fluctuations in energy prices, and governmental actions such as
spending cutbacks. In addition, senior management refines BAC's credit
policies and procedures in an effort to address the risks of the current
economic environment and to maintain BAC's overall strategic focus.
To manage credit risk, BAC strives to maintain diversification of its on-
and off-balance-sheet portfolios in terms of industry, product and geographic
concentration. The pie charts below and the loan outstandings table on page 31
illustrate this diversification within the loan portfolio by asset type. The
domestic consumer loan portfolio, which represents 48 percent of total loan
outstandings, includes residential first mortgages (50 percent), installment
loans (26 percent), and credit card loans (12 percent).
<TABLE>
<CAPTION>
Total Loan Outstandings by Geographic Area (Pie charts in non-EDGAR version)
12/31/94 12/31/93
-----------------------
<S> <C> <C>
Southern California 23.3% 26.1%
Northern California 12.0% 12.6%
Other U.S. 23.0% 18.9%
Central California 9.2% 9.4%
Other Western States 18.0% 16.8%
Foreign 14.5% 16.2%
-----------------------
Total 100% 100%
=======================
</TABLE>
29
<PAGE>
Diversification of domestic construction and development loans and domestic
commercial loans secured by real estate by geographic region and project type is
illustrated on page 32. Within the loan portfolio at December 31, 1994, no
individual loan type exceeded 24 percent of total loans.
The primary focus in managing risk when extending credit is to evaluate the
borrower's ability to meet obligations from its expected cash flows. In
addition, policies are in place to help ensure that sufficient collateral is
obtained when deemed appropriate, and that the ratios of outstanding loan
balances to the value of their associated collateral are adequately maintained.
Off-Balance-Sheet Credit Risk
Credit risk for foreign exchange and derivatives contracts consists of
closeout risk and settlement risk. Risk of closeout loss arises from a
counterparty's inability to perform under the terms of its contract and the
necessity for BAC to replace that contract at current market value. Risk of
settlement loss arises when BAC either pays out funds or delivers assets
before receiving assets or payment from a counterparty.
BAC manages its credit risk by dealing with creditworthy counterparties,
obtaining collateral where appropriate, and using master netting agreements.
In evaluating each counterparty's creditworthiness, BAC follows policies and
procedures established for all credit exposures, and employs the same
internal credit risk rating system. At December 31, 1994, approximately 95
percent of the counterparties with whom BAC had credit exposure from foreign
exchange and derivatives contracts had investment grade ratings.
BAC measures the closeout credit risk of all of the foreign exchange and
derivatives contracts it has with its customers. This measurement includes
both current exposure and potential future exposure. Current exposure is the
amount that BAC would have the right to receive if a foreign exchange or
derivative contract was terminated on the date of evaluation. Potential
future exposure is calculated based on the estimated change in the fair value
of a contract over its remaining life.
Both closeout risk and settlement risk are mitigated through the use of
legally enforceable master netting agreements such as the internationally
recognized International Swap and Derivatives Association (ISDA) agreement
and the International Foreign Exchange Master Agreement (IFEMA). These
contracts allow for the netting of a counterparty's positive and negative
closeout exposure associated with all of that counterparty's individual
transactions upon an event of default. It is BAC's policy to execute legally
enforceable master netting agreements with its foreign exchange and
derivative customers where possible. Settlement risk is reduced through
novation netting (a mutual agreement to substitute a new contract or
obligation for two or more existing contracts, and the discharge of the
existing obligations) and settlement netting (a contract to settle mutual
obligations at the net value of the contracts) arrangements, which may be
included as part of master netting agreements. Largely through the use of
these risk-mitigating controls, BAC was successful in limiting credit losses
associated with counterparty nonperformance to $3 million in 1994.
At December 31, 1994, BAC's current credit risk before taking into account
the benefit of netting agreements in relation to all of its foreign exchange
and derivative contracts outstanding was $14.4 billion, as measured by
current positive fair values of open contracts. At December 31, 1994, BAC's
current credit exposure, which takes into account master netting agreements
and equates to the actual current credit risk, was $6.6 billion.
Loan Portfolio Management
Total loans at December 31, 1994 increased $14.3 billion, or 11 percent, from
year-end 1993. This increase was largely due to the Continental merger, as
well as from continued portfolio growth. This growth was partially offset by
SFAS No. 115 reclassifications, as previously discussed. Excluding the loans
acquired in connection with the Continental merger and the SFAS No. 115
reclassifications, total loans grew by $5.6 billion between December 31, 1993
and December 31, 1994.
Domestic Consumer Loans
Domestic consumer loan outstandings increased $6.1 billion, or 10 percent, in
1994, primarily reflecting increases in residential first mortgages,
installment loans, and credit card loans. The increase in residential first
mortgages was attributable to growth in mortgage originations for the
purchase of homes and, to a lesser extent, a decline in the volume of
prepayments. Approximately 80 percent of BAC's residential first mortgages at
December 31, 1994 were secured by properties in California. Within
California, approximately 50 percent were secured by properties in the
following Southern California counties: Los Angeles, Orange, San Bernardino,
San Diego, Riverside, and Ventura.
30
<PAGE>
<TABLE>
<CAPTION>
Loan Outstandings
December 31
--------------------------------------------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $ 33,818 $ 30,483 $ 29,306 $18,897 $16,310
Installment/a/ 17,432 15,332 16,663 10,961 10,809
Individual lines of credit/a/ 8,427 8,486 8,347 5,546 4,566
Credit card 8,020 7,474 8,306 7,712 7,323
Other/a/ 467 274 354 181 186
--------------------------------------------------------------------------------------
68,164 62,049 62,976 43,297 39,194
Commercial:
Commercial and industrial 28,814 20,486 21,632 13,831 14,749
Loans secured by real estate 10,277 9,251 10,123 5,366 5,718
Construction and development loans
secured by real estate 3,616 4,418 6,781 4,002 4,265
Financial institutions 2,872 2,170 2,017 1,427 1,424
Agricultural 1,840 1,679 1,704 1,124 1,177
Lease financing 1,814 1,715 1,889 779 825
Loans for purchasing or carrying securities 1,529 3,090 987 216 255
Other 1,623 1,478 1,360 497 730
--------------------------------------------------------------------------------------
52,385 44,287 46,493 27,242 29,143
--------------------------------------------------------------------------------------
120,549 106,336 109,469 70,539 68,337
Foreign
Commercial and industrial 13,496 11,448 10,338 9,538 10,577
Banks and other financial institutions 2,516 2,279 1,855 2,080 1,867
Governments and official institutions 896 3,429 3,513 3,557 3,934
Other 3,455 3,064 1,436 920 1,100
--------------------------------------------------------------------------------------
20,363 20,220 17,142 16,095 17,478
--------------------------------------------------------------------------------------
Total loans 140,912 126,556 126,611 86,634 85,815
Less: Allowance for credit losses 3,690 3,508 3,921 2,420 2,912
--------------------------------------------------------------------------------------
$137,222 $123,048 $122,690 $84,214 $82,903
- ------------------------------------------------------------------------------------------------------------------------------------
</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: $13,589 million at December 31, 1994,
$12,847 million at December 31, 1993, $13,870 million at December 31, 1992,
$9,281 million at December 31, 1991, and $7,857 million at December 31,
1990.
The increase in installment loan outstandings was primarily due to
increases in junior mortgages in states other than California and in
manufactured housing loans nationwide. The increase in credit card loans during
1994 resulted from marketing efforts to encourage customers to open new credit
card accounts, a decrease in attrition levels from 1993, and the planned buyback
of certain credit card receivables.
During 1994, BAC's consumer loan delinquency ratios (the percentage of loan
outstandings in each portfolio that are past due 60 days or more) decreased in
every loan category. The delinquency ratio on residential first mortgages fell
to 1.68 percent at December 31, 1994 from 2.25 percent at year-end 1993. In
addition, the delinquency ratio on credit card loans decreased to 1.91 percent
from 2.39 percent at year-end 1993.
Domestic Commercial Loans
Domestic commercial loan outstandings increased $8.1 billion, or 18 percent,
during 1994, primarily reflecting increases in commercial and industrial
loans, loans secured by real estate, and loans to financial institutions.
These increases were partially offset by decreases in loans for purchasing or
carrying securities and construction and development loans secured by real
estate.
The increases in commercial and industrial loans, loans secured by real
estate, and loans to financial institutions were attributable primarily to
loans obtained in connection with the Continental merger. Excluding
Continental, the remaining increase in commercial and industrial loans was
due to increased loan demand by large corporate borrowers.
The decrease in loans for purchasing or carrying securities reflected lower
demand among brokers and dealers in 1994. The decline in construction and
development loans secured by real estate was primarily due to paydowns and bulk
loan sales.
31
<PAGE>
<TABLE>
<CAPTION>
Domestic Construction and Development Loans by Geographic Area and Project Type
December 31, 1994
-----------------------------------------------------------------------------------
Apartment & Light
(in millions) Office Subdivision Retail Condominium Hotel Industry Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $ 512 $467 $252 $208 $127 $ 95 $142 $1,803/a/
Washington 211 189 84 74 27 20 48 653
Pennsylvania 202 -- -- -- -- -- -- 202
Texas 2 23 63 37 -- 1 6 132
Illinois 39 32 47 -- -- 10 -- 128
Arizona 3 37 34 18 1 2 9 104
Georgia 15 8 48 14 -- 14 3 102
Nevada 24 14 19 19 -- 3 4 83
Florida -- 13 59 7 -- -- 3 82
Other/b/ 94 21 66 52 7 14 73 327
-----------------------------------------------------------------------------------
$1,102 $804 $672 $429 $162 $159 $288 $3,616
<CAPTION>
December 31, 1993
-----------------------------------------------------------------------------------
Apartment & Light
(in millions) Office Subdivision Retail Condominium Hotel Industry Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $ 689 $ 822 $388 $204 $128 $ 111 $162 $2,504/a/
Washington 231 192 236 96 27 48 37 867
Pennsylvania 200 -- -- 3 -- -- -- 203
Arizona 4 57 66 6 2 1 7 143
Oregon 17 1 36 34 -- 3 15 106
Nevada 26 11 17 34 -- 1 1 90
Other/b/ 137 57 104 58 10 11 128 505
-----------------------------------------------------------------------------------
$1,304 $1,140 $847 $435 $167 $ 175 $350 $4,418
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Approximately 65 percent and 70 percent of domestic construction and
development loans in California at December 31, 1994 and 1993,
respectively, 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 construction and development loans.
<TABLE>
<CAPTION>
Domestic Commercial Loans Secured by Real Estate by Geographic Area and Project Type
December 31, 1994
-----------------------------------------------------------------------------------
Light Apartment &
(in millions) Retail Office Industry Condominium Hotel Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $1,993 $ 815 $ 942 $ 617 $165 $ 911 $ 5,443/a/
Washington 360 445 457 429 152 449 2,292
Nevada 171 108 69 54 124 92 618
Oregon 85 37 59 96 31 45 353
Arizona 194 27 25 24 2 80 352
Other/b/ 161 451 72 131 257 147 1,219
-----------------------------------------------------------------------------------
$2,964 $1,883 $1,624 $1,351 $731 $1,724 $10,277
<CAPTION>
December 31, 1993
-----------------------------------------------------------------------------------
Light Apartment &
(in millions) Retail Office Industry Condominium Hotel Other Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $2,692 $ 561 $ 513 $ 529 $196 $ 626 $5,117/a/
Washington 313 425 442 358 137 386 2,061
Nevada 105 70 55 40 18 106 394
Oregon 28 54 14 98 38 49 281
Arizona 238 12 31 13 1 39 334
Other/b/ 254 159 88 36 298 229 1,064
-----------------------------------------------------------------------------------
$3,630 $1,281 $1,143 $1,074 $688 $1,435 $9,251
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Approximately 50 percent and 55 percent of domestic commercial loans
secured by real estate in California at December 31, 1994 and 1993,
respectively, 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 loans secured by real estate.
32
<PAGE>
<TABLE>
<CAPTION>
Total Loan Outstandings by Type (Pie charts in non-EDGAR version)
12/31/94 12/31/93
---------------------
<S> <C> <C>
Domestic Consumer 48.4% 49.0%
Domestic Commercial 37.2% 35.0%
Foreign 14.4% 16.0%
---------------------
Total 100% 100%
=====================
</TABLE>
Foreign Loans
Foreign loan outstandings increased $0.1 billion during 1994. Excluding
foreign loans obtained in connection with the Continental merger of $0.9
billion, foreign loans decreased $0.8 billion between year-end 1993 and
December 31, 1994, primarily due to the previously discussed $2.5 billion
reclassification of debt-restructuring par bonds and other instruments issued
by foreign governments to the securities portfolios related to the adoption
of SFAS No. 115. Partially offsetting this decrease was a $1.1 billion
increase in foreign commercial and industrial loans, primarily attributable
to increased loan demand in the Asia operations.
<TABLE>
<CAPTION>
Emerging Market Exposure
December 31, 1994
------------------------------------------------------------------------------------------------------------------
Available-for-Sale Held-to-Maturity
Loans Securities/a/ Securities/a/ Other/b/
----------------- -------------------------------- ------------------------------- ----------------------
Short- Medium-and Medium-and
(in millions) Total/c/ Term Long-Term Collateralized Uncollateralized Collateralized Uncollateralized Short-Term Long-Term
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Restructuring
Countries
Brazil $ 893 $ 406 $ 9 $140 $227 $ -- $ 3 $ 90 $ 18
Venezuela 710 73 11/d/ 204 4 362 18 19 19
Argentina 319 195 1 11 3 -- -- 93 16
Philippines 139 18 39 15 30 -- -- 26 11
Other/e/ 275 13 61 136 27 -- -- 38 --
-----------------------------------------------------------------------------------------------------------------
2,336 705 121 506 291 362 21 266 64
Other Emerging
Market Countries
Mexico 2,668 485 579/d/ 253 2 856 -- 423 70
Chile 392 127 109 -- -- -- -- 80 76
India 303 121 9 -- -- -- -- 173 --
Colombia 300 123 176 -- -- -- 1 -- --
China 279 66 31 -- 22 -- -- 160 --
Indonesia 248 212 26 -- 5 -- -- 5 --
Other/e/ 151 19 5 -- -- -- -- 127 --
-----------------------------------------------------------------------------------------------------------------
4,341 1,153 935 253 29 856 1 968 146
-----------------------------------------------------------------------------------------------------------------
$6,677 $1,858/f/ $1,056/f/ $759/g/ $320/g/ $1,218/gh/ $22/gh/ $1,234 $210
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents medium- and long-term exposure.
/b/ Includes the following assets, primarily in U.S. dollars, with borrowers or
customers in a foreign country: accrued interest receivable, acceptances,
interest-bearing deposits with other banks, trading account assets, other
interest-earning investments, and other monetary assets.
/c/ Excludes local currency outstandings that were funded by local currency
borrowings as follows: $7 million for Venezuela, $1 million for Argentina,
$78 million for other restructuring countries, $63 million for Chile, $225
million for India, $21 million for Colombia, $87 million for Indonesia, and
$77 million for other emerging market countries.
/d/ Venezuela and Mexico include $3 million and $30 million, respectively, of
loans that are collateralized by zero-coupon U.S. Treasury securities.
/e/ No other country individually exceeded 2 percent of total emerging market
exposure.
/f/ Total loans include nonaccrual loans of $95 million.
/g/ Total available-for-securities and total held-to-maturity securities
include $431 million and $10 million, respectively, of nonaccrual debt-
restructuring bonds.
/h/ The fair value of total held-to-maturity securities was approximately
$700 million.
33
<PAGE>
Emerging Market Exposure
In connection with its effort to maintain a diversified portfolio, BAC
attempts to limit its exposure to any one country. BAC also strives to ensure
that its exposure to groups of borrowers that may be similarly affected by
events is limited. One such group is emerging market countries, which are
presented in the table on page 33. At December 31, 1994, BAC's emerging
market exposure totaled $6,677 million, or 3 percent of total assets, and
included loans, restructured debt, non-restructured debt, and other
on-balance-sheet monetary assets.
Restructuring Country Debt
At December 31, 1994, total public and private sector cross-border outstandings,
which exclude debt-restructuring bonds and loans collateralized by U.S.
government securities, owed to BAC by borrowers in restructuring countries
amounted to $1,465 million. Of this amount, $494 million was medium- and long-
term exposure, and $36 million was local currency outstandings which were
neither hedged nor funded by local currency borrowings.
At December 31, 1994, cross-border outstandings included amounts owed to
BAC by borrowers in Brazil, which totaled $753 million and represented 51
percent of BAC's total cross-border outstandings with restructuring countries.
Of the total cross-border outstandings owed to BAC by borrowers in Brazil, $257
million was medium- and long-term exposure. During the fourth quarter of 1994
and year ended December 31, 1994, BAC received $16 million and $36 million,
respectively, 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.
Excluded from total cross-border outstandings, but included in
available-for-sale securities, held-to-maturity securities, and loans at
December 31, 1994, were $871 million in 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 bonds and other instruments. Under
SFAS No. 115, the bonds were classified as either available-for-sale
securities or held-to-maturity securities at December 31, 1994.
On April 15, 1994, the government of Brazil concluded a debt exchange in
connection with a plan to restructure its medium- and long-term debt. BAC
exchanged a portion of its debt with an aggregate carrying value of $139
million and an aggregate face value of $692 million and past due accrued
interest for 30-year bonds with an aggregate face value of $727 million. Of
these bonds, approximately half were collateralized by zero-coupon U.S.
Treasury securities, which, at maturity, will have redemption values equal to
the aggregate face amounts of the related bonds. Upon receipt, these bonds
were recorded in available-for-sale securities at their fair values.
Subsequent to the exchange, BAC sold a portion of these bonds. The fair value
of remaining Brazilian bonds from the April 1994 exchange was $294 million at
year-end 1994.
Allowance for Credit Losses
The allowance for credit losses at December 31, 1994 was $3,690 million, or
2.62 percent of total loan outstandings, compared with $3,508 million, or
2.77 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 3.36 percent and 3.59 percent of loans at
year-end 1994 and 1993, respectively.
Management develops the allowance using a "building block approach" for
various portfolio segments. The table on page 36 shows the allocation of the
allowance for credit losses by loan type. This allocation is based on
management's judgment of potential losses in the respective loan portfolios.
While management has allocated reserves to various portfolio segments, the
allowance is general in nature and is available for the loan portfolio in its
entirety.
<TABLE>
<CAPTION>
Composition of Allowance for Credit Losses
December 31
--------------------------------------
(in millions) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:
Historical loss experience
component $ 516 $ 475 $1,273 $ 718 $ 498
Credit management
allocated component 428 770 601 172 234
--------------------------------------
Total special mention
and classified 944 1,245 1,874 890 732
Other loans:
Domestic consumer 1,059 1,072 1,100 517 382
Domestic commercial 223 151 215 74 81
Foreign 270 165 328 639 1,501
--------------------------------------
2,496 2,633 3,517 2,120 2,696
Unallocated 1,194 875 404 300 216
--------------------------------------
$3,690 $3,508 $3,921 $2,420 $2,912
</TABLE>
The allowance is established by credit officers for each portfolio segment.
Significant loans, particularly those classified as "doubtful" are individually
analyzed, while other loans 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.
In addition to the allowance amounts that are calculated based on
historical loss experience, the credit officer responsible for each portfolio
segment makes adjustments to these amounts
34
<PAGE>
<TABLE>
<CAPTION>
Allowance for Credit Losses
Year Ended December 31
---------------------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $3,508 $3,921 $2,420 $2,912 $3,373
Credit Losses
Domestic consumer:
Residential first mortgages 49 23 15 3 2
Credit card 382 488 538 429 244
Other consumer 319 404 359 191 138
Domestic commercial:
Commercial and industrial 47 230 197 179 84
Loans secured by real estate 52 91 60 32 29
Construction and development loans secured by real estate 86 291 376 86 24
Financial institutions 2 18 41 6 5
Agricultural 8 7 10 2 2
Lease financing 1 9 12 3 1
Loans for purchasing or carrying securities -- 2 9 -- --
Other commercial -- -- 2 1 5
Foreign 42 36 126 375 548
---------------------------------------------------------------
Total credit losses 988 1,599 1,745 1,307 1,082
Credit Loss Recoveries
Domestic consumer:
Residential first mortgages 4 1 1 -- 2
Credit card 54 53 48 36 33
Other consumer 105 114 92 51 49
Domestic commercial:
Commercial and industrial 94 111 77 56 115
Loans secured by real estate 25 34 10 5 5
Construction and development loans secured by real estate 82 87 19 3 6
Financial institutions 16 2 1 1 1
Agricultural 8 10 6 7 18
Lease financing 6 6 9 4 3
Loans for purchasing or carrying securities -- -- -- -- --
Other commercial -- -- 4 1 --
Foreign 124 66 174 54 96
---------------------------------------------------------------
Total credit loss recoveries 518 484 441 218 328
---------------------------------------------------------------
Total net credit losses 470 1,115 1,304 1,089 754
Provision for credit losses 460 803 1,009 805 905
Allowance related to mergers and acquisitions/a/ 241 12 2,782 -- --
Losses on the sale or swap of loans to restructuring countries -- (3) (72) (207) (620)
Other net additions (deductions) (49) (110)/b/ (914)/b/ (1) 8
---------------------------------------------------------------
Balance, End of Year/c/ $3,690 $3,508 $3,921 $2,420 $2,912
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents the addition of consummation date allowances for credit losses
of Continental and Liberty Bank of $238 million and $3 million,
respectively, in 1994, First Gibraltar in 1993, and SPC, Valley Capital
Corporation, and H.F. Holdings, Inc. of $2,701 million, $63 million, and
$18 million, respectively, in 1992.
/b/ Due to the transfer of certain assets net of their related allowance to
other assets, the allowance for credit losses was reduced by $128 million
and $685 million during 1993 and 1992, respectively. The 1993 amount
included $88 million of regulatory-related allocated transfer risk reserve
(ATRR). In addition, the allowance for credit losses related to loans of
subsidiaries and operations pending disposition totaling $220 million was
reclassified to other assets during 1992.
/c/ Includes ATRR of $67 million at December 31, 1992, $145 million at December
31, 1991, and $165 million at December 31, 1990. Due to the transfer of
certain assets net of their related allowance to other assets during 1993,
the allowance for credit losses did not include any ATRR subsequent to the
transfer.
based on qualitative evaluations of individual classified assets, knowledge of
portfolio segment conditions, and 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 on page 34 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. During the fourth quarter of 1994, BAC changed
its statistical model used in calculating the historical loss experience
component to one that reflects the portfolio experience over a full economic
cycle. The effect of this change was to increase this historical loss experience
component and to decrease the credit management allocation component by
approximately equal amounts.
35
<PAGE>
Allocation of Allowance for Credit Losses by Loan Type
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------------ ------------------ ------------------ ------------------ -------------------
Percent Percent Percent Percent Percent
of Loan of Loan of Loan of Loan of Loan
(dollar amounts in millions) Allowance Category Allowance Category Allowance Category Allowance Category Allowance Category
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic consumer:
Residential first mortgages $ 91 0.27% $ 55 0.18% $ 62 0.21% $ 31 0.16% $ 18 0.11%
Other consumer 968 2.82 1,017 3.21 1,038 3.08 486 1.99 364 1.59
Domestic commercial:
Commercial and industrial/a/ 396 1.24 368 1.47 636 2.65 321 2.21 308 1.96
Loans secured by real estate 166 1.62 165 1.78 232 2.29 48 0.90 58 1.01
Construction and development
loans secured by real estate 389 10.76 611 13.83 884 13.04 367 9.17 237 5.56
Financial institutions 6 0.21 8 0.38 14 0.70 23 1.62 16 1.15
Agricultural 38 2.07 39 2.30 37 2.19 28 2.46 25 2.16
Lease financing 51 2.81 48 2.81 55 2.90 8 1.09 5 0.59
Foreign 391 1.92 322 1.59 559 3.26 808 5.02 1,665 9.53
Unallocated 1,194 -- 875 -- 404 -- 300 -- 216 --
-----------------------------------------------------------------------------------------------
$3,690 2.62% $3,508 2.77% $3,921 3.10% $2,420 2.79% $2,912 3.39%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes the allowance for credit losses for commercial and industrial
loans, loans for purchasing or carrying securities, and other commercial
loans.
Net Credit Losses (Recoveries) as a Percentage of Average Loan Outstandings
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic consumer:
Residential first mortgages 0.14 0.07 0.05 0.02 --
Credit card 4.50 5.81 6.16 5.41 3.30
Other consumer 0.85 1.18 1.15 0.87 0.62
Domestic commercial:
Commercial and industrial (0.20) 0.58 0.61 0.89 (0.21)
Loans secured
by real estate 0.29 0.59 0.57 0.49 0.43
Construction and
development loans
secured by real estate 0.10 3.57 5.32 2.08 0.44
Financial institutions (0.64) 0.80 2.18 0.30 0.35
Agricultural -- (0.23) 0.29 (0.46) (1.50)
Lease financing (0.30) 0.20 0.14 (0.15) (0.38)
Loans for purchasing or
carrying securities -- 0.11 0.86 -- --
Other commercial -- -- (0.15) -- 1.02
Total domestic 0.50 1.09 1.37 1.13 0.48
Foreign (0.44) (0.16) (0.28) 1.97 2.53
Total loans 0.37 0.89 1.12 1.29 0.93
- -----------------------------------------------------------------------------
</TABLE>
After an allowance has been established for the loan 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, and new business volume.
The special mention and classified amounts in the table on page 34 include
all loans regardless of type that have been internally risk rated as "special
mention," "substandard," or "doubtful." BAC's actual historical loss experience
since 1990 indicates ultimate loss rates for "special mention," "substandard,"
or "doubtful" loans of approximately 2 percent, 5 percent, and 31 percent,
respectively.
In 1994, net credit losses were $470 million, a decrease of $645 million,
or 58 percent, from the amount reported in 1993. Net credit losses in the
domestic consumer loan portfolio, the largest component of BAC's net credit
losses, decreased $160 million from the amount reported in 1993. This decrease
reflected an improvement in the credit portfolio that can be largely attributed
to improved economic conditions. In particular, the declines in consumer
bankruptcies, as well as BAC's continued diversification of its loan portfolio
decreased the level of net credit losses in the domestic consumer loan portfolio
in 1994.
Net credit recoveries in the domestic commercial loan portfolio amounted to
$35 million in 1994, compared to net credit losses of $398 million in 1993. This
decrease in credit losses was due to California emerging from its prolonged
recession and an improved national economy.
Net credit recoveries in the foreign loan portfolio amounted to $82 million in
1994, compared to net credit recoveries of $30 million in 1993. This increase
primarily resulted from recoveries on loans to Poland and Ecuador.
36
<PAGE>
Nonperforming Assets
Total nonaccrual assets decreased $806 million, or 28 percent, between year-end
1993 and December 31, 1994. Excluding $245 million of nonaccrual assets obtained
in connection with the Continental merger, nonaccrual assets decreased $1,051
million, or 36 percent, between December 31, 1993 and December 31, 1994. This
decrease reflected improvements in most segments of the loan portfolio,
particularly in construction and development loans and loans secured by real
estate. These improvements can be primarily attributed to full or partial
payments on nonaccrual loans and the restoration of nonaccrual loans to accrual
status. In addition, $210 million of this decrease was due to the sale of
selected real estate-related assets.
Nonaccrual Assets
<TABLE>
<CAPTION>
December 31
----------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic Loans
Consumer:
Residential
first mortgages $ 319 $ 406 $ 267 $ 93 $ 30
Other consumer 63 53 85 4 4
Commercial:
Commercial
and industrial 453 457 898 675 326
Loans secured
by real estate 347 570 721 286 198
Construction and
development loans
secured by real estate 647 1,037 2,430 960 431
Financial institutions 3 64 49 97 69
Agricultural 31 49 94 43 39
Lease financing 1 18 3 2 --
----------------------------------------------------
1,864 2,654 4,547 2,160 1,097
Foreign Loans
Commercial and
industrial 157 139 314 536 792
Banks and other
financial institutions 22 11 78 145 192
Governments
and official institutions 24 42 175 387 663
Other 12 40 116 75 51
----------------------------------------------------
215 232 683 1,143 1,698
Other interest-bearing
assets 1 -- 5 46 371
----------------------------------------------------
$2,080/a/ $2,886/ab/ $5,235/b/ $3,349 $3,166
- ---------------------------------------------------------------------------------
</TABLE>
/a/ Excludes certain nonaccrual debt-restructuring par bonds and other
instruments that were included in available-for-sale and held-to-maturity
securities of $441 million at December 31, 1994. Also excludes certain
other nonaccrual loans and other instruments issued by various governments
of $8 million and $196 million at December 31, 1994 and 1993,
respectively, that were included in other assets at the lower of cost or
fair value.
/b/ Excludes nonaccrual assets that were identified for accelerated
disposition with carrying values prior to reclassification to other assets
of $0.6 billion and $2.6 billion at December 31, 1993 and 1992,
respectively. These nonaccrual assets were included in other assets at the
lower of cost or fair value. The balance at December 31, 1992 primarily
represents nonaccrual assets that were acquired in the SPC merger and
identified for accelerated disposition at the merger date.
Analysis of Change in Nonaccrual Assets
<TABLE>
<CAPTION>
December 31
---------------------------
(in millions) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $2,886 $ 5,235
Additions:
Loans placed on nonaccrual status 1,058 1,440
Acquired in the Continental merger 245 --
Deductions:
Sales (210) (150)
Restored to accrual status (616) (988)
Foreclosures (155) (689)
Charge-offs (143) (433)
Restructuring- country-related assets
transferred to other assets -- (310)
Other, primarily payments (985) (1,219)
---------------------------
Balance, End of Year $2,080 $ 2,886
</TABLE>
Loans past due 90 days or more and still accruing interest, which are
generally well-secured and in the process of collection, decreased $142 million
in 1994. This decrease was primarily due to improved market conditions and
liquidity in the commercial real estate sector.
Loans Past Due 90 Days or More and Still Accruing Interest
<TABLE>
<CAPTION>
December 31
--------------------------------------------
(in millions) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $133 $153 $181 $ 96 $ 38
Other consumer 159 175 289 186 120
Commercial:
Commercial and industrial 25 20 19 26 11
Loans secured by real estate 54 138 22 23 7
Construction and
development loans
secured by real estate 38 86 117 28 14
Financial institutions 16 -- -- -- --
Agricultural 8 -- 4 -- --
Lease financing 1 -- 1 1 --
--------------------------------------------
434 572 633 360 190
Foreign 2 6 -- 8 1
--------------------------------------------
$436 $578 $633 $368 $191
</TABLE>
The improvement in BAC's credit quality during 1994 is also reflected in
BAC's nonperforming asset ratios. At December 31, 1994, the ratio of nonaccrual
loans to total loans was 1.48 percent, down from 2.28 percent at year-end 1993.
In addition, the ratio of nonperforming assets (comprised of nonaccrual assets
and OREO) to total assets declined 60 basis points from year-end 1993 to 1.22
percent at December 31, 1994. Management does not expect a comparable rate of
improvement in credit quality to continue in the future.
37
<PAGE>
Cash Interest Payments on Nonaccrual Assets by Loan Type
<TABLE>
<CAPTION>
December 31, 1994
-----------------------------------------------------------------------------------
Contractual Cumulative Nonaccrual Book as a
Principal Cumulative Interest Applied Book Percentage of
(dollar amounts in millions) Balance Charge-offs to Principal Balance Contractual
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $ 322 $ 2 $ 1 $ 319 99%
Other consumer 66 2 1 63 95
Commercial:
Commercial and industrial 722 175 94 453 63
Loans secured by real estate 463 62 54 347 75
Construction and development loans
secured by real estate 1,026 196 183 647 63
Financial institutions 10 4 3 3 30
Agricultural 39 3 5 31 79
Lease financing 1 -- -- 1 100
-----------------------------------------------------------------------------------
2,649 444 341 1,864 70
Foreign, excluding restructuring-
country-related assets
Commercial and industrial 149 45 25 79 53
Banks and other financial institutions 24 5 3 16 67
Governments and official institutions 28 -- 10 18 64
Other 24 9 3 12 50
-----------------------------------------------------------------------------------
225 59 41 125 56
-----------------------------------------------------------------------------------
Total, excluding restructuring-
country-related assets 2,874 503 382 1,989 69
Restructuring-country-related assets 131 37 3 91 69
-----------------------------------------------------------------------------------
$3,005 $540 $385 $2,080 69%
<CAPTION>
Year Ended
December 31, 1994
-----------------------------------------
Cash Interest
Payments Applied
-----------------------------------------
As Interest As Reduction
(dollar amounts in millions) Income of Principal Total
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $11 $ -- $ 11
Other consumer 3 -- 3
Commercial:
Commercial and industrial 12 12 24
Loans secured by real estate 11 13 24
Construction and development loans
secured by real estate 12 26 38
Financial institutions -- -- --
Agricultural 2 -- 2
Lease financing -- -- --
- ------------------------------------------------------------------------------------
51 51 102
Foreign, excluding restructuring-
country-related assets
Commercial and industrial 4 6 10
Banks and other financial institutions 2 3 5
Governments and official institutions -- -- --
Other -- -- --
- ------------------------------------------------------------------------------------
6 9 15
- ------------------------------------------------------------------------------------
Total, excluding restructuring-
country-related assets 57 60 117
Restructuring-country-related assets 3 -- 3
- ------------------------------------------------------------------------------------
$60 $60 $120
Cash yield on total nonaccrual assets 5.77%
</TABLE>
38
<PAGE>
Restructured Loans
<TABLE>
<CAPTION>
December 31
---------------------------------------------------
(in millions) 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic
Commercial and industrial $71 $ 66 $ 69 $41 $21
Commercial loans secured
by real estate 15 21 12 6 37
Construction and
development loans
secured by real estate 2 10 34 20 --
Financial institutions -- -- 1 2 2
Agricultural 7 -- 20 -- 3
Lease financing -- 1 -- -- 3
---------------------------------------------------
95 98 136 69 66
Foreign/a/ 2 36 40 10 --
---------------------------------------------------
$97 $134 $176 $79 $66
- --------------------------------------------------------------------------------
</TABLE>
/a/ Excludes debt restructurings with countries that have experienced liquidity
problems of $1.8 billion, $2.4 billion, $2.3 billion, $2.2 billion, and $2.1
billion at December 31, 1994, 1993, 1992, 1991, and 1990, respectively.
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. For
further information on these restructurings, refer to Note 8 of the Notes to
Consolidated Financial Statements on pages 61-62.
OREO, which is recorded in other assets, primarily includes properties
acquired through foreclosure or through full or partial satisfaction of loans.
OREO was $555 million and $517 million at December 31, 1994 and 1993,
respectively. At year-end 1994 and 1993, the aggregate fair value of properties
included in OREO represented approximately 118 percent and 130 percent,
respectively, of their net carrying value.
<TABLE>
<CAPTION>
Nonaccrual Assets at Year-End (Stacked block graphs in non-EDGAR version)
(in million of dollars) 1992 1993 1994
--------------------------
<S> <C> <C> <C>
Nonaccrual Assets at Year-End $5,235 $2,886 $2,080
</TABLE>
Market Risk Management
Overview
Market risk is the risk that BAC will suffer losses as a result of adverse price
or rate movements in its on- and off-balance-sheet positions. Market risk arises
in most areas of BAC's operations, including lending and borrowing, as well as
its trading activities in the debt, derivatives, foreign exchange, and other
securities markets.
BAC establishes limits on total market risk, taking into account both risk-
return and cost-benefit trade-offs. ALFI or its subcommittee, the Market Risk
Committee (MRC), reviews, determines, and implements policies regarding all
domestic and foreign treasury activities and global trading activities in all
financial products and approves limits for such activities and products. In
addition, the MRC reviews overall market exposures and analyzes the effects of
actual or projected changes in rates, prices, indices, or market liquidity on
BAC's on- and off-balance-sheet positions. MRC membership comprises senior line
managers who are responsible for market risk and senior corporate officers with
responsibility for accounting and credit policy.
Off-Balance-Sheet Market Risk
BAC's market exposures are managed by the MRC, which establishes and monitors
trading limits, operating controls, and reporting requirements that are
specifically designed to limit the market risk associated with foreign exchange
contracts and derivatives and to provide timely and accurate management
information regarding such activities. The day-to-day management of market risk
takes place at a decentralized level through established trading policies that
define the acceptable boundaries within which traders can buy and sell in their
respective markets.
A key element in market risk management is the estimation of potential losses
a portfolio may experience arising from adverse changes in market conditions. To
estimate such losses, BAC employs an "earnings-at-risk" (EAR) methodology,
which, using a 95 percent confidence interval, employs statistical historical
data to measure the loss that would result from an adverse, one-day shift in
market prices. This one day market price move is calculated at two levels; the
first assuming that major portfolio segments suffer adverse movements on a
perfectly correlated basis, and the second assuming that adverse moves in major
portfolio segments are uncorrelated.
39
<PAGE>
These pre-tax "gross" and "net" market risk measures during 1994 averaged $18.0
million and $8.2 million respectively, peaked at $28.4 million and $13.2
million, and were $25.7 million and $11.0 million at December 31, 1994.
Other mechanisms established by the MRC that are used by BAC to control its
market risk exposures on foreign exchange and derivatives contracts are product
volume, net position, and simulation limits. Product volume limits place
restrictions on aggregate notional dollar amounts that BAC can have in each
category of off-balance-sheet financial instrument. Net position limits place
restrictions on the risk in the same or similar instruments within specific
maturity groupings. Simulation models measure the potential dollar loss of
various trading portfolios according to specific, extremely adverse scenarios,
without regard to the statistical probability of their occurrence.
Additional information about off-balance-sheet financial instruments,
including their respective notional, credit risk, credit exposure, and fair
value amounts, is provided in Note 21 of the Notes to Consolidated Financial
Statements on pages 71-77.
Interest Rate Risk Management
Objectives and Results of Interest Rate Risk Management
BAC's governing objective in interest rate risk management is to minimize the
potential for significant loss as a result of changes in interest rates. BAC
measures interest rate risk in terms of potential impact on both its economic
value and reported earnings. Economic value calculations measure changes in net
future cash flows from all assets and liabilities until maturity. Those changes
can result from interest rate movements or from altered expectations of future
market conditions. BAC measures earnings variability by estimating the potential
effect of changes in interest rates on projected net income over a three-year
period.
As discussed in the following section, there are several sources of interest
rate risk. In general, BAC measures and manages economic value at risk by type
of interest rate risk. To minimize exposure to declines in economic value due to
gap risk, BAC's policy is that assets and liabilities must have approximately
equal total duration. An internally developed methodology is used to translate
each rate maturity mismatch or gap into a one-year position that would have the
same estimated risk content. For example, a six-month mismatch of $200 million
is treated as having approximately the same risk content as a $100 million one-
year mismatch. As shown in the following graph, BAC's net one-year position has
been essentially balanced throughout the last four years.
<TABLE>
<CAPTION>
Net Interest Rate Risk Position (Plot point graph in non-EDGAR version)
(in billions of dollars) 12/31/91 12/31/92 12/31/93 12/31/94
<S> <C> <C> <C> <C>
Net Interest Rate Risk Position $(8.1) $(6.9) $1.0 $(2.8)
</TABLE>
Graph indicates the composite long (+) or short (-) position measured across
the entire maturity mismatch profile and expressed as a one-year mismatch
position bearing the same aggregate level of risk.
BAC also monitors earnings exposure to interest rate risk and keeps such
exposure within appropriate limits. As is discussed in greater detail on page
41, management believes that a 200 basis point change in rates would reduce
forecasted annual after-tax earnings by less than 1 percent.
Sources and Management of Interest Rate Risk
Gap, options, and index mismatches are the primary sources of interest rate
risk. A discussion of how BAC manages these individual sources of risk follows.
Gap Risk - Gap mismatches result from timing differences in the repricing or
maturity of asset, liability, and off-balance-sheet financial instruments.
Expected interest rate sensitivity of individual categories of U.S. dollar-
denominated assets and liabilities as of December 31, 1994 is shown in the table
on page 41.
BAC has made numerous estimates and assumptions which significantly influence
this presentation. For example, consumer rate deposit product maturities reflect
expected repricings in response to market rate movements and expected customer
reactions. Similarly, adjustable-rate mortgage maturities reflect potential
repricing constraints attributable to periodic rate caps, floors and lifetime
ceilings, as well as their expected influence on customer prepayment activity.
Management continually reassesses its gap maturity assumptions in light of
changing conditions. In addition, common equity is assumed to be an
intermediate-to long-term source of funds in this presentation.
40
<PAGE>
<TABLE>
<CAPTION>
U.S. Dollar Denominated Interest Rate Sensitivity By Repricing or Maturity Dates
December 31, 1994
----------------------------------------------------------------------------
(greater than) (greater than) Over
(dollar amounts in millions) 0-6 months 6-12 months 1-5 years 5 years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic Assets
Interest-bearing deposits in banks $ 53 $ -- $ -- $ -- $ 53
Federal funds sold and securities
purchased under resale agreements 2,055 -- -- -- 2,055
Trading account securities 1,668 -- -- -- 1,668
Loans:
Prime indexed 17,684 -- -- -- 17,684
Adjustable rate first residential mortgages 10,650 4,261 6,426 6,443 27,780
Other loans, net 36,188 5,684 14,382 9,100 65,354
Other assets 19,731 684 9,655 8,232 38,302
----------------------------------------------------------------------------
Domestic Assets 88,029 10,629 30,463 23,775 152,896
----------------------------------------------------------------------------
Domestic Liabilities and Stockholders' Equity
Domestic deposits (56,334) (14,196) (25,960) (17,688) (114,178)
Other short-term borrowings (6,026) -- (7) -- (6,033)
Long-term debt and subordinated captial notes (6,909) (301) (2,647) (4,827) (14,684)
Other liabilities and equity (7,129) (481) (9,240) (15,089) (31,939)
----------------------------------------------------------------------------
Domestic Liabilities and Stockholders' Equity (76,398) (14,978) (37,854) (37,604) (166,834)
Offshore Funding Books, net (2,530) 477 390 1,663 --
----------------------------------------------------------------------------
Core Gap before Risk Management Positions 9,101 (3,872) (7,001) (12,166) (13,938)
----------------------------------------------------------------------------
Interest Rate Risk Management Positions
Investment securities/a/ 2,336 1,343 4,535 5,724 13,938
Off-balance-sheet financial instruments/b/ (10,217) 2,528 1,179 6,510 --
----------------------------------------------------------------------------
Total Interest Rate Risk Management Position (7,881) 3,871 5,714 12,234 13,938
----------------------------------------------------------------------------
Net Gap 1,220 (1) (1,287) 68 --
----------------------------------------------------------------------------
Cumulative Gap $ 1,220 $ 1,219 $ (68) $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Available-for-sale and held-to-maturity securities.
/b/ Represents repricing effect of off-balance-sheet positions which include
interest rate swaps, futures contracts, and similar agreements.
At December 31, 1994, BAC had a "core" imbalance before risk management
positions, as liabilities and equity exceeded assets by $14 billion. BAC's risk
management activities eliminated this imbalance while reducing gaps in
individual repricing periods.
BAC uses both on-balance-sheet securities and off-balance-sheet financial
instruments to manage exposure to gaps. As shown in the table above, investment
securities reduced net liability positions in the 6-12 months, 1-5 years, and
over 5 years repricing periods. In addition, off-balance-sheet financial
instruments, principally "receive fixed" interest rate swaps, essentially
neutralized gaps beyond one year. The "pay floating" side of the same swaps
significantly reduced the net asset position in the 0-6 month period.
For information regarding BAC's securities portfolio, as well as off-balance-
sheet financial instruments and their associated credit exposure, refer to notes
7 and 21 of the Notes to Consolidated Financial Statements on pages 60-61 and
71-77, respectively.
The risk from gap mismatches is measured by evaluating the effect of major
interest rate movements. Economic value at risk is estimated assuming certain
immediate changes in rates. Management has used a stress scenario in which one-
year rates would increase by approximately 200 basis points and ten-year rates
would increase by approximately 110 basis points. Based on this scenario,
management believes that BAC's maximum economic value exposure attributable to
gap positions represented less than 1 percent of common equity at December 31,
1994.
The near term earnings exposure to rate maturity gaps is evaluated in the
context of certain upward and downward interest rate changes occurring ratably
over a twelve month period. At December 31, 1994, a 200 basis point change in
rates would reduce forecasted annual after-tax earnings by less than 1 percent.
41
<PAGE>
BAC has defined limits for the size of rate maturity gap positions. Any
adjustments made within these limits would not significantly alter BAC's gap
maturities or core earnings.
Options and Index Risk - Options and index risk from core deposit and lending
activities generally are measured and managed separately from gap risk.
Options are most common in retail products and primarily work to customers'
advantage. They exist in forms such as limits on variable rate loan and
deposit repricings (caps and floors), unilateral rights to prepay loans, and
depositors' ability to withdraw deposits on demand.
Index mismatches exist in variable rate assets, liabilities, and
off-balance-sheet financial instruments that may reprice simultaneously, but
are not tied to the same index. This risk arises from differences between
treasury, wholesale CD, and LIBOR indices and is also inherent in certain
variable-rate products, such as prime-rate loans and retail deposits.
BAC measures core options and index risk using actual historical patterns of
changes in rate levels, yield curve slopes, and index spreads. Numerous
independent scenarios are simulated, including many that diverge widely from
consensus market expectations. Exposures to options and index risk are
sensitive not only to underlying positions, but also to fluctuations in
market conditions.
Cash flows attributable to options and index mismatches are modeled and
valued separately for each simulated scenario. Consistent with the
expectation that core positions will be held to maturity, risk is measured
assuming options and index mismatch positions are open throughout their
lives, a period that can be as long as 30 years.
For each scenario that is simulated, BAC calculates an economic value that
could result from option mismatches, net of tax effects. Based on this
analysis, there is a 75 percent probability that BAC's loss of economic
value would not exceed 2 percent of common equity. At 90 percent and 99
percent probability levels, the analysis indicates maximum losses of 6
percent and 15 percent of common equity. BAC has entered into hedging
transactions that reduce these exposures to 1 percent, 5 percent, and 13 per
cent, respectively, of common equity.
Some residual options and index mismatch risk is unavoidable. Hedging
products available to BAC do not provide perfect hedges of option and index
risk embedded in retail products. In addition, BAC's risk measurement
methodology depends on predictions of customer responses to interest rate
movements. If actual customer behavior varies from these predictions, the
actual changes in economic value will also differ from the estimated effects.
BAC's risk management policy only permits transactions that reduce options
and index risk. Accordingly, BAC does not use written options, either
free-standing or embedded in off-balance-sheet products, for risk management
purposes. At December 31, 1994, BAC's purchased option contracts, which
reduce option and index risk, had a gross notional value of $4.5 billion.
Liquidity Risk Management
Overview
Liquidity risk is the risk that BAC will be unable to maintain cash flows
that are adequate to fund its operations and meet its commitments on a timely
and cost-effective basis. BAC manages its liquidity through the coordination
of the relative maturities of its assets and liabilities. In addition, BAC's
liquidity is enhanced by its ability to raise additional funds in money and
capital markets.
Liquidity risk is interrelated with credit and market risk. Many of BAC's
controls and limits for product and market liquidity are monitored and
managed through the market risk limits and risk control mechanisms previously
discussed, including limitations on the markets and products in which BAC may
participate.
BAC's 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.
Funding sources include core deposits, capital market funds, and purchased
money market liabilities. Core deposits include domestic interest- and
noninterest-bearing retail deposits, which have historically been a
relatively stable source of funds. Capital market funds include long-term
debt, subordinated capital notes, and common and preferred equity. Purchased
money market liabilities primarily include overseas time deposits, federal
funds purchased, securities sold under repurchase agreements, and
42
<PAGE>
other short-term borrowings. The cost and availability of these funding sources
are affected by credit ratings of BankAmerica Corporation (the parent) and its
subsidiaries.
BAC's liquidity is managed at both the parent and banking subsidiary levels.
The parent is funded primarily by the issuance of debt and equity, as well as
by dividend and interest income from its subsidiaries. The parent's direct
and indirect banking subsidiaries are funded primarily by their domestic
retail deposits. Lines of credit between banking subsidiaries and the bank
and between nonbanking subsidiaries and the parent, are structured to provide
additional funding support. In addition to significant liquid assets, the
parent and the bank have considerable unused borrowing capacity in capital
and money markets. Finally, BAC may issue common stock, preferred stock, and
senior and subordinated debt from time to time when market conditions are
judged appropriate in light of funding and capital needs.
Liquidity Review
At December 31, 1994, BAC's liquid assets totaled $42.6 billion, up $13.4
billion, or 46 percent, from $29.2 billion at year-end 1993. This growth was
largely reflected in increases in available-for-sale securities,
interest-bearing deposits in banks, cash and due from banks, and securities
purchased under resale agreements. These increases can be primarily
attributed to the Continental merger and asset transfers made in connection
with the first-quarter 1994 adoption of SFAS No. 115. At December 31, 1994,
liquid assets accounted for 20 percent of BAC's total assets, compared with
16 percent at year-end 1993.
<TABLE>
<CAPTION>
Liquid Assets at Year-End (Stacked block graphs in non-EDGAR version)
(in billions of dollars) 1992 1993 1994
--------------------------
<S> <C> <C> <C>
Liquid Assets at Year-End $ 24.8 $ 29.2 $ 42.6
</TABLE>
Various factors affected BAC's liquidity during 1994 and 1993. During 1994,
total loan originations and purchases exceeded principal collections,
resulting in a cash outflow of $8.4 billion. Conversely, total sales,
maturities, prepayments, and calls of investment securities exceeded total
purchases, resulting in a cash inflow of $5.1 billion. In total, the above
transactions resulted in a net cash outflow of $3.3 billion.
In 1993, a net cash outflow of $0.4 billion resulted from these same
activities, as total loan originations and purchases exceeded principal
collections by $2.5 billion and total sales, maturities, prepayments, and
calls of securities exceeded purchases by $2.1 billion. Additionally, in
1993, principal payments and retirements of long-term debt and subordinated
capital notes exceeded proceeds from issuances of long-term debt by $2.2
billion. However, in 1994, proceeds from the issuances of long-term debt
exceeded principal payments and retirements of long-term debt and
subordinated capital notes by $0.1 billion.
During both 1994 and 1993, BAC's liquidity was also enhanced by proceeds from
sales of loans, totaling $1.5 billion and $2.3 billion, respectively. These
loan sales consisted primarily of loans that were not originated or acquired
with the intent to sell but were sold within the same reporting period as
originated due to various economic factors.
In addition, in both 1994 and 1993, the parent paid dividends of $819 million
and $738 million, respectively, to its preferred and common stockholders. For
information concerning dividend and loan restrictions, refer to Note 24 of
the Notes to Consolidated Financial Statements on pages 80-82.
Operational and Settlement Risk Management
Operational risk is the risk that inadequate internal controls or procedures,
human error, system failure, or fraud can result in unexpected losses.
Mitigating this risk are systems and procedures to monitor transactions and
positions, documentation of transactions, regulatory compliance review, and
periodic review by internal and external auditors. In addition, BAC maintains
contingency systems for operations support in the event of natural disasters
and reconciliation procedures to ensure that critical data have been captured
by the systems.
43
<PAGE>
Settlement risk is the exposure to loss arising when an institution either
pays out funds or delivers assets before receiving assets or payment from its
counterparty. For example, settlement risk can occur when delivery of
securities or foreign currencies is not synchronized with payment for them.
BAC mitigates settlement risk through credit limits for each counterparty,
and, wherever possible, the use of legally enforceable master netting
agreements.
Capital Management
BAC's capital position continued to improve in 1994. At December 31, 1994,
stockholders' equity totaled $18.9 billion, up $1.8 billion, or 10 percent,
from $17.1 billion at year-end 1993. Of this increase, $1.4 billion was due
to 1994 earnings net of preferred and common stock dividends. In addition,
common equity increased $0.6 billion primarily due to stock issuances in
connection with the Continental merger. These increases were partially offset
by the adoption of SFAS No. 115, which resulted in $0.3 billion of net
unrealized losses on available-for-sale securities (net of related income
taxes) at December 31, 1994.
<TABLE>
<CAPTION>
Common and Total Stockholders' Equity (Plot point graph in non-EDGAR version)
(in billions of dollars) 1993 1994
----------------------------------- -----------------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total $ 16.1 $ 16.4 $ 16.8 $ 17.1 $ 16.9 $ 17.1 $ 18.9 $ 18.9
Common $ 13.1 $ 13.5 $ 13.8 $ 14.2 $ 13.9 $ 14.1 $ 15.6 $ 15.8
</TABLE>
Supported by the growth of BAC's capital base, on February 6, 1995, its Board
of Directors declared an increase in the quarterly dividend on BAC's common
stock from $0.40 per share to $0.46 per share. The dividend is payable on
March 14, 1995 to shareholders of record on February 22, 1995. In addition,
the Board authorized a stock repurchase program. This program enables BAC to
buy back approximately $1.9 billion of its common stock and to buy back or
redeem approximately $500 million of its preferred stock by the end of 1997.
Under this program BAC may purchase up to $800 million of its common stock by
the end of 1996. During each quarter of 1995, 1996, and 1997, BAC may
purchase additional amounts of common stock up to the level of amortization
of goodwill and core deposit intangibles for that quarter. Currently, this
level is approximately $90 million per quarter.
The parent and its domestic banking subsidiaries are subject to risk-based
capital regulations. These guidelines are used by bank regulatory authorities
to evaluate capital adequacy, and are based on an institution's asset risk
profile and off-balance-sheet exposures, such as unused loan commitments,
standby letters of credit, and derivative and foreign exchange contracts.
The Federal Reserve has established guidelines that certain banking
organizations are required to maintain a minimum 8 percent total risk-based
capital ratio (the ratio of total capital divided by risk-weighted assets),
including a Tier 1 capital ratio of 4 percent. The risk-based capital rules
have been further supplemented by a leverage ratio, defined as Tier 1 capital
divided by average total assets, after certain adjustments. The minimum
leverage ratio is 3 percent for banking organizations that do not anticipate
significant growth and have well-diversified-risk (including no undue
interest rate risk exposure), excellent asset quality, high liquidity, and
good earnings. Other banking organizations not in this category are expected
to have ratios well above the minimums, depending on their particular
condition and growth plans. Higher capital ratios could also be required if
warranted by the particular circumstances or risk profile of a given banking
organization. In the current
44
<PAGE>
Risk-Based Capital, Risk Weighted Assets, and
Risk-Based Capital Ratios
<TABLE>
<CAPTION>
December 31
--------------------------------------
(dollar amounts in millions) 1994/a/ 1993/a/ 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-Based Capital
Common stockholders' equity $ 16,149 $ 14,165 $ 12,509
Perpetual preferred stock 3,068 2,979 2,979
Less: Goodwill, nongrandfathered
core deposit and other identifiable
intangibles, and other deductions (5,559)/b/ (5,248)/b/ (4,179)
--------------------------------------
Tier 1 capital 13,658 11,896 11,309
Eligible portion of the allowance
for credit losses (exclusive of
allocated transfer risk reserve) 2,366 1,993 2,096
Hybrid capital instruments 336 568 1,762
Subordinated notes and debentures 5,707 4,422 4,122
Less: Other deductions (114) (37) (250)
--------------------------------------
Tier 2 capital 8,295 6,946 7,730
--------------------------------------
Total Risk-Based Capital $ 21,953 $ 18,842 $ 19,039
Risk Weighted Assets $187,810 $157,890 $165,815
Risk-Based Capital Ratios
Tier 1 capital 7.27% 7.53% 6.82%
Tier 2 capital 4.42 4.40 4.66
--------------------------------------
Total Risk-Based Capital Ratio 11.69% 11.93% 11.48%
Tier 1 Leverage Ratio 6.74% 6.58% 6.37%
- -----------------------------------------------------------------------------
</TABLE>
/a/ The Federal Reserve has issued final capital regulations on the adoption of
SFAS No. 109, which will become effective April 1, 1995. The December 31,
1994 and 1993 information reflect these new regulations.
/b/ Includes nongrandfathered CDI and other identifiable intangibles acquired
after February 19, 1992 of $937 million and $100 million, respectively, at
December 31, 1994, and $1,008 million and $71 million, respectively, at
December 31, 1993. Also, includes $111 million and $158 million at December
31, 1994 and 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.
regulatory environment, banking companies must stay well capitalized to receive
favorable regulatory treatment of acquisition and other expansion activities and
favorable risk-based deposit insurance assessments. It is BAC's policy to
maintain capital ratios above the regulatory well-capitalized levels, which are
10 percent for the total risk-based capital ratio, 6 percent for the Tier 1
capital ratio, and 5 percent for the Tier 1 leverage ratio.
The Federal Deposit Insurance Corporation Improvement Act of 1991 requires all
federal banking agencies to incorporate interest rate risk into their risk-based
capital framework. Until all final interest rate risk regulations have been
issued, BAC will be unable to determine the effect of such regulations on its
regulatory capital ratios or those of its subsidiary banks.
At December 31, 1994, BAC's total and Tier 1 risk-based capital ratios
decreased 24 basis points and 26 basis points, respectively, from the amounts
reported at year-end 1993. These declines were primarily due to the increase in
total risk weighted assets in connection with the Continental merger.
BAC evaluates and modifies its mix of capital sources, including debt, equity,
and off-balance-sheet financing arrangements, on an ongoing basis, taking into
consideration various factors. Such factors include regulatory capital targets,
as well as the costs of capital sources, which are influenced by prevailing
interest rates and credit-risk spreads. BAC's capital mix may vary from time to
time in response to changes in these factors.
To determine BAC's level of capital appropriate to various lines of business,
an economic capital framework has been developed which promotes the efficient
deployment of capital. This framework encompasses credit, market, country and
operating business risks, and is a key tool utilized to ensure that capital
resources are allocated to businesses in proportion to the economic risks they
incur and the returns they generate.
45
<PAGE>
Report of Management
The management of BankAmerica Corporation and its subsidiaries has
responsibility for the preparation, integrity, and reliability of the financial
statements and related financial information contained in this annual report.
The financial statements were prepared in accordance with generally accepted
accounting principles and prevailing practices of the banking industry and
include necessary judgments and estimates by management.
Management has established and is responsible for maintaining an internal
control environment designed to provide reasonable assurance as to the integrity
and reliability of the financial statements, the protection of assets, and the
prevention and detection of fraudulent financial reporting. The internal control
environment includes: an effective financial accounting structure; a
comprehensive internal audit function; an independent auditing and examining
committee (the committee) of the Board of Directors; and extensive financial and
operating policies and procedures. BAC's management also fosters an ethical
climate supported by a code of conduct, appropriate levels of management
authority and responsibility, an effective corporate organizational structure,
and appropriate selection and training of personnel.
The Board of Directors, primarily through the committee, oversees the adequacy
of BAC's control environment. The committee, whose members are neither officers
nor employees of BAC, meets periodically with management, internal auditors,
credit examination officers, and the independent auditors to review the
functioning of each and to ensure that each is properly discharging its
responsibilities.
BAC's financial statements are audited by Ernst & Young LLP, BAC's independent
auditors, whose audit is made in accordance with generally accepted auditing
standards and includes such audit procedures as they consider necessary to
express the opinion in their report that follows. In addition, Ernst & Young LLP
reviews BAC's quarterly financial information. A review is substantially less in
scope than an audit in accordance with generally accepted auditing standards
and, accordingly, Ernst & Young LLP does not express an opinion on the
quarterly financial information. Ernst & Young LLP meets regularly with
management as well as the committee to discuss its audit and its findings as to
the integrity of the financial statements and the adequacy of the internal
controls.
Management recognizes that there are inherent limitations in the effectiveness
of any internal control environment. However, management believes that, as of
December 31, 1994, BAC's internal control environment, as described above,
provided reasonable assurance as to the integrity and reliability of the
financial statements and related financial information.
Richard M. Rosenberg
- --------------------
Richard M. Rosenberg
Chairman and Chief Executive Officer
Lewis W. Coleman
- ----------------
Lewis W. Coleman
Vice Chairman of the Board and Chief Financial Officer
James H. Williams
- -----------------
James H. Williams
Executive Vice President and Chief Accounting Officer
January 17, 1995
46
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
BankAmerica Corporation
We have audited the accompanying consolidated balance sheet of BankAmerica
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of BankAmerica Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BankAmerica
Corporation and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
In 1994, BankAmerica Corporation adopted Financial Accounting Standards Board
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," and Financial Accounting Standards Board Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts." These changes are
discussed in Notes 1 and 7 of the Notes to Consolidated Financial Statements.
/s/ Ernst & Young LLP
San Francisco, California
January 17, 1995
47
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations BankAmerica Corporation and Subsidiaries
Year Ended December 31
----------------------------------------
(dollar amounts in millions, except per share data) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans, including fees $ 9,806 $ 9,463 $ 9,729
Interest-bearing deposits in banks 325 194 283
Federal funds sold 55 35 61
Securities purchased under resale agreements 351 174 163
Trading account assets 473 372 297
Available-for-sale and held-to-maturity securities 1,374 1,389 1,080
----------------------------------------
Total interest income 12,384 11,627 11,613
Interest Expense
Deposits 3,337 2,971 3,769
Federal funds purchased 27 16 20
Securities sold under repurchase agreements 351 158 108
Other short-term borrowings 275 201 270
Long-term debt 810 727 614
Subordinated capital notes 42 113 114
----------------------------------------
Total interest expense 4,842 4,186 4,895
----------------------------------------
Net interest income 7,542 7,441 6,718
Provision for credit losses 460 803 1,009
----------------------------------------
Net interest income after provision for credit losses 7,082 6,638 5,709
Noninterest Income
Deposit account fees 1,201 1,198 1,049
Credit card fees 343 354 350
Trust fees 285 294 222
Other fees and commissions 1,111 1,083 922
Net trading account related 120 244 163
Foreign exchange trading related 237 325 300
Net securities gains 24 61 11
Net gain on sales of subsidiaries and operations 85 -- 155
Net gain on sales of assets 126 106 117
Venture capital activities 136 129 26
Other income 479 479 334
----------------------------------------
Total noninterest income 4,147 4,273 3,649
Noninterest Expense
Salaries 2,936 2,886 2,557
Employee benefits 703 573 491
Occupancy 690 684 561
Equipment 589 610 523
Amortization of intangibles 411 421 248
Communications 323 330 305
Regulatory fees and related expenses 290 309 265
Professional services 225 268 201
Merger-related expenses 50 9 449
Other expense 1,295 1,393 1,076
----------------------------------------
Total noninterest expense 7,512 7,483 6,676
----------------------------------------
Income before income taxes 3,717 3,428 2,682
Provision for income taxes 1,541 1,474 1,190
----------------------------------------
Net Income $ 2,176 $ 1,954 $ 1,492
Net income applicable to common stock $ 1,928 $ 1,713 $ 1,323
Earnings per common and common equivalent share 5.36 4.79 4.24
Earnings per common share -- assuming full dilution 5.33 4.76 4.21
Dividends declared per common share 1.60 1.40 1.30
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
48
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet BankAmerica Corporation and Subsidiaries
December 31
----------------------------------------
(dollar amounts in millions) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 13,578 $ 10,482
Interest-bearing deposits in banks 6,371 2,988
Federal funds sold 640 2,050
Securities purchased under resale agreements 5,259 3,549
Trading account assets 6,941 6,866
Available-for-sale securities (market value: 1993 -- $3,405) 9,849 3,282
Held-to-maturity securities (market value: 1994 -- $7,292; 1993 -- $16,802) 8,167 16,415
Loans 140,912 126,556
Less: Allowance for credit losses 3,690 3,508
----------------------------------------
Net loans 137,222 123,048
Customers' acceptance liability 1,069 851
Accrued interest receivable 1,449 982
Goodwill, net 4,296 3,973
Identifiable intangibles, net 2,149 2,191
Unrealized gains on off-balance-sheet instruments 6,267 --
Premises and equipment, net 3,955 3,631
Other assets 8,263 6,625
----------------------------------------
Total Assets $215,475 $186,933
Liabilities and Stockholders' Equity
Deposits in domestic offices:
Interest-bearing $ 90,374 $ 89,134
Noninterest-bearing 34,956 31,578
Deposits in foreign offices:
Interest-bearing 27,454 19,608
Noninterest-bearing 1,610 1,298
----------------------------------------
Total deposits 154,394 141,618
Federal funds purchased 3,283 220
Securities sold under repurchase agreements 5,505 4,229
Other short-term borrowings 5,053 3,523
Acceptances outstanding 1,069 851
Accrued interest payable 831 505
Unrealized losses on off-balance-sheet instruments 6,571 --
Other liabilities 4,450 4,728
Long-term debt 14,823 13,508
Subordinated capital notes 605 607
----------------------------------------
Total liabilities 196,584 169,789
Stockholders' Equity
Preferred stock 3,068 2,979
Common stock, par value $1.5625 (authorized: 1994 and 1993 -- 700,000,000 shares;
issued: 1994 -- 371,887,723 shares; 1993 -- 358,498,930 shares) 581 560
Additional paid-in capital 7,743 7,118
Retained earnings 7,854 6,502
Net unrealized losses on available-for-sale securities (326) --
Common stock in treasury, at cost (1994 -- 705,719 shares; 1993 -- 586,760 shares) (29) (15)
----------------------------------------
Total stockholders' equity 18,891 17,144
----------------------------------------
Total Liabilities and Stockholders' Equity $215,475 $186,933
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
49
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows BankAmerica Corporation and Subsidiaries
Year Ended December 31
----------------------------------------
(in millions) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 2,176 $ 1,954 $ 1,492
Adjustments to net income to arrive at net cash provided by operating activities:
Provision for credit losses 460 803 1,009
Net gain on sales of assets and subsidiaries and operations (211) (106) (272)
Depreciation and amortization of premises and equipment 489 461 395
Amortization of intangibles 411 421 248
Provision for deferred income taxes 713 964 44
Change in assets and liabilities net of effects from acquisitions, consolidations,
divestitures, and pending dispositions:
(Increase) decrease in accrued interest receivable (325) 45 417
Increase (decrease) in accrued interest payable 421 (18) (236)
(Increase) decrease in trading account assets (35) (3,888) 337
Increase in current income taxes payable 64 436 515
Other, net (143) (650) 105
----------------------------------------
Net cash provided by operating activities 4,020 422 4,054
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Sales proceeds 3,019 2,018 410
Maturities, prepayments, and calls 6,481 6,526 355
Purchases (5,815) (4,694) (492)
Activity in held-to-maturity securities:
Sales proceeds -- -- 453
Maturities, prepayments, and calls 2,763 5,296 4,816
Purchases (1,319) (7,052) (8,389)
Proceeds from sales of loans 1,516 2,327 4,665
Purchases of loans (758) (705) (625)
Purchases of premises and equipment (617) (791) (746)
Proceeds from sales of other real estate owned 587 552 308
Net cash provided (used) by:
Loan originations and principal collections (7,602) (1,839) 5,431
Interest-bearing deposits in banks (2,576) (806) 1,063
Federal funds sold 1,941 (562) 4,122
Securities purchased under resale agreements (1,108) (723) 291
Net cash provided by acquisitions 700 106 5,375
Proceeds from liquidations of assets identified for disposition 300 1,750 1,076
Increase (decrease) in cash due to deconsolidations and divestitures -- 20 (2,017)
Other, net (151) 263 452
----------------------------------------
Net cash provided (used) by investing activities (2,639) 1,686 16,548
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 3,400 3,150 5,285
Principal payments and retirements of long-term debt and subordinated capital notes (3,263) (5,387) (2,388)
Proceeds from issuance of common stock 52 268 156
Proceeds from issuance of preferred stock -- -- 1,311
Preferred stock repurchased (324) -- --
Treasury stock purchased (503) -- --
Common stock dividends (571) (497) (409)
Preferred stock dividends (248) (241) (169)
Net cash provided (used) by:
Deposits 598 (4,588) (8,212)
Federal funds purchased 2,677 (197) (328)
Securities sold under repurchase agreements 756 3,303 (1,451)
Other short-term borrowings (708) 1,435 (4,633)
Cash used by divestitures of deposits -- -- (4,750)
Cash used by disposition of liabilities of deconsolidated subsidiaries and operations (70) (197) (776)
Other, net (92) (509) 316
----------------------------------------
Net cash provided (used) by financing activities 1,704 (3,460) (16,048)
Effect of exchange rate changes on cash and due from banks 11 (14) (32)
----------------------------------------
Net increase (decrease) in cash and due from banks 3,096 (1,366) 4,522
Cash and due from banks at beginning of year 10,482 11,848 7,326
----------------------------------------
Cash and Due from Banks at End of Year $13,578 $10,482 $11,848
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Stockholders' Equity BankAmerica Corporation and Subsidiaries
Year Ended December 31
----------------------------------------
(in millions) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock
Balance, beginning of year $ 2,979 $ 2,979 $ 1,326
Preferred stock issued 389 -- 1,653
Preferred stock repurchased (300) -- --
----------------------------------------
Balance, end of year 3,068 2,979 2,979
Common Stock
Balance, beginning of year 560 545 342
Common stock issued 21 15 203
----------------------------------------
Balance, end of year 581 560 545
Additional Paid-In Capital
Balance, beginning of year 7,118 6,690 2,024
Common stock issued 623 428 4,682
Preferred stock issued 26 -- (16)
Preferred stock repurchased (24) -- --
----------------------------------------
Balance, end of year 7,743 7,118 6,690
Retained Earnings
Balance, beginning of year 6,502 5,283 4,378
Net income 2,176 1,954 1,492
Common stock dividends (571) (497) (409)
Preferred stock dividends (248) (241) (169)
Foreign currency translation adjustments,
net of related income taxes (5) 3 (11)
Valuation adjustments on marketable equity securities,
net of related income taxes -- -- 2
----------------------------------------
Balance, end of year 7,854 6,502 5,283
Net Unrealized Loss on Available-for-Sale Securities
Balance, beginning of year -- -- --
Effect of adoption of SFAS No. 115, net of related income taxes (15) -- --
Valuation adjustments, net of related income taxes (311) -- --
----------------------------------------
Balance, end of year (326) -- --
Common Stock in Treasury, at Cost
Balance, beginning of year (15) (9) (7)
Treasury stock purchased (503) -- --
Treasury stock issued 489 -- --
Other -- (6) (2)
----------------------------------------
Balance, end of year (29) (15) (9)
----------------------------------------
Total Stockholders' Equity $18,891 $17,144 $15,488
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
51
<PAGE>
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
The consolidated financial statements of BankAmerica Corporation and
subsidiaries (BAC) are prepared in conformity with generally accepted accounting
principles and prevailing practices of the banking industry. The statements also
reflect specialized industry accounting practices of certain nonbanking
subsidiaries that may differ from those used by banking subsidiaries. The
following is a summary of the significant accounting and reporting policies used
in preparing the consolidated financial statements.
Financial Statement Presentation
The consolidated financial statements of BAC include the accounts of BankAmerica
Corporation (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), Bank of America Illinois, Seafirst Corporation
(Seafirst), and other banking and nonbanking subsidiaries. The revenues,
expenses, assets, and liabilities of the subsidiaries are included in the
respective line items in the consolidated financial statements after elimination
of intercompany accounts and transactions.
BAC's results of operations reflect the effects of the merger with
Continental Bank Corporation (Continental) subsequent to its consummation on
August 31, 1994 and the effects of the merger with Security Pacific Corporation
(SPC) subsequent to its consummation on April 22, 1992.
The consolidated statement of cash flows explains the change in cash and due
from banks as disclosed in the consolidated balance sheet. The cash flows from
hedging transactions are classified in the same category as the cash flows from
the items being hedged.
Certain amounts in prior periods have been reclassified to conform to the
current presentation.
Trading Account Assets
Trading account assets, which are generally held for the short term in
anticipation of market gains and for resale, are carried at their fair value.
Realized and unrealized gains and losses on trading account assets are included
in net trading account related and foreign exchange trading related income.
Available-for-Sale Securities and
Held-to-Maturity Securities
BAC's securities portfolios include U.S. Treasury and other government agency
securities, mortgage-backed securities, state, county, municipal, and foreign
government securities, equity securities and other securities which primarily
consist of corporate debt securities.
Effective January 1, 1994, BAC adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 permits debt securities for which BAC has the positive
intent and ability to hold to maturity to be classified as held-to-maturity
securities and reported at amortized cost. Debt securities that BAC may not hold
to maturity and marketable equity securities are classified as available-for-
sale securities if they are not considered to be part of trading-related
activities. Available-for-sale securities are 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.
Prior to the adoption of SFAS No. 115, securities were classified as held-to-
maturity when BAC had the ability to hold the securities to maturity and the
intent to hold them on a long-term basis. Held-to-maturity securities were
carried at amortized cost. Securities were classified as available-for-sale when
BAC had the intent to hold the securities for an indefinite period of time but
not necessarily to maturity. Available-for-sale securities were carried at the
lower of amortized cost or market value.
Dividend and interest income, including amortization of premiums and
accretion of discounts, for both available-for-sale and held-to-maturity
securities are included in interest income.
Realized gains and losses for both securities portfolios are recorded in net
securities gains and are computed using the specific identification method. Any
decision to sell available-for-sale securities would be based on various
factors, including movements in interest rates, changes in the maturity mix of
BAC's assets and liabilities, liquidity demands, regulatory capital
considerations, and other similar factors.
Prior to the adoption of SFAS No. 115, marketable equity securities were
generally carried at the lower of cost or aggregate market value and included in
other assets. Unrealized losses from temporary declines in the value of
marketable equity securities were reported as a separate component of
stockholders' equity on a net-of-tax basis. Realized gains and losses, declines
in value judged to be other than temporary, and dividends were recorded in other
income.
52
<PAGE>
Loans
Loans are generally carried at the principal amount outstanding net of unearned
discounts. Interest income on discounted loans is generally recognized based on
methods that approximate the interest method.
Loans, in addition to those originated or acquired with the intent to sell,
may be sold prior to maturity due to various economic factors, including
significant movements in interest rates, changes in the maturity mix of BAC's
assets and liabilities, liquidity demands, regulatory capital considerations,
and other similar factors. These loans are recorded at the lower of cost or fair
value when they are identified as being held for sale. The fair value of loans
being held for sale represents the cash price anticipated to be received in a
current sale.
Loans are generally placed on nonaccrual status when full payment of
principal or interest is in doubt, or when they are past due 90 days as to
either principal or interest. The past due period is 180 days for residential
real estate loans and certain consumer loans that are collateralized by junior
mortgages on residential real estate. Senior management may grant a waiver from
nonaccrual status if a past due loan is well secured and in the process of
collection. A nonaccrual loan may be restored to accrual status when all
principal and interest amounts contractually due, including arrearages, are
reasonably assured of repayment within a reasonable period, and there is a
sustained period of repayment performance by the borrower in accordance with the
contractual terms of the loan.
When a loan is placed on nonaccrual status, interest accrued but not received
is reversed against interest income. If management determines that ultimate
collectibility of principal is in doubt, cash receipts on nonaccrual loans are
applied to reduce the principal balance.
BAC provides equipment financing to its customers through a variety of lease
arrangements. Direct financing leases are carried at the aggregate of lease
payments receivable plus estimated residual value less unearned income. Unearned
income on direct financing leases is amortized over the lease terms by methods
producing level rates of return on net lease assets. Leveraged leases, which are
a form of financing lease, are carried net of nonrecourse debt. Unearned income
on leveraged leases is amortized over the lease terms by methods producing level
rates of return on the net investments in the leases.
In 1993, the Financial Accounting Standards Board (FASB) issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." SFAS No. 114, as amended,
requires that the carrying value of certain loans be measured based on the
present value of their expected future cash flows or, as practical expedients,
the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. When foreclosure is probable, the carrying value
of the loan must be measured at the collateral's fair value. SFAS No. 114 is
effective for fiscal years beginning after December 15, 1994 and will be adopted
by BAC effective January 1, 1995. BAC does not expect that, at adoption, SFAS
No. 114 will have a material effect on its financial position or results of
operations.
Allowance for Credit Losses
The allowance for credit losses is a reserve for estimated credit losses and
other credit-related charges. Credit losses arise primarily from the loan
portfolio, but may also be derived from other credit-related sources, including
commitments to extend credit, guarantees, and standby letters of credit.
Actual credit losses and other charges, net of recoveries, are deducted from
the allowance for credit losses. Other charges to the allowance include amounts
related to loans and loans of subsidiaries and operations that were subsequently
transferred to other assets, as well as the difference between the carrying
value of restructuring country assets sold or swapped and the fair value of
assets received. A provision for credit losses, which is a charge against
earnings, is added to the allowance based on a quarterly assessment of the
portfolio. While management has attributed reserves to various portfolio
segments, the allowance is general in nature and is available for the credit
portfolio in its entirety.
Premises and Equipment
Premises, equipment, and leasehold improvements are carried at cost, less
accumulated depreciation and amortization computed on a straight-line basis over
the estimated useful lives of the assets or the terms of the leases. Net gains
and losses on disposal or retirement of premises and equipment are included in
net gain on sales of assets.
Other Real Estate Owned
Other real estate owned (OREO), which is recorded in other assets, includes
properties acquired through foreclosure or through full or partial satisfaction
of loans, as well as properties that are nonperforming acquisition, development,
and construction arrangements. OREO also includes loans where BAC has obtained
physical possession of the related collateral.
53
<PAGE>
OREO is carried at the lower of fair value, net of estimated selling and
disposal costs, or cost. Fair value adjustments are made when real estate is
acquired through foreclosure or through full or partial satisfaction of loans.
These fair value adjustments are treated as credit losses. Estimated selling and
disposal costs are charged to other expense at the time a loan is reclassified
to OREO. Changes in estimated selling and disposal costs, routine holding costs,
subsequent declines in fair values, and net gains or losses on disposal of
properties classified as OREO are included in other expense as incurred.
Goodwill and Identifiable Intangibles
Goodwill represents the excess of the purchase price over the estimated fair
value of identifiable net assets associated with BAC's merger and acquisition
transactions. Goodwill is amortized on a straight-line basis over 25 years.
Core deposit intangibles (CDI) represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions and are
amortized using an accelerated method based on the expected runoff of the
related deposits. Other identifiable intangibles consist primarily of credit
card intangibles (CCI) and purchased mortgage servicing rights (PMSR). CCI
represents the intangible value of credit card customer relationships resulting
from customer balances acquired. PMSR represents the intangible value of
purchased rights to service mortgage loans. Other identifiable intangibles are
amortized using accelerated methods over their estimated periods of benefit.
Goodwill and identifiable intangibles are assessed quarterly for other-than-
temporary impairment. Should such an assessment indicate that the value of
goodwill may be impaired, an evaluation of the recoverability would be performed
prior to any writedown of the assets. If the net book value of identifiable
intangibles were to exceed their respective undiscounted future net cash flows,
identifiable intangibles would be written down to their respective undiscounted
future net cash flows.
Investments in Affiliates, Joint Ventures,
and Other Entities
Investments in affiliates, joint ventures, and other entities are recorded in
other assets. Investment in affiliates, which are generally 20-to-50-percent-
owned companies, and joint ventures are generally accounted for by the equity
method. BAC's share of net income or loss from these investments is recorded in
other income. Gains or losses resulting from issuances of stock by an equity
affiliate that change BAC's percentage of ownership are recognized at the issue
date and are recorded in other income. Dividends are recorded as a reduction of
the carrying value of the investment when received.
Investments in other entities (less-than-20-percent-owned companies) are
generally carried at cost less writedowns for declines in value judged to be
other than temporary. These valuation losses are recorded in other income when
incurred. Dividends are recorded in other income when received.
Offsetting of Amounts Related to Certain Contracts
Financial Accounting Standards Board Interpretation (FIN) No. 39, "Offsetting of
Amounts Related to Certain Contracts," was prospectively adopted by BAC
effective January 1, 1994. FIN 39 requires that unrealized gains on forward,
swap, option, and other conditional or exchange contracts be recorded as assets
and unrealized losses on these contracts be recorded as liabilities for those
instruments reported on a mark-to-market basis. However, unrealized gains and
losses with the same counterparty may be netted when contracts are executed
under legally enforceable master netting agreements. BAC nets unrealized gains
and losses on these contracts 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.
During 1994, the FASB issued FIN 41, "Offsetting of Amounts Related to
Certain Repurchase and Reverse Repurchase Agreements." FIN 41 did not have a
significant effect on BAC's financial position.
Foreign Exchange and Derivatives Contracts
BAC uses foreign exchange and derivatives contracts in both its trading and
asset and liability management activities.
Trading Instruments
Interest rate derivative contracts used in BAC's trading activities are carried
at market value. The resulting realized and unrealized gains and losses are
recognized in net trading account-related income.
Foreign exchange contracts, which include spot, futures, forward, swap, and
option positions, are carried at market value. Realized and unrealized gains and
losses related to these positions are included in foreign exchange trading
related income.
54
<PAGE>
Asset and Liability Management Instruments
BAC uses certain derivative financial instruments to manage interest rate and
foreign currency exposures. When these instruments meet specific criteria, they
may be approved as accounting hedges and accounted for on either a deferral
basis, an accrual basis, or a mark-to-market basis, depending upon the nature of
BAC's hedge strategy and the method used to account for the hedged item. Under
the deferral or accrual method, gains or losses on terminated hedging
instruments are deferred and amortized over the remaining life of the hedged
item.
Deferral Accounting - BAC accounts for derivative financial instruments on a
deferral basis when the market value of the hedging instrument fulfills the
objectives of the hedge strategy, and the carrying value of the hedged item
is other than fair value.
Interest Rate Contracts - Under deferral accounting, for hedges of existing
assets and liabilities, realized and unrealized gains and losses on the
hedging instrument are recorded as an adjustment to the carrying value of the
hedged item and amortized to the interest income or expense account related
to the hedged item.
BAC accounts for futures and forward rate agreements on a deferral basis.
Deferred gains and losses are reported as adjustments to the carrying values
of loans, deposits, and long-term debt. The amortization of these deferred
gains and losses is reported in the corresponding interest income and
interest expense accounts.
Initial margin deposits for exchange-traded instruments are reported in
other assets. Fees and commissions received or paid are deferred and
recognized as an adjustment to the carrying value of the hedged item,
consistent with the recognition of gains and losses on the hedging
instrument.
Foreign Exchange Contracts - Realized and unrealized gains and losses on
instruments that hedge firm commitments are deferred and included in the
measurement of the subsequent transaction; however, losses are deferred only
to the extent of expected gains on the future commitment. Fees and
commissions received or paid related to firm commitments are included in the
measurement of the transaction when it occurs.
Accrual Accounting - BAC accounts for derivative financial instruments on an
accrual basis when the cash flows generated from the hedging instrument
fulfill the objectives of the hedge strategy.
Under accrual accounting, interest income or expense on the hedging
instrument is accrued and recorded as an adjustment to the interest income or
expense related to the hedged item. BAC accounts for certain interest rate swaps
and interest rate option contracts (caps and floors) on an accrual basis.
Interest income or expense on derivative financial instruments accounted for
using accrual accounting are reported in interest income-loans, interest
expense-deposits, and interest expense- long-term debt.
Fees and commissions received or paid on interest rate swaps are deferred and
amortized as an adjustment to the interest income or expense related to the
hedged item over the term of the swap. Premiums paid for interest rate options
are deferred as a prepaid expense and are amortized to interest income or
expense over the term of the cap or floor.
Mark-to-Market Accounting - BAC accounts for derivative financial instruments on
a mark-to-market basis when the market value of the hedging instrument fulfills
the objectives of the hedge strategy, and the carrying value of the hedged item
is fair value.
Under mark-to-market accounting, realized and unrealized gains and losses on
the hedging instrument are recognized when they occur in conjunction with the
gains and losses on the hedged item.
BAC accounts for certain interest rate swaps designated as hedges of
available-for-sale securities on a mark-to-market basis. The accrual of interest
payable and interest receivable on these interest rate swaps is reported in
interest income-available-for-sale securities. Changes in the market values of
these interest rate swaps, exclusive of net interest accruals, are reported in
stockholders' equity on a net-of tax basis.
Foreign Currency Translation
Assets, liabilities, and operations of foreign branches and subsidiaries are
recorded based on the functional currency of each entity. For the majority of
the foreign operations, the functional currency is the local currency, in which
case the assets, liabilities, and operations are translated, for consolidation
purposes, at current exchange rates from the local currency to the reporting
currency, the U.S. dollar. The resulting gains or
55
<PAGE>
losses are reported as a component of retained earnings within stockholders'
equity on a net-of-tax basis. In certain other instances, including
hyperinflationary economies, the functional currency used to measure the
financial statements of a foreign entity is the U.S. dollar. In these instances,
the resulting gains and losses are included in foreign exchange trading related
income, except for those of units in hyperinflationary economies, which are
included in other income.
Provision for Income Taxes
BAC prospectively adopted SFAS No. 109 on January 1, 1993. SFAS No. 109 mandates
the use of the liability method of accounting for income taxes. Under the
liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of existing differences between financial
reporting and tax reporting bases of assets and liabilities, as well as for
operating losses and tax credit carryforwards, using enacted tax laws and rates.
Deferred tax expense represents the net change in the deferred tax asset or
liability balance during the year. This amount, together with income taxes
currently payable or refundable for the current year, represents the total
income tax expense for the year. Prior to the adoption of SFAS No. 109, income
tax expense was determined using the deferred method. Deferred tax expense was
based on items of income and expense that were reported in different years in
the financial statements and tax returns and were measured at the tax rate in
effect in the year the difference originated.
The parent files a consolidated U.S. federal income tax return and
consolidated or combined returns for certain states, including California.
State, local, and foreign income tax returns are filed according to the taxable
activity of each unit.
2. Merger with Continental Bank Corporation
On August 31, 1994, Continental was merged with and into the parent, and
Continental's principal subsidiary, Continental Bank, was renamed Bank of
America Illinois. Each outstanding share of Continental's common stock was
converted into either 0.7993 of a share of the parent's common stock or $38.297
in cash. In connection with the Continental merger, the parent issued 21.5
million shares of common stock valued at $985 million on January 27, 1994, the
day preceding the announcement of the merger. The 21.5 million shares issued
included 11.8 million shares of treasury stock purchased in anticipation of the
merger at an average per-share price of $42.43. The aggregate amount of cash
paid to Continental common stockholders was approximately $950 million.
In addition, each outstanding share of Continental's Adjustable Rate
Preferred Stock, Series 1 and Adjustable Rate Cumulative Preferred Stock, Series
2 was converted upon consummation of the Continental merger, into one share of
the parent's Adjustable Rate Preferred Stock, Series 1 (Preferred Stock, Series
1) and Adjustable Rate Cumulative Preferred Stock, Series 2 (Preferred Stock,
Series 2), respectively, having substantially the same terms. The parent's
preferred stock issued in connection with the Continental merger was valued at
$415 million, based on market factors as of January 27, 1994. On December 5,
1994 the Preferred Stock, Series 2 was redeemed by the parent. Refer to Note 16
of the Notes to Consolidated Financial Statements on page 65 for further
information on this redemption.
Continental was a Delaware corporation organized in 1968 and was registered
as a bank holding company under the Bank Holding Company Act of 1956, as
amended, and the Illinois Bank Holding Company Act of 1957. Continental provided
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 provided business financing, specialized financial and
operating services, and private banking services. Continental also engaged in
equity finance and investing, as both principal and arranger, and international
trading.
The Continental merger was recorded by the parent during the third quarter of
1994 using the purchase method of accounting in accordance with Accounting
Principles Board Opinion (APB) No. 16, "Business Combinations." Under this
method of accounting, the purchase price was allocated to assets acquired and
liabilities assumed based on their estimated fair values at consummation. At
December 31, 1994, goodwill (net of accumulated amortization) recorded in
connection with the Continental merger, which represents the excess of the
purchase price over the estimated fair value of identifiable tangible and
intangible net assets, amounted to approximately $619 million. Identifiable
intangibles (net of accumulated amortization) related to the Continental merger
totaled approximately $84 million at December 31, 1994.
56
<PAGE>
Merger-related expenses of $50 million were accrued during 1994 to reflect
management's best estimate of separation and benefits costs related to pre-
merger BAC employees, employment assistance costs for separated employees of
pre-merger BAC, and other expenses of pre-merger BAC associated with the
Continental merger.
Unaudited Pro Forma Combined Summary of Operations
The following table presents an unaudited pro forma combined summary of
operations of BAC and Continental for the years ended December 31, 1994 and
1993. The Unaudited Pro Forma Combined Summary of Operations is presented as if
the Continental merger had been effective January 1, 1993.
This information combines the historical results of operations of BAC and
Continental after giving effect to amortization of purchase accounting
adjustments. This summary excludes an $80 million cumulative effect of
accounting change for income taxes recognized by Continental for the year ended
December 31, 1993.
The Unaudited Pro Forma Combined Summary of Operations is based on BAC's
historical results of operations for the year ended December 31, 1994, which
included combined operations from the Continental merger date forward.
Accordingly, BAC's earnings for the period September 1, 1994 through December
31, 1994 included revenues and expenses related to former Continental
operations, as well as the amortization of purchase accounting adjustments, such
as fair value adjustments, goodwill, and identifiable intangibles.
The combined historical results of operations of BAC and Continental were
adjusted to reflect the amortization of the fair value adjustments and other
purchase accounting adjustments recorded in connection with the Continental
merger, including those related to available-for-sale securities, loans,
goodwill, identifiable intangibles, deposits, and long-term debt. Amortization
was calculated based on the methods and periods of benefit determined
appropriate by management. The historical income statement information for the
year ended December 31, 1993 was adjusted to include amortization for the full
period.
The Unaudited Pro Forma Combined Summary of Operations is intended for
informational purposes only and is not necessarily indicative of the future
results of operations of BAC, or of the results of operations of BAC that would
have occurred had the Continental merger been in effect for the full years
presented.
Unaudited Pro Forma Combined Summary of Operations
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
(dollar amount in millions, except per share data) 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Summary of Operations
Interest income $13,152 $12,755
Interest expense 5,298 4,803
----------------------
Net interest income 7,854 7,952
Provision for credit losses 520 984
----------------------
Net interest income after provision
for credit losses 7,334 6,968
Noninterest income 4,485 4,913
Noninterest expense 7,951/a/ 8,178
----------------------
Income before income taxes 3,868 3,703
Provision for income taxes 1,606 1,587
----------------------
Net Income $ 2,262 $ 2,116
Earnings per common and common
equivalent share $ 5.32 $ 4.84
Earnings per common and common
equivalent share - assuming full dilution 5.29 4.81
- -----------------------------------------------------------------------------
</TABLE>
/a/ Merger-related expenses, as described above, of $50 million have been
eliminated from the combined historical results of operations, as these
expenses do not represent ongoing expenses of BAC.
Primary and fully diluted pro forma combined earnings per common share for
the years ended December 31, 1994 and 1993 were calculated based on pro forma
combined net income, less the sum of actual preferred dividends paid by BAC and
Continental during each of the years. Actual average common and common
equivalent shares outstanding and average common shares outstanding assuming
full dilution for the quarter ended December 31, 1994 were used to approximate
the same information for the full year ended December 31, 1994 as if the
Continental merger had taken place on January 1, 1993. The share amounts used to
calculate primary and fully diluted pro forma combined earnings per common share
for the year ended December 31, 1993 were determined as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(in millions) Primary Fully Diluted
- -----------------------------------------------------------------------------
<S> <C> <C>
Actual average number of common
and common equivalent shares
outstanding for BAC for the
year ended December 31, 1993 358 363
Common shares issued in connection
with the Continental merger 22 22
Continental's common stock
equivalents for the year ended
December 31, 1993 1 1
------------------------------
381 386
</TABLE>
57
<PAGE>
3. Merger with Security Pacific Corporation
The SPC merger was consummated on April 22, 1992. Each outstanding share of
SPC's common stock was converted into 0.88 of a share of the parent's common
stock. In total, 113,118,334 shares of the parent's common stock, valued at $4.2
billion, were issued. In addition, the outstanding shares of SPC's 11% Preferred
Stock, Series I and 11% Preferred Stock, Series J, were converted upon
consummation of the SPC merger into an equal number of shares of the parent's
preferred stock having substantially the same terms. The parent also purchased
for $22 million all shares of SPC restricted common stock issued under the SPC
Stock-Based Incentive Award Plan. The SPC merger was recorded using the purchase
method of accounting in accordance with APB No. 16.
SPC was registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended, and provided banking and financial services throughout
the United States and in selected overseas markets to consumers and business
customers, including corporations, governments, and other institutions. SPC's
principal subsidiary, Security Pacific National Bank, which provided an
extensive range of commercial and consumer banking and trust services, primarily
in California, was merged with and into the bank.
Merger-related expenses totaling $449 million were recorded during 1992 to
reflect management's estimate of the costs to restructure the operations and
human resources of pre-merger BAC associated with the SPC merger. Such costs
include separation and benefits costs related to pre-merger BAC employees,
employment assistance costs for separated pre-merger BAC employees, costs
related to the closure of certain pre-merger BAC branches and other facilities,
vacant space costs, systems conversions costs, and other expenses of pre-merger
BAC.
The results of operations and financial position of the former SPC and its
subsidiaries have been included in BAC's consolidated financial statements since
the consummation of the SPC merger.
Unaudited Pro Forma Combined Summary of Operations
The table on page 59 presents an unaudited pro forma combined summary of
operations of BAC and SPC for the year ended December 31, 1992. The Unaudited
Pro Forma Combined Summary of Operations is presented as if the SPC merger had
been effective January 1, 1991.
This information combines the historical results of operations of BAC and SPC
after giving effect to amortization of purchase accounting adjustments and the
elimination of the estimated revenues and expenses of subsidiaries and
operations sold or pending disposition. In addition, certain amounts in SPC's
historical results of operations were reclassified to conform to BAC's financial
statement presentation.
The Unaudited Pro Forma Combined Summary of Operations is based on BAC's
historical results of operations for the year ended December 31, 1992 which
included combined operations from the SPC merger date forward, and SPC's
historical results of operations for the period January 1, 1992 through April
21, 1992. Accordingly, BAC's results of operations for the period April 22, 1992
through December 31, 1992 included revenues and expenses related to former SPC
operations, as well as the amortization of purchase accounting adjustments, such
as fair value adjustments, goodwill, and identifiable intangibles.
The combined historical results of operations of BAC and SPC were adjusted to
reflect the amortization of the fair value adjustments and other purchase
accounting adjustments recorded in connection with the SPC merger, including
those related to available-for-sale securities, held-to-maturity securities,
loans, premises and equipment, goodwill, identifiable intangibles, deposits,
other short-term borrowings, long-term debt, and subordinated capital notes.
Amortization was calculated based on the final methods and estimated periods of
benefit determined appropriate by management.
The historical income statement information for the period presented was
adjusted to eliminate the estimated income statement impact of subsidiaries and
operations sold or pending disposition.
The Unaudited Pro Forma Combined Summary of Operations data is intended for
informational purposes only and is not necessarily indicative of the results of
operations that would have actually occurred had the SPC merger been in effect
for the full period presented.
Primary and fully diluted pro forma combined earnings per common share for
the year ended December 31, 1992 were calculated based on pro forma combined net
income, less the sum of actual preferred dividends paid by BAC and SPC during
the year. Actual average common and common equivalent shares outstanding and
average common shares outstanding assuming full dilution for the fourth quarter
of 1992 were used to approximate the same information for the full year ended
December 31, 1992 as if the SPC merger had taken place on January 1, 1991.
However, due to the antidilutive
58
<PAGE>
effect of the parent's 6 1/2% Cumulative Convertible Preferred Stock, Series
G (Convertible Preferred Stock) on 1992 fully diluted pro forma combined
earnings per common share, the average common shares outstanding assuming full
dilution for the fourth quarter of 1992 were adjusted to eliminate 5,482,456
hypothetical shares related to the Convertible Preferred Stock.
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Summary of Operations
(dollar amounts in millions,
except per share data) Year Ended December 31, 1992
- -------------------------------------------------------------------------
<S> <C>
Summary of Operations
Interest income $12,860
Interest expense 5,529
---------
Net interest income 7,331
Provision for credit losses 2,305
---------
Net interest income after provision
for credit losses 5,026
Noninterest income 4,082
Noninterest expense 7,558/a/
---------
Income before income taxes 1,550
Provision for income taxes 1,062
---------
Net Income $ 488
Earnings per common and
common equivalent share $ 0.88
Earnings per common and
common equivalent share --
assuming full dilution 0.88
- -------------------------------------------------------------------------
</TABLE>
/a/ Merger-related expenses, as described on page 58, of $449 million have been
eliminated from the combined historical results of operations for the year
ended December 31, 1992, as these expenses do not represent ongoing
expenses of BAC.
4. Completed Acquisitions
On February 1, 1993, the parent, through its subsidiary, Bank of America
Texas, N.A. (Bank of America Texas), acquired certain branches and assets and
assumed certain liabilities of First Gibraltar Bank, FSB, (First Gibraltar)
of Irving, Texas. The total purchase price consisted of 2.4 million shares of
the parent's common stock, valued at $125 million, and $25 million in cash.
The fair values of assets acquired in this transaction included $0.7 billion
of consumer loans, $0.2 billion of domestic commercial loans, and $5.9 billion
of U.S. government securities and other liquid assets. Bank of America Texas
also assumed deposits with a fair value of $7.1 billion. In addition, the parent
and the sellers agreed to indemnify each other from losses resulting from
certain events subsequent to the closing date.
There were no other significant acquisitions during 1994 or 1993 except for
Continental, which is described in Note 2 of the Notes to Consolidated Financial
Statements.
5. Supplemental Disclosure
of Cash Flow Information
During the years ended December 31, 1994, 1993, and 1992, BAC made interest
payments on deposits and other interest-bearing liabilities of $4,422 million,
$4,185 million, and $5,132 million, respectively, and made net income tax
payments of $785 million, $156 million, and $631 million, respectively.
During the years ended December 31, 1993 and 1992, BAC securitized
residential first mortgages of $132 million and $364 million, respectively, and
reclassified them to available-for-sale securities. No residential first
mortgages were securitized during the year ended December 31, 1994.
Foreclosures totaled $493 million, $752 million, and $558 million for the
years ended December 31, 1994, 1993, and 1992, respectively. Loans made to
facilitate the sale of OREO totaled $29 million, $27 million, and $67 million
during the years ended December 31, 1994, 1993, and 1992, respectively. During
the year ended December 31, 1993, $310 million of restructuring-country-related
assets, primarily loans, were transferred to other assets.
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., a former
subsidiary of SPC, would not be sold. Accordingly, assets and liabilities of
these subsidiaries that were previously recorded in other assets, including $329
million of available-for-sale securities, $1,950 million of loans, and $1,249
million of deposits, were consolidated in BAC's financial statements effective
January 1, 1993.
6. Restrictions on Cash and Due from Banks
BAC's banking subsidiaries are required to maintain reserves with the Federal
Reserve Bank. Reserve requirements are based on a percentage of deposit
59
<PAGE>
7. Available-For-Sale and
Held-to-Maturity Securities
The following is a summary of available-for-sale and held-to-maturity
securities:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Available-for-Sale Securities
----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Treasury and other
government agency
securities $ 2,275 $ 35 $ 88 $2,222
Mortgage-backed securities 5,537 15 279 5,273
State, county, and
municipal securities 9 -- -- 9
Foreign governments/a/ 1,747 234 503 1,478
Equity securities 186 62 20 228
Other securities/a/ 639 9 9 639
----------------------------------------------------
$10,393 $355 $899 $9,849
December 31, 1993
U.S. Treasury and other
government agency
securities $ 748 $ 69 $ -- $ 817
Mortgage-backed securities 1,744 48 1 1,791
Foreign governments/a/ 353 6 -- 359
Other securities/a/ 437 2 1 438
----------------------------------------------------
$3,282 $125 $ 2 $3,405
<CAPTION>
Held-to-Maturity Securities
----------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Treasury and other
government agency
securities $ 431 $ 1 $ 3 $ 429
Mortgage-backed
securities 4,753 19 333 4,439
State, county, and
municipal securities 478 4 17 465
Foreign governments/a/ 2,181 2 541 1,642
Other securities/a/ 324 2 9 317
----------------------------------------------------
$ 8,167 $ 28 $903 $ 7,292
December 31, 1993
U.S. Treasury and other
government agency
securities $ 3,449 $ 63 $ 18 $ 3,494
Mortgage-backed securities 11,317 305 8 11,614
State, county, and municipal
securities 516 27 4 539
Foreign governments/a/ 554 5 -- 559
Other securities/a/ 579 18 1 596
----------------------------------------------------
$16,415 $418 $ 31 $16,802
- ---------------------------------------------------------------------------------------
</TABLE>
/a/ Securities for which no market values were available are stated at equity,
cost, or appraised value as deemed appropriate by management.
In connection with the 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, debt-
restructuring par bonds and other instruments issued by the governments of
certain countries, most notably Mexico and Venezuela, were reclassified from
loans to 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.
In connection with the Continental merger, $1.2 billion of investment
securities were obtained and classified as available-for-sale securities.
As a result of the Continental merger, $2.5 billion of BAC's held-to-maturity
securities were transferred to available-for-sale securities to enable BAC to
maintain its pre-merger interest rate risk position. This transfer resulted in
gross unrealized losses of $145 million and gross unrealized gains of $22
million.
At December 31, 1994, nonaccrual debt-restructuring par bonds and other
instruments issued by the governments of Brazil, Argentina, Poland, and Ecuador
with an aggregate face value of $732 million were included in available-for-sale
securities at their fair value of $431 million, which includes unrealized gains
of $199 million. In addition, at December 31, 1994, nonaccrual debt-
restructuring bonds of $10 million issued by the government of Mexico were
included in held-to-maturity securities.
During the year ended December 31, 1994, BAC sold available-for-sale
securities for aggregate proceeds of $3,019 million, resulting in gross realized
gains of $94 million and gross realized losses of $70 million. During the year
ended December 31, 1993, BAC sold available-for-sale securities for aggregate
proceeds of $2,018 million, resulting in gross realized gains of $61 million and
no gross realized losses. There were no sales or transfers of held-to-maturity
securities other than those described above during the years ended December 31,
1994 and 1993.
Effective July 1, 1992, BAC modified its accounting policies to classify a
portion of its securities portfolio as available-for-sale securities. During the
six months ended December 31, 1992, BAC sold available-for-sale securities for
aggregate proceeds of $410 million, resulting in gross realized gains of $2
million and no gross realized losses. During the six months
60
<PAGE>
ended June 30, 1992, BAC sold securities held for investment for aggregate
proceeds of $431 million, resulting in gross realized gains of $9 million and no
gross realized losses. During the fourth quarter of 1992, BAC sold securities
held for investment of $22 million, resulting in no gross realized gains or
losses. These securities were acquired through an acquisition transaction in the
third quarter of 1992, and upon analysis in the fourth quarter, it was
determined that these securities did not meet BAC's criteria for held-to-
maturity securities.
The following is a summary of the contractual maturities of available-for-
sale debt securities at December 31, 1994. These amounts exclude equity
securities, which have no contractual maturities:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Amortized Fair
(in millions) Cost Value
- -----------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,643 $ 1,641
Due after one year through five years 1,078 1,071
Due after five years through ten years 638 567
Due after ten years 6,848 6,342
-----------------------
$10,207 $ 9,621
</TABLE>
The following is a summary of the contractual maturities of held-to-maturity
securities at December 31, 1994:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Amortized Fair
(in millions) Cost Value
- -----------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,250 $ 1,233
Due after one year through five years 535 533
Due after five years through ten years 419 407
Due after ten years 5,963 5,119
-----------------------
$ 8,167 $ 7,292
</TABLE>
Issuers may have the right to call or prepay obligations with or without call
or prepayment penalties. This right may cause actual maturities to differ from
the contractual maturities summarized above.
Assets, primarily trading and investment securities, with carrying values of
$11,116 million and $9,812 million at December 31, 1994 and 1993, respectively,
were pledged to collateralize U.S. government and public deposits, trust and
other deposits, and repurchase agreements.
During the year ended December 31, 1994, net trading account related income
included a net unrealized holding loss on trading securities of $25 million,
excluding the net unrealized trading results of the parent's securities broker
and dealer subsidiaries, which are not subject to the requirements of SFAS No.
115.
8. Other Debt Restructurings
Not included in restructured loans as described in Note 9 of the Notes to
Consolidated Financial Statements on page 62 were other debt restructurings
totaling $2,230 million and $2,384 million at December 31, 1994 and 1993,
respectively, with countries experiencing liquidity problems. These amounts
include securities and loans received in connection with formal debt
restructurings. 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.
Included in other debt restructurings at December 31, 1994 and 1993, were
$1,624 million and $2,243 million, respectively, of par bonds issued by the
governments of Mexico and Venezuela in 1990, and Uruguay in 1991. The face
values of these par bonds at December 31, 1994 and 1993 were $2,129 million and
$2,289 million, respectively. The majority of the Mexican par bonds have a fixed
annual interest rate of 6.25 percent, and the Venezuelan and Uruguayan par bonds
each have fixed annual interest rates of 6.75 percent. The principal of these
par bonds is collateralized by zero-coupon U.S. Treasury securities, which at
maturity, will have redemption values equal to the face values of the par bonds.
The market value of the par bonds totaled $1,140 million and $1,837 million at
December 31, 1994 and 1993, respectively. The fair value of the U.S. Treasury
securities collateralizing the principal of the par bonds totaled $315 million
and $404 million at December 31, 1994 and 1993, respectively.
Also included in other debt restructurings at December 31, 1994 were
Brazilian bonds with a face value of $611 million. These bonds had a carrying
value and fair value of $358 million. The majority of these bonds were obtained
on April 15, 1994 when BAC exchanged then-existing Brazilian medium- and long-
term loans with an aggregate carrying value of $139 million and an aggregate
face value of $692 million plus past due accrued interest for various bonds with
a face value of $727 million. Subsequent to the restructuring, some of these
bonds were sold. The bonds outstanding at December 31, 1994 mature between 1999
and 2024 and primarily have variable rates based upon six-month London InterBank
Offered Rate (LIBOR) plus, in most cases, margins ranging from 0.8125 percent to
0.875 percent. The fixed rate bonds have annual interest rates that range from 4
percent to 8.75 percent. At December 31, 1994, Brazilian bonds with a total face
value of $247 million were collateralized by zero-coupon U.S. Treasury
securities, which at maturity, will have an equivalent redemption value. At
December 31, 1994, the collateral had a fair value of approximately $27 million.
61
<PAGE>
Included in the aggregate other debt restructurings discussed above were $248
million and $141 million at December 31, 1994 and 1993, respectively, related to
other restructuring transactions with borrowers in Mexico, Venezuela, Poland,
the Philippines, Ecuador, and Argentina.
The following is a summary of interest recognized on total other debt
restructurings:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Year Ended December 31
----------------------
(in millions) 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
Interest income that would have been
recognized had the loans performed in
accordance with their original terms $139 $102
Less: Interest income included in the results
of operations 170 151
-----------------
$(31) $(49)
</TABLE>
9. Loans
Loans are presented net of unearned income of $777 million and $428 million at
December 31, 1994 and 1993, respectively.
The following is a summary of loans:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
December 31
-------------------------------
(in millions) 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C>
Domestic
Consumer:
Residential first mortgages $ 33,818 $ 30,483
Residential junior mortgages 13,589 12,847
Other installment 10,598 9,129
Credit card 8,020 7,474
Other individual lines of credit 1,736 1,901
Other 403 215
-------------------------------
68,164 62,049
Commercial:
Commercial and industrial 28,814 20,486
Loans secured by real estate 10,277 9,251
Construction and development loans
secured by real estate 3,616 4,418
Financial institutions 2,872 2,170
Agricultural 1,840 1,679
Lease financing 1,814 1,715
Loans for purchasing or
carrying securities 1,529 3,090
Other 1,623 1,478
-------------------------------
52,385 44,287
-------------------------------
120,549 106,336
Foreign
Commercial and industrial 13,496 11,448
Banks and other financial institutions 2,516 2,279
Governments and official institutions 896 3,429
Other 3,455 3,064
-------------------------------
20,363 20,220
-------------------------------
$140,912 $126,556
</TABLE>
Restructured loans, excluding the other debt restructurings described in Note
8 of the Notes to Consolidated Financial Statements on pages 61 and 62 were $97
million and $134 million at December 31, 1994 and 1993, respectively. Interest
income foregone on these loans was not significant in 1994 or 1993.
Previously restructured loans of $104 million and $58 million were on
nonaccrual status at December 31, 1994 and 1993, respectively.
10. Allowance for Credit Losses
The following is a summary of changes in the allowance for credit losses:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Year Ended December 31
----------------------------------
(in millions) 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $3,508 $3,921 $2,420
Credit losses 988 1,599 1,745
Credit loss recoveries 518 484 441
----------------------------------
Net credit losses 470 1,115 1,304
Provision for credit losses 460 803 1,009
Allowance related to mergers
and acquisitions/a/ 241 12 2,782
Losses on the sale or swap of loans
to restructuring countries -- (3) (72)
Other net deductions (49) (110)/b/ (914)/b/
----------------------------------
Balance, End of Year/c/ $3,690 $3,508 $3,921
- ------------------------------------------------------------------------------
</TABLE>
/a/ Represents the addition of consummation-date allowances for credit losses
of Continental and Liberty Bank of $238 million and $3 million,
respectively, in 1994, First Gibraltar in 1993, and SPC, Valley Capital
Corporation, and H.F. Holdings, Inc. of $2,701 million, $63 million, and
$18 million, respectively, in 1992.
/b/ The allowance for credit losses was reduced by $128 million and $685
million during 1993 and 1992, respectively, due to the transfer of certain
assets net of their related allowance to other assets. The 1993 amount
included $88 million of regulatory-related allocated transfer risk reserve
(ATRR). In addition, the 1992 amount includes $220 million that represents
the allowance for credit losses related to loans of subsidiaries and
operations pending disposition. Subsidiaries and operations pending
disposition were reclassified to other assets net of their related
allowance during 1992.
/c/ Includes ATRR of $67 million at December 31, 1992. Due to the transfer of
certain assets net of their related allowance to other assets during 1993,
the allowance for credit losses did not include any ATRR subsequent to the
transfer.
62
<PAGE>
11. Premises and Equipment
The following is a summary of premises and equipment:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
December 31
----------------------
(in millions) 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
Premises, including capitalized leases $2,800 $2,378
Equipment and furniture,
including capitalized leases 2,732 2,490
Leasehold improvements 795 741
Land 465 455
----------------------
6,792 6,064
Less: Accumulated depreciation
and amortization 2,837 2,433
----------------------
$3,955 $3,631
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994,
1993, and 1992 was $489 million, $461 million, and $395 million, respectively.
12. Short-Term Borrowings
BAC had unused short-term lines of credit of $8 million and $15 million at
December 31, 1994 and 1993, respectively.
13. Long-Term Debt
BAC's fixed-rate long-term debt of $8,562 million at December 31, 1994 matures
through 2017. At both December 31, 1994 and 1993, the interest rates on fixed-
rate long-term debt ranged from 4.55% to 14.25%, respectively. These obligations
were denominated primarily in U.S. dollars. BAC has entered into interest rate
swaps relating to certain of these obligations to change its interest rate
exposure from fixed rate to floating rate. At December 31, 1994 and 1993, the
weighted average interest rates on fixed-rate long-term debt, including the
effect of interest rate swaps, were 8.00% and 6.50%, respectively.
BAC's floating-rate long-term debt of $6,261 million at December 31, 1994
matures through 2004. The majority of the floating rates are based on LIBOR. At
December 31, 1994 and 1993, the interest rates on floating-rate long-term debt
ranged from 4.79% to 7.17% and from 3.23% to 5.50%, respectively. These
obligations were denominated primarily in U.S. dollars. At December 31, 1994 and
1993, the weighted average interest rates on floating-rate long-term debt were
6.27% and 3.85%, respectively.
The following is a summary of long-term debt (original maturities of more than
one year)/a/:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31
----------------------------------------------------
1994 1993
----------------------------------------------------
Various Various
Fixed-Rate Floating-Rate
Debt Debt
(in millions) Obligations Obligations Total Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The parent
Senior Debt:
Due in 1994 $ -- $ -- $ -- $ 2,296
Due in 1995 811 958 1,769 1,980
Due in 1996 805 684 1,489 1,619
Due in 1997 1,018 1,082 2,100 1,560
Due in 1998 267 1,102 1,369 1,169
Due in 1999 214 1,490 1,704 7
Thereafter 73 251 324 163
----------------------------------------------------
3,188 5,567 8,755 8,794
Subordinated Debt:
Due in 1998 52 70 122 123
Due in 2000
and thereafter 4,774 378 5,152 4,265
----------------------------------------------------
4,826 448 5,274 4,388
----------------------------------------------------
Total parent 8,014 6,015 14,029 13,182
Subsidiaries
Senior Debt:
Due in 1994 -- -- -- 125
Due in 1995 23 69 92 79
Due in 1996 3 72 75 75
Due in 1997 23 66 89 14
Due in 1998 1 -- 1 --
Due in 1999 -- 39 39 --
Thereafter 27 -- 27 33
----------------------------------------------------
77 246 323 326
Subordinated Debt:
Due in 1995 9 -- 9 --
Due in 1996 9 -- 9 --
Due in 1997 10 -- 10 --
Due in 1998 11 -- 11 --
Due in 1999 12 -- 12 --
Thereafter 420 -- 420 --
----------------------------------------------------
471 -- 471 --
----------------------------------------------------
Total subsidiaries 548 246 794 326
----------------------------------------------------
$8,562 $6,261 $14,823 $13,508
- ------------------------------------------------------------------------------
</TABLE>
/a/ Maturity distribution is based upon contractual maturities or earlier dates
due to call notices issued.
63
<PAGE>
At December 31, 1994 and 1993, $93 million and $116 million, respectively, of
subsidiary long-term debt was guaranteed by the parent.
At December 31, 1994 and 1993, $3,801 million and $2,131 million,
respectively, of long-term debt was redeemable at par at the option of the
parent on dates ranging from March 15, 1995 through November 15, 1999.
At December 31, 1994, BAC had an unused long-term line of credit of $2.0
billion that expires in 1999.
14. Subordinated Capital Notes
The following is a summary of subordinated capital notes recorded by the
parent/a/:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31
-----------------
(in millions) 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Floating Rate Notes due 1996 $246 $245
9.75% Note Due 1999 261 264
Auction Rate Notes due 1999 98 98
-----------------
$605 $607
- ---------------------------------------------------------------------
</TABLE>
/a/ These notes are subordinate to senior indebtedness of the parent and
qualify as Tier 2 risk-based capital under Federal Reserve Board guidelines
for assessing capital adequacy.
At the option of the parent, the Floating Rate Notes and the Auction Rate
Notes may be exchanged for common stock, perpetual preferred stock, or other
capital securities acceptable to the Federal Reserve Board having a market price
equal to the principal amount of the notes or, under certain circumstances, may
be redeemed in whole or in part for cash.
The Floating Rate Notes have interest rates that approximate LIBOR and are
subject to a minimum interest rate of 5.25%.
The Auction Rate Notes had an annual interest rate of 9.73% through May 17,
1993. This interest rate was adjusted effective May 18, 1993 as follows: $67
million bears interest at a fixed rate of 4.99% while the remaining $31 million
bears interest at a floating rate of 0.50% over LIBOR through May 17, 1996.
Thereafter, the Auction Rate Notes bear interest, at the election of the
holders, as to the final three-year period at either a fixed rate determined by
auction or a floating rate of 0.50% over LIBOR.
As of December 31, 1994, proceeds from issuances of common and preferred
stock of $600 million have been dedicated to fully retire or redeem subordinated
capital notes.
15. Preferred Share Purchase Rights and
Common Stock Warrants
On April 11, 1988, the Board of Directors of the parent declared a dividend of
one preferred share purchase right (a Right) for each outstanding share of the
parent's common stock as of April 22, 1988 (the Rights Agreement). While the
Rights Agreement is in effect, every share of common stock issued before the
rights become effective also represents a right. Each Right entitles the holder
to buy from the parent, until the earlier of April 22, 1998 or the redemption of
the Rights, one one-hundredth of a share of Cumulative Participating Preferred
Stock, Series E, at an exercise price of $50.00 per Right (subject to
adjustment). The Rights will not be exercisable or transferable apart from the
parent's common stock until certain events occur pertaining to a person or group
acquiring or announcing the intention to acquire 20 percent or more of the
parent's outstanding common stock. Under specified circumstances, all of which
relate to a potential acquisition of the parent, a Right may: (i) become a right
to purchase shares of an acquiring company at half of the then-market price,
(ii) become a right to purchase the parent's common stock at half of the then-
market price or (iii) be exchanged by the parent for one share of common stock
or one one-hundredth of a share of Preferred Stock, Series E, or an equivalent
preferred share. The Board of Directors may redeem the Rights at a price of
$0.001 per Right (rounded as to each holder to the nearest $0.01) at any time
prior to the acquisition by a person or group of 20 percent or more of the
outstanding common stock of the parent. Under other specified conditions, the
Rights may be automatically redeemed. The Rights are excluded from the
computation of earnings per common share.
At December 31, 1994 and 1993, common stock warrants outstanding totaled
449,506 and 629,677, respectively. These warrants give the holder the right to
purchase shares of common stock of the parent at a price of $17.50 per share,
subject to adjustment in certain events, until expiration on October 22, 1997.
64
<PAGE>
16. Preferred Stock
The parent is authorized to issue, in one or more series, 70,000,000 shares of
preferred stock. The parent's outstanding preferred shares are nonvoting except
in certain limited circumstances, while dividends are cumulative and are
payable quarterly on February 28, May 31, August 31, and November 30, except for
the Preferred Stock, Series 1, 11% Preferred Stock, Series I, and the 11%
Preferred Stock, Series J, which are payable quarterly on March 31, June 30,
September 30, and December 31. The shares are redeemable at the option of the
parent during the redemption period and at the redemption price per share noted
below plus accrued and unpaid dividends to the redemption date. Holders of the
preferred shares have dividend and liquidation preferences senior to those of
holders of the parent's common stock.
In connection with the Continental merger on August 31, 1994, the parent
issued Preferred Stock, Series 1 and Series 2, the terms of which are summarized
in the table below. Preferred Stock, Series 2 was redeemed by the parent on
December 5, 1994. The terms of this redemption are also summarized below.
The following is a summary of preferred stock at December 31, 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Dividend
Shares Issued Stated Value Per Share Redemption Price
Preferred Stock Series and Outstanding Per Share Per Annum Redemption Period Per Share
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Adjustable:
Series A 5,178,000 $ 50.00 $ 3.25/a/ On or after 11/30/87 $ 50.00
Series B 3,546,100 100.00 6.00/b/ On or after 2/28/88 100.00
Series 1 1,788,000 50.00 3.75/c/ On or after 8/31/94 50.00
Series 2 --/d/ 100.00 9.00/e/ Redeemed 12/05/94 108.00
Cumulative Fixed:
9 5/8% Series F 7,250,000 25.00 2.41 On or after 4/16/96 25.00
9% Series H 11,250,000 25.00 2.25 On or after 1/15/97 25.00
11% Series I 200,000/f/ 500.00 55.00 On or after 9/30/95/g/ /g/
11% Series J 400,000/f/ 500.00 55.00 On or after 3/31/96/h/ /h/
8 3/8% Series K 14,600,000 25.00 2.09 On or after 2/15/97 25.00
8.16% Series L 800,000/f/ 500.00 40.80 On or after 7/13/97 500.00
7 7/8% Series M 700,000/f/ 500.00 39.38 On or after 9/30/97 500.00
8 1/2% Series N 475,000/f/ 500.00 42.50 On or after 12/15/97 500.00
Cumulative Convertible Fixed:
6 1/2% Series G/i/ 4,998,357 50.00 3.25 On or after 5/31/95/j/ /j/
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ For the Cumulative Adjustable Preferred Stock, Series A, the dividend is
adjusted quarterly, and is 2.0% lower than the highest of three U.S.
Treasury rates, but is no lower than 6.5% and no greater than 14.5% per
annum.
/b/ For the Cumulative Adjustable Preferred Stock, Series B, the dividend is
adjusted quarterly, and is 4.0% lower than the highest of three U.S.
Treasury rates, but is no lower than 6.0% and no greater than 12.0% per
annum.
/c/ For the Preferred Stock, Series 1, the dividend is adjustable quarterly,
and is 1.0% lower than the highest of three U.S. Treasury rates, but is no
lower than 7.5% and no greater than 13.5% per annum.
/d/ 3,000,000 shares, represented by 12,000,000 depositary shares, each
corresponding to a one-fourth interest in a share of Preferred Stock, were
issued and subsequently redeemed.
/e/ For the Preferred Stock, Series 2, the dividend was adjustable quarterly,
and was 1.1% higher than the highest of three U.S. Treasury rates, but was
no lower than 9% and no greater than 15.75% per annum.
/f/ Represented by depositary shares, each corresponding to a one-twentieth
interest in a share of Preferred Stock.
/g/ The preferred shares may be redeemed on or after September 30, 1995 and
prior to September 30, 1996 at $527.50 per share (equivalent to $26.375 per
depositary share), and thereafter at prices declining to $500.00 per share
(equivalent to $25.00 per depositary share) on September 30, 2000 and
thereafter.
/h/ The preferred shares may be redeemed on or after March 31, 1996 and prior
to March 31, 1997 at $527.50 per share (equivalent to $26.375 per
depositary share), and thereafter at prices declining to $500.00 per share
(equivalent to $25.00 per depositary share) on March 31, 2001 and
thereafter.
/i/ The shares are convertible into common stock at any time, unless previously
redeemed, at a conversion price of $45.60 per common share, subject to
adjustment under certain conditions.
/j/ The preferred shares may be redeemed on or after May 31, 1995 and prior to
May 31, 1996 at $51.95 per share, and thereafter at prices decreasing to
$50.00 per share on May 30, 2001 and thereafter.
65
<PAGE>
17. Lease Commitments
BAC leases certain premises and equipment under noncancelable agreements
expiring between the years 1995 and 2070.
The following is a summary of future minimum rental commitments for
noncancelable leases at December 31, 1994, which have not been reduced by
minimum sublease rental income of $7 million for capital leases and $176 million
for operating leases:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Capital Operating
(in millions) Leases Leases
- ----------------------------------------------------------------------
<S> <C> <C>
1995 $ 8 $ 388
1996 7 350
1997 7 305
1998 7 279
1999 7 248
Thereafter 58 1,554
------------------
Total minimum lease payments 94 $3,124
Amount representing interest (47)
-------
Present Value of Net Minimum Lease Payments $ 47
</TABLE>
Total rental expense was $327 million in 1994, $336 million in 1993, and $286
million in 1992.
18. Income Taxes
The significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Year Ended December 31
---------------------------------
(in millions) 1994/a/ 1993/a/ 1992/b/
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for (Benefit from)
Income Taxes
Current:
Federal $ 559 $ 269 $ 870
State and local 140 93 153
Foreign 129 148 123
---------------------------------
828 510 1,146
Deferred:
Federal 567 754 (44)
State and local 137 212 88
Foreign 9 (2) --
---------------------------------
713 964 44
---------------------------------
$1,541 $1,474 $1,190
- ------------------------------------------------------------------------------
</TABLE>
/a/ Liability method
/b/ Deferred method
Effective January 1, 1993, BAC changed its method of accounting for income
taxes from the deferred method to the liability method required by SFAS No. 109.
The significant components of deferred income tax assets and liabilities at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
December 31
---------------------
(in millions) 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred Income Tax Assets
Allowance for credit losses $ 1,570 $ 1,596
Accrued expenses 255 640
Foreign subsidiaries pending disposition -- 160
Other real estate owned 88 142
Tax carryovers/a/ 359 75
Other 379 45
Valuation allowance for deferred
income tax assets/a/ (124) (37)
---------------------
Total deferred income tax assets 2,527 2,621
Deferred Income Tax Liabilities
Lease financing (1,229) (1,039)
Identifiable intangible assets (607) (626)
Securities valuation (352) (385)
Employee benefit plans (90) (146)
Accumulated tax depreciation in excess of
book depreciation (209) (199)
Deferred gains and installment sales (128) (139)
Other (46) (97)
---------------------
Total deferred income tax liabilities (2,661) (2,631)
---------------------
Net Deferred Income Tax Liabilities $ (134) $ (10)
- -------------------------------------------------------------------------
</TABLE>
/a/ The valuation allowance for deferred income tax assets relates primarily to
net operating loss carryovers of foreign subsidiaries and pre-acquisition
tax carryovers associated with the SPC and Continental mergers, which are
subject to certain limitations under the tax code. This valuation allowance
was established since BAC may not realize all of these tax benefits in the
future. If BAC determines that it will realize the pre-acquisition
carryover tax benefits in the future, the corresponding reduction in the
valuation allowance will decrease goodwill instead of tax expense.
Management believes that BAC will fully realize its total deferred income tax
assets as of December 31, 1994 based upon BAC's recoverable taxes from prior
carryback years, its total deferred income tax liabilities, and its current
level of operating income. At December 31, 1994, BAC had federal capital loss
carryforwards of $351 million which will expire in 1997 through 1999.
66
<PAGE>
The components of the provision for deferred income taxes for the year ended
December 31, 1992 are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
(in millions)
- ----------------------------------------------------------------------
<S> <C>
Loss on debt restructurings with countries
experiencing liquidity problems $ (66)
Change in the allowance for credit losses 18
Lease financing income 204
Accrued expenses (155)
Real estate valuation 56
Foreign exchange gains and losses (25)
Other, net 12
-------
$ 44
</TABLE>
The reconciliation of the provision for income taxes computed at the U.S.
statutory income tax rate to pre-tax income is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year Ended December 31
------------------------------
1994/a/ 1993/a/ 1992/b/
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35% 35% 34%
State and local income taxes,
net of federal tax effect 5 6 6
Effect of purchase accounting for
the SPC merger 2 3 4
Other, net (1) (1) --
------------------------------
Effective Tax Rate 41% 43% 44%
- -------------------------------------------------------------------------------
</TABLE>
/a/ Liability method
/b/ Deferred method
BAC's effective tax rate in 1994 decreased from 1993 primarily due to
reductions in the state effective tax rate and the effective tax rate applied to
leveraged lease income.
The decrease in BAC's effective income tax rate during 1993 from 1992 was
primarily due to the adoption of SFAS No. 109, which was partially offset by the
effects of tax legislation in 1993, that included a one percent increase in the
federal corporate tax rate. The remeasurement of deferred income taxes caused by
the rate increase did not have a significant effect on BAC's deferred taxes.
The valuation allowance for deferred income tax assets increased by $87
million to $124 million in 1994 due primarily to a valuation allowance
established through purchase accounting on certain deferred income tax assets
associated with the Continental merger. The recognition of deferred tax assets
subject to the valuation allowance would result in a reduction to goodwill of
$92 million.
In 1994, deferred tax benefits of $218 million relating to unrealized losses
on available-for-sale securities was credited directly to shareholders' equity.
At December 31, 1994, federal income taxes had not been provided on $440
million of undistributed earnings of foreign subsidiaries earned prior to 1987
that are reinvested for an indefinite period. If the undistributed earnings were
distributed, credits for foreign taxes paid on such earnings, and for the
related foreign withholding taxes payable upon remittance, would be available to
offset $80 million of the $190 million of the resulting tax expense. Subsequent
to 1986, federal taxes are provided on earnings of foreign subsidiaries as a
result of a tax law change.
BAC provided tax expense of $9 million, $25 million, and $4 million on net
securities gains in 1994, 1993, and 1992, respectively.
19. Employee Benefit Plans
Defined Benefit Plans
The majority of salaried, U.S. employees within BAC are covered under the
BankAmeraccount Plan, the Continental Employees Pension Plan, or the Seafirst
Corporation Retirement Plan. The BankAmeraccount Plan is a defined benefit cash
balance plan while the Continental and Seafirst Plans are defined benefit final
average pay plans. Benefits are based on length of service and level of
compensation and, in the case of the cash balance plan, a specified interest
rate. Contributions are made by the employers and are based on actuarial
computations of the amount sufficient to fund the current service cost plus
amortization of the unfunded actuarial accrued liability. Contributions are
determined in accordance with Internal Revenue Service funding requirements, and
are invested in diversified portfolios. Effective January 1, 1995, the
Continental Employees Pension Plan was merged into the BankAmeraccount Plan.
In connection with the SPC merger, BAC acquired the Trusteed Retirement
Income Plan (TRIP), which was SPC's defined benefit plan. The TRIP was merged
into the BankAmeraccount Plan effective January 1, 1993.
BAC maintains certain nonqualified, nonfunded employee defined benefit
retirement plans and the related retirement benefits are paid from BAC's assets.
Certain non-U.S. employees of BAC are covered by noncontributory defined benefit
pension plans that the employers fund based primarily on local laws. The
assumptions used in computing the present value of the accumulated benefit
obligation, the projected benefit obligation, and net pension expense for the
non-U.S. plans are substantially consistent with those assumptions used for the
U.S. plans, given local conditions.
67
<PAGE>
The following is a reconciliation between the funded status of all defined
benefit plans and amounts included in BAC's consolidated balance sheet:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31
-----------------------
(in millions) 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Prepaid Pension Cost
Plan assets at fair value, primarily listed
stocks and bonds $2,492 $2,388
Less: Actuarial present value of projected
benefit obligation 2,403 2,388
-----------------------
Plan assets in excess of projected
benefit obligation/a/ 89 --
Unrecognized net loss 280 310
Unrecognized prior service cost 53 57
Unrecognized net transition obligation 27 30
Additional minimum liability (6) (5)
-----------------------
Prepaid Pension Cost $ 443 $ 392
Actuarial Present Value of Benefit Obligation
Vested benefit obligation $2,165 $2,202
Accumulated benefit obligation 2,284 2,290
- -------------------------------------------------------------------------------
</TABLE>
/a/ Certain defined benefit plans not covered by the Pension Benefit Guaranty
Corporation (PBGC) had an accumulated benefit obligation of $172 million
and $159 million which exceeded plan assets of $68 million and $86 million
at December 31, 1994 and 1993, respectively. The estimated vested benefit
obligation for PBGC covered plans using a 6.50% interest rate and the Group
Annuity Mortality 83 table as of December 31, 1994 is $2,401 million as
compared with assets of $2,423 million.
The following is a summary of the components of net pension expense:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31
------------------------------
(in millions) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost--benefits earned during the year $ 78 $ 83 $ 70
Interest cost on projected benefit obligation 175 170 133
Net amortization and deferral (202) 60 (13)
Effect of actual return on plan assets 16 (264) (152)
----------------------------
Net Pension Expense $ 67 $ 49 $ 38
</TABLE>
The following is a summary of the assumptions used in computing the present
value of the accumulated benefit obligation, the present value of projected
benefit obligation, and the net pension expense for the U.S. plans:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate in determining expense 7.25% 8.75% 8.75%
Discount rate in determining benefit
obligations at year end 8.50 7.25 8.75
Rate of increase in future compensation
levels for determining expense/a/ 4.00 4.00 4.50
Rate of increase in future compensation
levels for determining benefit obligations
at year end/a/ 5.50 4.00 4.00
Expected long-term rate of return on assets 8.50 9.75 9.75
Account growth interest rate 6.75 5.00 5.75
- --------------------------------------------------------------------------------
</TABLE>
/a/ Rates are attributable to the Seafirst Corporation Retirement Plan since
this is the only U.S. defined benefit final average pay plan as of
January 1, 1995.
During the fourth quarter of 1992, BAC recognized a curtailment loss of $13
million. This loss was due to a reduction of participants in the BankAmeraccount
Plan as a result of the SPC merger and was included in merger-related expenses
for the year ended December 31, 1992.
During 1992, the TRIP sold 100,000 shares of the parent's common stock for $4
million. The remaining 780,000 shares at December 31, 1992, were merged into the
BankAmeraccount Plan effective January 1, 1993 and were sold during 1993 for $38
million.
Defined Contribution Plans
The majority of salaried, U.S. employees within BAC are eligible to participate
in either the BankAmerishare Plan, the Seafirst Corporation Employee Matched
Savings Plan, or the Continental Employees Savings Incentive Plan and Trust.
These plans provide tax-deferred investment opportunities to salaried employees
who have completed the required length of service. Employees may contribute to
the plans up to certain limits prescribed by the Internal Revenue Service. A
portion of these contributions is matched by the employers. Contributions are
invested at the direction of the participant. In addition, substantially all
full-time former Continental U.S. employees participate in the Continental
Employees Stock Ownership Plan. Effective January 1, 1995, the two Continental
plans were merged into the BankAmerishare Plan.
68
<PAGE>
In connection with the SPC merger, BAC acquired the Thrift Plus Plan, which
was SPC's defined contribution plan. The Thrift Plus Plan was merged into the
BankAmerishare Plan effective January 1, 1993.
BAC maintains certain supplemental nonqualified defined contribution
retirement plans. The related retirement benefits are paid from BAC's assets. In
addition, certain non-U.S. employees of BAC are covered under defined
contribution pension plans that are separately administered in accordance with
local laws.
The Seafirst Corporation Employee Matched Savings Plan included special
contributions made by both employees and the employers to Tax Reduction Act
Stock Ownership Programs (TRASOP) in 1992.
Aggregate contributions by the employers for all defined contribution plans
were $86 million, $75 million, and $73 million in 1994, 1993, and 1992,
respectively. Certain employer and employee contributions to the plans are used
to purchase the parent's common stock at prices that approximate market values.
Contributions, including dividends, to the plans were used to purchase 539,910
shares for $23 million in 1994, 784,344 shares for $37 million in 1993, and
536,517 shares for $23 million in 1992.
Sales by the plans of the parent's common stock were 220,468 shares for $10
million in 1994, 637,000 shares for $29 million in 1993, and 847,252 shares for
$38 million in 1992. The plans held 16,611,787 shares, 15,375,896 shares, and
15,918,481 shares of the parent's common stock at December 31, 1994, 1993, and
1992, respectively.
Management Stock Plans
The parent offers shares of its common stock to certain key employees under
management stock plans. Under the plans, three kinds of options are
outstanding: Non-Qualified Stock Options, Performance Stock Options, and
Incentive Stock Options. The shares under option generally become exercisable
not earlier than six months and not later than ten years after the date the
option was granted.
Options awarded before August 5, 1991 held by principal officers of the
parent, subject to certain restrictions, also constitute stock appreciation
rights equal to the number of shares covered by the options. These stock
appreciation rights are exercisable for the difference between the option
price and the current market price of the stock. The difference can be
received in cash or shares. Stock appreciation rights are exercisable under
the same terms as the related stock options.
The following is a summary of changes in shares under option:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31
------------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year 10,449,395 10,835,247
Issued in connection with
the Continental merger 4,766,781 --
Granted 3,904,968 2,991,175
Exercised (1,342,334) (2,701,923)
Canceled (422,683) (675,104)
------------------------------
Balance, End of Year 17,356,127 10,449,395
</TABLE>
Options to purchase 10,511,439 and 5,228,932 shares were exercisable at
December 31, 1994 and 1993, respectively. Expiration dates ranged from
January 6, 1995 to November 7, 2004 for options outstanding at December 31,
1994.
The following is a summary of option prices per share:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Range of prices of shares under
option at December 31 $8.63 to $61.00 $8.63 to $57.39
Weighted average price of shares
under option at December 31 $36.87 $37.99
Range of prices of shares
exercised during year $8.69 to $47.73 $8.63 to $47.73
- --------------------------------------------------------------------------------
</TABLE>
Also under the plans, the parent awards restricted stock to certain key
employees. The restricted stock awarded under the plans is held in escrow
until the employee has completed a specified continuous service requirement,
generally five years, or upon the earlier of death or retirement. During 1994
and 1993, the parent awarded 942,138 shares and 585,502 shares, respectively,
under the plans. In addition, during 1994, 417,000 shares of restricted stock
were awarded, which will vest separately in three equal annual installments,
provided the price of BAC common stock attains certain targets. If the target
stock prices are not reached, but BAC attains a certain ranking among a
comparison group of bank holding companies with respect to total shareholder
return at the end of a three-year performance period, the shares will
nevertheless vest unless the Executive Personnel and Compensation Committee
(EPCC) of the Board of Directors determines that all or part of the shares
shall not vest.
Both stock options and restricted stock are granted by the EPCC. Shares
available for grant, as either stock options or restricted stock, were 856,531
and 2,187,961 at December 31, 1994 and 1993, respectively. Canceled options,
except for those converted in connection with the SPC and Continental mergers,
become available for future grants.
69
<PAGE>
Postretirement Health Care and Life Insurance Benefits
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," was adopted by BAC effective January 1, 1993. This standard requires
that employers use the accrual method of accounting for postretirement benefits
other than pensions, such as medical, dental, and life insurance plans for
retirees.
BAC provides certain defined health care and life insurance benefits under
plans for retired U.S. employees. Retiree health care benefits are offered under
self-insured arrangements, as well as through various health maintenance
organizations. BAC contributes a fixed dollar amount to the plans, which is
periodically reviewed and evaluated. The retirees' share is the remainder of the
cost for the given coverage. BAC's policy is to fund the cost of medical
benefits in amounts determined at the discretion of management. Employer
contributions are invested in diversified portfolios, including fixed income and
equity investments.
The assumed discount rates used to measure the accumulated postretirement
benefit obligation were 8.50 percent and 7.25 percent at December 31, 1994 and
1993, respectively. The expected long-term rates of return on plan assets used
in computing the net periodic postretirement cost were 8.50 percent and 9.75
percent for the years ended December 31, 1994 and 1993, respectively. The
expected long-term rate of return on plan assets used in computing the net
periodic postretirement cost for 1995 will be 10.00 percent. This change is not
expected to have a material effect on BAC's results of operations.
The following is a reconciliation between the funded status of all
postretirement benefit plans other than pensions and the amounts included in
BAC's consolidated balance sheet:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31
---------------------
(in millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $470 $487
Fully eligible active plan participants 26 17
Other active plan participants 91 114
---------------------
Total accumulated postretirement
benefit obligation 587 618
Less: Plan assets at fair value, primarily
listed stocks and bonds 62 39
---------------------
Accumulated postretirement benefit
obligation in excess of plan assets 525 579
Less:Unrecognized net transition obligation 478 504
Unrecognized net (gain) loss (56) 66
Unrecognized prior service cost 5 5
---------------------
Accrued Postretirement Benefit Cost $ 98 $ 4
</TABLE>
The unrecognized net transition obligation is being amortized on a straight-
line basis over twenty years.
The following is a summary of the components of net periodic postretirement
cost:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31
------------------------------
(in millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Service cost--benefits earned during the year $ 8 $ 6
Interest cost on accumulated postretirement
benefit obligation 48 47
Net amortization and deferral 24 27
Effect of actual return on plan assets -- (3)
-------------------
Net Periodic Postretirement Cost $80 $77
</TABLE>
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," was adopted
by BAC effective January 1, 1994. This statement applies to postemployment
benefits provided to former or inactive employees, their beneficiaries, and
covered dependents after employment but before retirement. The accounting
policies of BAC were already substantially in compliance with SFAS No. 112 and,
accordingly, the adoption of this statement did not have a significant effect on
BAC's results of operations or financial position.
20. Earnings per Common Share
Earnings per common and common equivalent share are computed by dividing net
income applicable to common stock by the total of the average number of common
shares outstanding and the additional dilutive effect of stock options and
warrants outstanding during the respective period. The dilutive effect of stock
options and warrants is computed using the average market price of the parent's
common stock for the period.
Earnings per common share, assuming full dilution, are computed based on the
average number of common shares outstanding during the period, and the
additional dilutive effect of stock options and warrants outstanding during the
period. The dilutive effect of outstanding stock options and warrants is
computed using the greater of the closing market price or the average market
price of the parent's common stock for the period. Earnings per common share,
assuming full dilution, also includes the dilution which would result if the
parent's Convertible Preferred Stock outstanding during the period had been
converted at the beginning of the period. Net income applicable to common stock
is adjusted for dividends declared during the period on the Convertible
Preferred Stock.
70
<PAGE>
Earnings per common share have been computed based on the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31
-----------------------------------------
(dollar amounts in millions) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable
to common stock $1,928 $1,713 $1,323
Average number
of common
shares outstanding 357,312,433 355,106,722 308,190,534
Average number
of common
and common
equivalent shares
outstanding 359,793,169 357,679,670 312,218,182
Average number
of common
shares outstanding--
assuming full dilution 365,273,824 363,243,993 317,855,736
- --------------------------------------------------------------------------------
</TABLE>
21. Off-Balance-Sheet Transactions
In the ordinary course of business, BAC enters into various types of
transactions that involve credit-related financial instruments and foreign
exchange and derivatives contracts that contain off-balance-sheet risk.
Credit-related financial instruments are typically customer-driven while
foreign exchange and derivatives contracts are entered into both on behalf of
customers and for BAC's own account in managing interest rate and foreign
exchange risk.
In its effort to manage credit risk associated with foreign exchange and
derivatives contracts, BAC ensures that its off-balance-sheet portfolio is well
diversified, both in terms of instrument type and industry and customer
concentration. In addition, credit risk is managed through BAC's credit
approval process. Also, it is BAC's policy to execute legally enforceable master
netting agreements with its foreign exchange and derivative customers, which
provide for the net closeout of conditional or exchange contracts with the same
counterparty in the event of default. To further mitigate off-balance-sheet
credit exposures, BAC obtains collateral where determined appropriate.
Credit-Related Financial Instruments
Credit-related financial instruments include commitments to extend credit,
standby letters of credit, financial guarantees, and commercial letters of
credit. Fees received from credit-related financial instruments are recognized
over the terms of the contracts and are included in other fees and commissions
in noninterest income.
Unfunded credit commitments at December 31, 1994 and 1993 totaled $131,070
million and $97,111 million, respectively, of which $7,108 million and $5,788
million related to foreign-based customers and $123,962 million and $91,323
million related to domestic-based customers. The unfunded credit commitments to
domestic-based customers at December 31, 1994 and 1993 included $28,058 million
and $23,437 million, respectively, of unutilized credit card lines. At both
December 31, 1994 and 1993, no domestic or foreign industry nor any individual
foreign country comprised more than ten percent of total unfunded
noncredit-card-related commitments. For a summary of funded loan outstandings by
type at December 31, 1994 and 1993, refer to Note 9 of the Notes to Consolidated
Financial Statements on page 62.
The following table is a summary of the contractual amounts of each
significant class of credit-related financial instruments outstanding. The
contractual amounts of these instruments are not recorded as assets or
liabilities on the balance sheet. These amounts represent the amounts at risk
should the contract be fully drawn upon, the client defaults, and the value of
any existing collateral becomes worthless.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31
--------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $28,058 $23,437
Other commitments to extend credit 82,929 57,227
Standby letters of credit and financial
guarantees (net of participations
sold: 1994--$2,402; 1993--$2,076) 15,870 13,323
Commercial letters of credit 4,213 3,124
- --------------------------------------------------------------------------------
</TABLE>
Commitments to Extend Credit
Unutilized credit card lines are commitments to extend credit. These lines
are not secured and may be canceled by BAC after thirty-days written notice
to the customer. Many credit card customers are not expected to fully draw
down their total lines of credit and, therefore, the total contractual amount
of these lines does not necessarily represent future cash requirements.
Other commitments to extend credit represent agreements to extend credit to a
customer for which BAC may have received fees. These commitments have specified
interest rates and generally have fixed expiration dates and may be terminated
by BAC if certain conditions of the contract are violated. Although they are
currently subject to drawdown, many of
71
<PAGE>
these commitments are expected to expire or terminate without being funded. Of
total other commitments to extend credit at December 31, 1994, $34,018 million
will expire in less than one year, $43,611 million from one to five years, and
$5,300 million after five years. Generally, other commitments are not secured,
but, when required, collateral may include cash, securities, and real estate.
Standby Letters of Credit and Financial Guarantees
Standby letters of credit are performance assurances made on behalf of customers
who have a contractual obligation to produce or deliver goods or services or
otherwise perform. Credit risk arises in these transactions from the possibility
that a customer may not be able to repay BAC upon default of performance if the
standby letter of credit has been drawn upon. At December 31, 1994 and 1993,
standby letters of credit totaled $6,312 million and $6,400 million,
respectively. Of the December 31, 1994 balance, $1,610 million will expire in
less than one year, $4,537 million from one to five years, and $165 million
after five years.
BAC issues financial guarantees assuring performance of customer financial
obligations under money market instruments, such as commercial paper and state,
county, and municipal securities. At December 31, 1994 and 1993, financial
guarantees totaled $9,558 million and $6,923 million, respectively. Of the
December 31, 1994 balance, $2,188 million will expire in less than one year,
$7,108 million from one to five years, and $262 million after five years.
Fees received for standby letters of credit and financial guarantees are
recognized over the lives of the contracts and are included in other fees and
commissions in noninterest income. Generally, standby letters of credit and
financial guarantees are not secured, but, when required, collateral may include
cash and securities.
Commercial Letters of Credit
Through commercial letters of credit, BAC guarantees a customer's foreign or
domestic trade transactions to a third party, generally to finance a commercial
contract for the shipment of goods. BAC's credit risk in these transactions is
limited since the contracts are collateralized by the merchandise being shipped
and are generally of short duration.
Foreign Exchange and Derivatives Contracts
Foreign exchange and derivatives contracts include futures, forwards, swaps, and
option contracts, and are principally linked to interest rates, foreign exchange
rates, security prices, or commodity or equity indices. For contracts other than
certain foreign exchange contracts, notional amounts are used solely to
determine cash flows to be exchanged. For certain foreign exchange contracts,
principal amounts are exchanged on a common settlement date. The notional or
contract amounts associated with these financial instruments are not recorded as
assets or liabilities on the balance sheet.
The notional or contract amounts of these transactions do not represent the
potential for gain or loss associated with such transactions. Foreign
exchange and derivatives contracts that do not qualify as hedges for BAC's
own assets and liabilities are marked to market, and the unrealized gains and
unrealized losses are recorded on the consolidated balance sheet on a gross
basis unless right of set-off criteria are met. Unrealized gains and losses
on contracts executed with the same counterparty may be netted when contracts
have been executed under legally enforceable master netting agreements. This
treatment is in compliance with FIN 39, which was adopted by BAC
on January 1, 1994.
The accounting for gains and losses on foreign exchange and derivatives
contracts that qualify as accounting hedges differs based on the type of
contract and the nature of the hedge strategy. For further information regarding
the accounting for foreign exchange and derivatives contracts, refer to Note 1
of the Notes to Consolidated Financial Statements on pages 52-56.
The table on page 73 summarizes the notional amounts, credit risk, and credit
exposure for each significant class of foreign exchange and derivative contract
outstanding in BAC's trading portfolio and the notional amounts and credit risk
for each significant class of foreign exchange and derivative contract
outstanding in BAC's asset and liability management portfolio.
Credit risk represents BAC's 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. Credit exposure
represents the potential loss to which BAC is exposed, after taking into
consideration legally enforceable master netting agreements. Historically,
losses associated with counterparty nonperformance on derivative and foreign
exchange instruments have been immaterial.
72
<PAGE>
Notional, Credit Risk, and Credit Exposure Amounts for Derivative Financial
Instruments Held or Issued for Trading Purposes
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
-------------------------------------------------------------------------------
Notional Credit Credit Notional Credit Credit
(in millions) Amount Risk/a/ Exposure/b/ Amount Risk/a/ Exposure/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Interest rate swaps $ 348,515 $ 4,971 $1,960/c/ $232,327 $ 6,739 $3,212/c/
Futures and forward rate contracts
Commitments to purchase 95,010 192 192 57,950 8 6
Commitments to sell 116,408 35 35 81,017 36 25
Written options 35,909 --/d/ --/d/ 29,576 --/d/ --/d/
Purchased options 44,779 441 279 27,866 340 221
-------------------------------------------------------------------------------
Total interest rate contracts 640,621 5,639 2,466 428,736 7,123 3,464
Foreign exchange contracts
Spot, forward, and futures contracts 630,867 6,623 2,234 424,790 4,486 3,025
Written options 19,617 --/d/ --/d/ 9,566 --/d/ --/d/
Purchased options 18,861 267 208 10,026 147 135
Currency swaps 21,943 1,595 1,353 21,735 1,837 1,616
-------------------------------------------------------------------------------
Total foreign exchange contracts 691,288 8,485 3,795 466,117 6,470 4,776
Stock index options and commodity contracts 825 9 6 -- -- --
-------------------------------------------------------------------------------
Total $1,332,734/e/ $ 14,133 $6,267 $894,853/f/ $13,593 $8,240
</TABLE>
Notional and Credit Risk Amounts for Derivative Financial Instruments Held or
Issued for Asset and Liability Management Purposes
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------------------------------------------------------------------
Notional Credit Notional Credit
(in millions) Amount Risk/a/ Amount Risk/a/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate contracts
Interest rate swaps $32,864 $120 $26,342 $109
Futures and forward rate contracts 28,773 -- 28,951 --
Purchased options 4,510 43 8,600 18
--------------------------------------------------------------------------------
Total interest rate contracts 66,147 163 63,893 127
Foreign exchange contracts
Spot, forward, and futures contracts 1,383 -- 1,083 --
Currency swaps 443 129 288 89
--------------------------------------------------------------------------------
Total foreign exchange contracts 1,826 129 1,371 89
--------------------------------------------------------------------------------
Total $67,973/e/ $292 $65,264/f/ $216
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Excluding the effects of legally enforceable master netting agreements.
/b/ Including the effects of legally enforceable master netting agreements.
/c/ Including the results of cross product netting of certain interest rate
derivatives and currency swaps.
/d/ Interest rate and foreign exchange options written have no credit risk or
credit exposure.
/e/ Interest rate swaps and interest rate options in both the trading and
asset and liability management portfolios include $9.8 billion and $0.1
billion, respectively, of intercompany hedging-related contracts. Foreign
exchange contracts in both the trading and asset and liability management
portfolios include $1.5 billion of intercompany hedging-related contracts.
/f/ Interest rate swaps, futures and forward rate contracts, and interest rate
options in both the trading and asset and liability management portfolios
include $13.2 billion, $4.3 billion, and $0.5 billion, respectively, of
intercompany hedging-related contracts. Foreign exchange contracts in both
the trading and asset and liability management portfolios include $1.1
billion of intercompany hedging-related contracts.
73
<PAGE>
The following table summarizes the average and year-end fair values of each
significant class of foreign exchange and derivative contract outstanding in
BAC's trading portfolio and the year-end fair values for each significant class
of foreign exchange and derivative contract outstanding in BAC's asset and
liability management portfolio. Fair value amounts consist of unrealized gains
and losses, accrued interest receivable and payable, and premiums paid or
received. These amounts take into account master netting agreements in
accordance with FIN 39. The fair value amounts for the trading portfolio are
disaggregated by gross unrealized gains (assets) and gross unrealized losses
(liabilities), while the fair value amounts for the asset and liability
management portfolio are shown on a net basis. Fair value amounts were generally
calculated using discounted cash flow models based on current market yields for
similar instruments and the maturity of each instrument .
Fair Values of Derivative Financial Instruments Held or Issued for Trading
Purposes
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------------------------------------------------------------
Average Fair Value Period End Period End
(in millions) For The Year Ended/ab/ Fair Value/b/ Fair Value/bc/
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest rate contracts
Interest rate swaps
Assets $ 2,230 $ 1,960 $ 557
Liabilities (1,659) (1,588) --
Futures and forward rate contracts
Assets 149 227 --
Liabilities (133) (189) (9)
Written options (292) (299) (397)
Purchased options 283 279 401
----------------------------------------------------------------------
Total interest rate contracts 578 390 552
Foreign exchange contracts
Spot, forward, and futures contracts
Assets 3,393 2,234 --
Liabilities (3,744) (2,766) (150)
Written options (238) (228) (163)
Purchased options 221 208 145
Currency swaps
Assets 1,538 1,353 --
Liabilities (1,729) (1,494) (223)
----------------------------------------------------------------------
Total foreign exchange contracts (559) (693) (391)
Stock index options and commodity contracts
Assets 9 6 --
Liabilities (9) (7) --
----------------------------------------------------------------------
Total stock index options and commodity
contracts -- (1) --
----------------------------------------------------------------------
Total $ 19 $ (304) $ 161
</TABLE>
Fair Values of Derivative Financial Instruments Held or Issued for Asset and
Liability Management Purposes
<TABLE>
<CAPTION>
December 31
-------------------------------
(in millions) 1994/b/ 1993/b/
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate contracts
Interest rate swaps $(693) $ 840
Futures and forward rate contracts (42) 7
Purchased options 39 254
-------------------------------
Total interest rate contracts (696) 1,101
Foreign exchange contracts
Spot, forward, and futures contracts -- --
Currency swaps 129 85
-------------------------------
Total foreign exchange contracts 129 85
-------------------------------
Total $(567) $1,186
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average fair value amounts are calculated based on monthly balances.
/b/ For a description of fair value methodologies, refer to Note 22 of the
Notes to Consolidated Financial Statements on pages 78-80.
/c/ Period end fair value amounts are presented on a net basis prior to the
adoption of FIN 39 on January 1, 1994.
74
<PAGE>
Foreign Exchange Contracts
Foreign exchange contracts, which include spot, forward and futures contracts,
represent agreements to exchange the currency of one country for the currency of
another country at an agreed-upon price, on an agreed-upon settlement date.
Foreign exchange option contracts are similar to interest rate option contracts,
except that they are based on currencies, rather than interest rates. Exposure
to loss on these contracts will increase or decrease over their respective lives
as currency exchange rates fluctuate. For exchange-traded foreign exchange
contracts, BAC's exposure to off-balance-sheet credit risk is limited, as these
transactions are executed on organized exchanges and generally require security
deposits and daily settlement of margins.
Interest Rate and Currency Swaps
Interest rate swaps represent contractual agreements between two parties to
exchange interest payments in the same currency, each of which is computed on a
different basis, on a specified notional amount. Most interest rate swaps
involve the net exchange of payments calculated as the difference between fixed
and floating rate interest payments. Currency swaps, in their simplest form,
represent contractual agreements that involve the exchange of both periodic and
final amounts in two different currencies. Exposure to loss on both types of
swap contracts will increase or decrease over their respective lives as a
function of maturity dates, market interest and foreign exchange rates, and
timing of payments.
Interest Rate Futures, Forward, and Option Contracts
Interest rate futures are exchange-traded instruments and represent commitments
to purchase or sell a designated security or money market instrument at a
specified future date and price. Interest rate forward agreements are over-the-
counter products and represent contracts where two parties agree on an interest
rate for one party to pay the other for a specific period in the future.
Interest rate options, which primarily consist of caps and floors, are interest
rate protection instruments that involve the payment from the seller to the
buyer of an interest rate differential in exchange for a premium paid by the
buyer. This differential represents the difference between current interest
rates and an agreed-upon rate applied to a notional amount. Exposure to loss on
all interest rate contracts will increase or decrease over their respective
lives as interest rates fluctuate. For interest rate futures and exchange-traded
option contracts, BAC's exposure to off-balance-sheet credit risk is limited, as
these transactions are executed on organized exchanges that assume the
obligations of counterparties and generally require security deposits and daily
settlement of margins.
Trading Activities
Trading-related income represents the net amount earned from BAC's trading
activities, which include entering into transactions to meet customer demand and
taking positions for BAC's own account in a diverse range of financial
instruments and markets. The profitability of these trading activities depends
largely on the volume and diversity of the transactions BAC executes, the level
of risk it is willing to assume, and the volatility of price and rate movements.
Trading-related income, as disclosed in BAC's consolidated statement of
operations, does not include the net interest income derived from foreign
exchange contracts and derivatives associated with trading activities. However,
the trading-related net interest income amounts are presented in the table below
as they should be considered in evaluating the overall profitability of those
activities.
To reflect the business purpose and use of the financial contracts into which
BAC enters, trading income and the related net interest revenue or expense
associated with such contracts have been allocated into three broad functional
categories: interest rate trading, foreign exchange trading, and debt
instruments trading. Trading income from interest rate instruments primarily
includes income from interest rate and currency swaps and from interest rate
futures, option contracts, and forward rate agreements as well as cash
instruments used in the management of this function. Foreign exchange trading-
related income primarily includes amounts generated from foreign exchange spot,
forward, futures, and option contracts. Trading income from debt instruments
primarily includes amounts from debt securities.
Trading-related Income and Net Interest Income (Expense) by Function
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-------------------------------------------
Interest Foreign Debt
(in millions) Rate Exchange Instruments Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading-related income $63 $237 $ 57 $357
Net interest income
(expense) (3) 7 85 89
-------------------------------------------
$60 $244 $142 $446
<CAPTION>
Year Ended December 31, 1993
-------------------------------------------
Interest Foreign Debt
(in millions) Rate Exchange Instruments Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading-related income $80 $325 $164 $569
Net interest income
(expense) 1 (9) 26 18
-------------------------------------------
$81 $316 $190 $587
</TABLE>
75
<PAGE>
Asset and Liability Management Activities
BAC uses foreign exchange contracts and derivative instruments, primarily
interest rate contracts, to manage interest rate risk related to specific assets
and liabilities, including fixed rate and adjustable rate residential mortgages,
long-term debt, and deposits. Foreign exchange contracts are used to hedge net
capital exposure and foreign currency exposures.
One strategy that BAC employs in managing interest rate risk is the use of
interest rate swaps to modify the interest rate characteristics of designated
assets and liabilities. For example, BAC may enter into an interest rate swap to
alter cash flows on its long-term debt from floating-rate to fixed-rate in an
effort to reduce gap mismatches.
Another hedging strategy used by BAC is the purchase of options to protect
against significant loss due to extreme interest rate movements. For example,
BAC may purchase interest rate floors on its adjustable rate mortgage portfolio
to reduce the risk of loss from a rapid or prolonged decline in interest rates.
In addition, BAC uses interest rate swaps to hedge against market value
fluctuations of available-for-sale securities.
The above hedging strategies would be rendered ineffective if BAC disposes of
the underlying product being hedged or if certain unexpected events occur. In
addition, BAC may terminate its hedging-related contracts in reaction to certain
events or circumstances. However, such terminations are infrequent, and the
deferred gains or losses on terminated contracts recorded in BAC's consolidated
balance sheet at December 31, 1994 and 1993, and the amortization of such
amounts for the years ended 1994 and 1993 were not significant.
The table on page 77 summarizes the expected or contractual maturities and
weighted average interest rates associated with amounts to be received or paid
on BAC's interest rate swaps used to manage asset and liability interest rate
exposure at December 31, 1994 and 1993. These swaps have been designated as
accounting hedges and are used to modify the interest rate characteristics of
certain specified assets and liabilities.
Approximately 65 percent of BAC's hedging-related interest rate futures and
forward rate agreements outstanding at December 31, 1994 mature within one year,
while approximately 85 percent of its hedging-related option contracts mature
within three years. Approximately 95 percent of BAC's hedging-related interest
rate futures and forward rate agreements outstanding at December 31, 1993 mature
within one year, while approximately 80 percent of its hedging-related option
contracts mature within five to ten years. The difference in the maturity
distributions between year-end 1994 and 1993 can be largely attributed to the
Continental merger.
All of BAC's hedging-related foreign exchange forward contracts outstanding at
December 31, 1994 and 1993 mature within 60 days. At both December 31, 1994 and
1993, BAC's hedging-related foreign exchange forward contracts were denominated
in various currencies, most notably Hong Kong dollars and Spanish pesetas.
Securities Lending
BAC 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 default of
a customer combined with a decline in the value of the associated collateral,
BAC may be exposed to risk of loss.
The following summarizes indemnified securities lending transactions and the
associated collateral:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31
----------------
(in millions) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Indemnified securities lent $5,910 $5,133
Associated collateral 6,039 5,185
- ---------------------------------------------------------------------------
</TABLE>
76
<PAGE>
Asset and Liability Management Interest Rate Swaps/a/
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------------------------------------
(is greater (is greater (is greater (is greater (is greater (is greater
than) than) than) than) than) than)
(in billions) 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-10 years 10 years Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/b/
Notional amount $ 2.7 $ 1.8 $ 1.5 $ 1.0 $ 0.8 $ 7.5 $ 2.0 $17.3/c/
Weighted average receive rate 5.83% 7.31% 6.99% 7.55% 5.73% 6.30% 6.79% 6.50%
Pay fixed/b/
Notional amount $ 3.0 $ 3.6 $ 1.8 $ 0.1 $ 0.6 $ 2.8 $ 0.4 $12.3
Weighted average pay rate 4.91% 5.06% 6.40% 7.00% 7.50% 6.84% 7.35% 5.82%
Forward receive fixed/d/
Notional amount -- -- $ 0.2 -- -- $ 0.7 $ 0.2 $ 1.1
Weighted average receive rate -- -- 5.93% -- -- 6.90% 6.66% 6.67%
Forward pay fixed/d/
Notional amount -- -- $ 0.3 -- $ 0.2 $ 1.0 -- $ 1.5
Weighted average pay rate -- -- 6.28% -- 6.16% 7.60% -- 7.15%
Basis swaps/e/
Notional amount $ 0.4 -- -- -- -- $ 0.3 -- $ 0.7
----------------------------------------------------------------------------------------------------
Total Notional Amount $32.9/f/
<CAPTION>
December 31, 1993
----------------------------------------------------------------------------------------------------
(is greater is greater (is greater (is greater (is greater (is greater
than) than) than) than) than) than)
(in billions) 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-10 years 10 years Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/b/
Notional amount $ 5.8 $ 1.0 $ 0.3 $ 0.5 $ 0.4 $ 6.7 $ 1.0 $15.7/c/
Weighted average receive rate 7.54% 6.59% 7.10% 7.27% 7.91% 6.25% 6.47% 6.86%
Pay fixed/b/
Notional amount $ 0.2 $ 3.0 $ 3.3 $ 1.7 -- $ 0.4 -- $ 8.6
Weighted average pay rate 7.49% 5.34% 4.62% 6.24% -- 4.95% -- 5.27%
Forward receive fixed/d/
Notional amount -- -- -- $ 0.2 -- $ 0.7 $ 0.2 $ 1.1
Weighted average receive rate -- -- -- 5.93% -- 7.00% 6.66% 6.74%
Forward pay fixed/d/
Notional amount -- -- -- $ 0.3 -- -- -- $ 0.3
Weighted average pay rate -- -- -- 6.28% -- -- -- 6.28%
Basis swaps/e/
Notional amount $ 0.1 $ 0.2 -- -- -- $ 0.3 -- $ 0.6
----------------------------------------------------------------------------------------------------
Total Notional Amount $26.3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes intercompany swaps.
/b/ The variable rate side of substantially all receive fixed rate and pay fixed
rate swaps is based on the one-, three-, or six-month LIBOR. At December 31,
1994, and 1993, the one-, three-, and six-month LIBOR rates were 6.125
percent and 3.250 percent, 6.3125 percent and 3.375 percent, and 6.8125
percent and 3.500 percent, respectively.
/c/ Includes $0.6 billion of swaps with amortizing notional amounts at both
December 31, 1994 and 1993.
/d/ 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 each reported year end.
/e/ Basis swaps are interest rate swaps in which both amounts paid and received
are based on floating rates. BAC's pay rates are primarily based on a LIBOR
or Prime index and its receive rates are primarily based on LIBOR.
/f/ Includes $5.5 billion of interest rate swaps entered into by Continental.
77
<PAGE>
22. Fair Value of Financial Instruments
Management uses its best judgment in estimating the fair value of BAC's
financial instruments; however, there are inherent weaknesses in any
estimation technique. Therefore, for substantially all financial instruments,
the fair value estimates presented herein are not necessarily indicative of
the amounts BAC could have realized in a sales transaction at either December
31, 1994 or 1993. The estimated fair value amounts for 1994 and 1993 have
been measured as of their respective year ends, and have not been reevaluated
or updated for purposes of these consolidated financial statements subsequent to
those respective dates. As such, the estimated fair values of these financial
instruments subsequent to the respective reporting dates may be different than
the amounts reported at each year end.
The following information should not be interpreted as an estimate of the fair
value of the entire corporation since a fair value calculation is only required
for a limited portion of BAC's assets.
This disclosure of fair value amounts does not include the fair values of any
intangibles, including core deposit intangibles, purchased mortgage servicing
rights, and credit card intangibles.
Due to the wide range of valuation techniques and the degree of subjectivity
used in making the estimates, comparisons between BAC's disclosures and those of
other companies may not be meaningful.
The following methods and assumptions were used to estimate the fair values of
BAC's financial instruments at December 31, 1994 and 1993.
Financial Instruments Valued at Carrying Value
The respective carrying values of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash and due
from banks, interest-bearing deposits in banks, federal funds sold and
purchased, securities purchased and sold under resale and repurchase agreements,
trading account assets, customers' acceptance liability, accrued interest
receivable, certain other assets, other short-term borrowings, acceptances
outstanding, accrued interest payable, and other liabilities that are considered
financial instruments. Carrying values were assumed to approximate fair values
for these financial instruments as they are short term in nature and their
recorded amounts approximate fair values or are receivable or payable on demand.
Available-for-sale securities and held-to-maturity securities
Fair value amounts of available-for-sale and held-to-maturity securities were
based on quoted market prices, where available. Where quoted market prices did
not exist, fair values were estimated using book, cost, or appraised value as
deemed appropriate by management. The aggregate fair value and aggregate
carrying value of available-for-sale securities at December 31, 1994 presented
in the table on page 79 exclude the fair value of off-balance-sheet financial
instruments that qualify as accounting hedges of $43 million. The notional
amount of these instruments was $515 million at December 31, 1994. At December
31, 1994, available-for-sale securities were carried at their aggregate fair
value. At December 31, 1993, the carrying value of available-for-sale securities
was equal to the lower of amortized cost or market value. In addition, debt-
restructuring par bonds and other instruments, which were previously included
primarily in foreign loans, were reclassified to either available-for-sale or
held-to-maturity securities upon adoption of SFAS No. 115. For further
information on available-for-sale and held-to-maturity securities, refer to Note
1 of the Notes to Consolidated Financial Statements on pages 52-55.
Loans
For purposes of these fair value calculations, the aggregate fair value of each
loan portfolio, excluding nonaccrual domestic commercial and foreign loans, was
adjusted by a related portion of the allowance for credit losses. The allowance
for credit losses primarily represents the credit risk associated with loans
that reprice within relatively short time frames. The fair values of nonaccrual
domestic commercial and foreign loans were computed by deducting an estimated
market discount from their carrying values to represent the uncertainty of
future cash flow amounts and timing.
The aggregate fair value of loans at December 31, 1994 excludes the effect of
off-balance-sheet financial instruments that qualify as accounting hedges. The
notional amounts of these instruments were $8,484 million at December 31, 1994,
and their associated net fair value was zero. There were no off-balance-sheet
financial instruments that qualified as accounting hedges for loans at
December 31, 1993.
At December 31, 1994 and 1993, the allowance for credit losses included $1,194
million and $875 million, respectively, that was not allocated to a specific
segment of the loan portfolio. As such, these portions of the allowance for
credit losses were not included in any of the carrying values or fair values of
loans presented in the table on page 79 at each respective year end.
78
<PAGE>
The following methods and assumptions were used to calculate the fair values
of loans.
Residential first mortgages
The fair values of residential first mortgages were calculated using pricing
procedures that are similar to those used when these loans are sold in the
secondary market in the normal course of business. These pricing procedures
use current market rates for similar types of loans.
Residential junior mortgages, consumer installment loans, credit card loans,
individual lines of credit, and other consumer loans (other consumer loans)
The fair values of other consumer loans were calculated using discounted cash
flow models. The discount rates were based on current market interest rates
for similar types of loans.
Domestic commercial loans
The carrying values of loans that reprice within relatively short time frames
were assumed to approximate their fair values.
The fair values of domestic commercial loans that do not reprice or mature
within relatively short time frames were calculated using discounted cash flow
models based on the maturity of the loans. The discount rates, which were based
on market interest rates for similar types of loans, incorporated adjustments
for credit risk.
The fair values of commitments to extend credit were not significant at either
December 31, 1994 or 1993.
Foreign loans
Substantially all of the foreign loans reprice within relatively short time
frames. As a result, the carrying values of these foreign loans were assumed
to approximate their fair values. The carrying and fair values at December
31, 1993 included debt restructuring par bonds that were reclassified to
either available-for-sale or held-to-maturity securities upon the adoption of
SFAS No. 115.
Other Financial Instruments
For non-exchange-traded equity securities, which are included in other
assets, fair values were estimated using equity, cost, or appraised value as
deemed appropriate by management. Prior to the adoption of SFAS No. 115,
other assets included exchange-traded marketable equity securities. Their
fair values were calculated based on quoted market prices. The carrying
values of all other components of other assets that are considered financial
instruments approximated their respective fair values, as they are short term
in nature or are receivable or payable on demand.
The following is a summary of previously described on-balance-sheet asset
financial instruments whose fair values differ from their carrying values for
either of the periods presented:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31
----------------------------------------------
1994 1993
------------------- ---------------------
Carrying Fair Carrying Fair
(in millions) Value Value Value Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Available-for-sale securities $ 9,806 $ 9,806 $ 3,282 $ 3,405
Held-to-maturity securities 8,167 7,292 16,415 16,802
Loans:
Domestic consumer:
Residential first mortgages 33,727 32,541 30,428 31,192
Other consumer 32,252 32,063 29,585 30,300
Domestic commercial 49,576 49,454 41,381 41,055
Foreign 19,552 19,544 19,898 19,466
----------------------------------------------
Total loans 135,107 133,602 121,292 122,013
Other financial instruments 2,204 2,217 1,639 1,689
- ------------------------------------------------------------------------------
</TABLE>
Deposits
The fair values of domestic and foreign demand deposits, savings deposits,
and money market deposits without defined maturities were the amounts payable
on demand. For substantially all domestic deposits with defined maturities,
the fair values were calculated using discounted cash flow models based on
market interest rates for different product types and maturity dates for the
state in which the deposit was held. For variable-rate deposits with fixed
repricing dates, the first repricing date was considered the maturity date
for purposes of the fair value calculation. For variable rate deposits where
BAC has the contractual right to change rates, carrying value was assumed to
approximate fair value. The discount rates used were based on rates for compa
rative deposits.
The fair values of domestic business negotiable certificates of deposit and
domestic business time deposits were calculated using a discounted cash flow
model. This model was based on the maturities of the related deposits and market
interest rates for similar types of deposits. The carrying values of total
foreign time deposits were assumed to approximate their fair values since these
deposits primarily had variable rates and repriced within relatively short time
frames.
The aggregate fair values of deposits exclude the aggregate fair values of
off-balance-sheet financial instruments that qualify as accounting hedges for
the bank's deposits, which were ($653) million and $960 million, respectively,
at December 31, 1994 and 1993. The notional amounts of these contracts were
$50,959 million and $54,882 million at December 31, 1994 and 1993, respectively.
79
<PAGE>
Long-term debt
The fair values of BAC's long-term debt instruments were calculated based on
quoted market prices. For those long-term debt issues where quoted market
prices were not available, a discounted cash flow model was used. The
discount rates were based on yield curves appropriate for the remaining
maturities of the instruments. The fair value of long-term debt excludes the
fair values of off-balance-sheet financial instruments that qualify as
accounting hedges for the parent's long-term debt, which were $43 million and
$226 million, respectively, at December 31, 1994 and 1993. The notional
amounts of these contracts were $5,225 million and $6,816 million at December
31, 1994 and 1993, respectively.
Subordinated capital notes
The fair values of BAC's subordinated capital notes were calculated based on
quoted market prices.
The following is a summary of previously described on-balance-sheet liability
financial instruments whose aggregate fair values differ from their carrying
value of BAC's subordinated capital notes:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31
----------------------------------------------
1994 1993
------------------- ---------------------
Carrying Fair Carrying Fair
(in millions) Value Value Value Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities
Deposits $154,394 $154,329 $141,618 $142,014
Long-term debt 14,823 14,762 13,508 14,253
Subordinated capital notes 605 610 607 644
- ------------------------------------------------------------------------------
</TABLE>
Foreign exchange contracts and derivatives
The following is a summary of the fair values of foreign exchange and
derivatives contracts outstanding. The fair values of exchange-traded foreign
exchange and derivative contracts are based on quoted market prices or dealer
quotes. Fair values of non-exchange traded, or over-the-counter (OTC) foreign
exchange and derivatives contracts consist of net unrealized gains and losses,
accrued interest receivable or payable, and premiums paid or received. These
amounts were generally calculated using discounted cash flow models based on
current market yields for similar types of instruments and the maturity
Fair Values of Foreign Exchange Contracts and Derivatives
<TABLE>
<CAPTION>
December 31
-----------------------------------
(in millions) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Trading $(304) $ 161
Asset and Liability Management (567) 1,186
- --------------------------------------------------------------------------------
</TABLE>
of each instrument. The discount rates were based on market interest rates and
indices for similar foreign exchange contracts and derivatives prevalent in the
market. Refer to Note 21 of the Notes to Consolidated Financial Statements on
pages 71-77 for more information regarding off-balance-sheet transactions,
including a summary of the fair values for each significant class of foreign
exchange and derivative contract outstanding in BAC's trading portfolio and
asset and liability management portfolio.
23. Legal Contingencies
Due to the nature of its business, BAC is subject to various threatened or
filed legal actions. Although the amount of the ultimate exposure, if any,
cannot be determined at this time, BAC, based upon the advice of counsel,
does not expect the final outcome of threatened or filed suits to have a
material adverse effect on its financial position.
24. BankAmerica Corporation
(Parent Company Only)
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
(in millions) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from subsidiaries:
Banking $2,107 $1,088 $ 195
Nonbanking 5 143 48
Interest on subordinated notes purchased
from banking subsidiaries 184 141 146
Interest on advances to subsidiaries:
Banking 8 13 9
Nonbanking 198 223 165
Interest on deposits in banks:
Banking subsidiaries 86 31 83
Third parties 6 1 43
Interest on available-for-sale securities
and held-to-maturity securities 123 179 80
Interest from securities purchased under
resale agreements:
Banking subsidiaries -- -- 13
Third parties 4 9 15
Net securities gains 21 7 --
Other income 15 3 49
--------------------------
Total income 2,757 1,838 846
Interest on other short-term borrowings 28 20 39
Interest on long-term debt 778 703 587
Interest on subordinated capital notes 42 113 112
Amortization of goodwill 30 27 25
Other expense 157 103 62
--------------------------
Total expense 1,035 966 825
--------------------------
Income before income taxes and equity
in undistributed income of subsidiaries 1,722 872 21
Benefit from income taxes 172 108 75
Equity in undistributed income
of subsidiaries 282 974 1,396
--------------------------
Net Income $2,176 $1,954 $1,492
- ---------------------------------------------------------------------------
</TABLE>
See notes following the Statement of Cash Flows on page 82.
80
<PAGE>
Balance Sheet
<TABLE>
<CAPTION>
December 31
-----------------
(in millions) 1994 1993
- ----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and short-term investments $ 2,571 $ 1,524
Available-for-sale securities 1,482 627
Held-to-maturity securities 125 1,148
Investments in subsidiaries:
Banking 20,228 17,944
Nonbanking 1,276 1,075
Subordinated notes purchased from
banking subsidiaries 4,525 4,223
Advances to subsidiaries:
Banking 98 236
Nonbanking 3,730 4,228
Accrued interest receivable 63 63
Goodwill 680 825
Other assets 640 632
-----------------
Total Assets $35,418 $32,525
Liabilities and Stockholders' Equity
Borrowings from subsidiaries $ 84 $ 24
Other short-term borrowings 835 595
Accrued interest payable 193 191
Other liabilities 781 782
Long-term debt 14,029 13,182
Subordinated capital notes 605 607
-----------------
Total liabilities 16,527 15,381
Stockholders' equity 18,891 17,144
-----------------
Total Liabilities and Stockholders' Equity $35,418 $32,525
- ----------------------------------------------------------------------------
</TABLE>
See notes following the Statement of Cash Flows on page 82.
The amount of funds available to the parent from its subsidiaries is limited
by restrictions placed on them by law and various debt covenants.
Under the U.S. National Bank Act and other federal laws, the parent's
national banking subsidiaries are subject to prohibitions on the payment of
dividends in certain circumstances and to restrictions on the amount that each
can pay without the prior approval of the Office of the Comptroller of the
Currency. Without the Comptroller's approval, dividends for a given year cannot
exceed each bank's net income (as defined by national banking laws) for that
year and retained net income from the preceding two years. In addition,
dividends may not be paid in excess of each bank's undivided profits, subject to
other applicable provisions of law. Based upon these laws, the bank could have
declared dividends for 1994 of $3,761 million, Seattle-First could have declared
dividends to its parent, Seafirst, of $369 million while the parent's other
national banking subsidiaries could have declared dividends of $4 million. At
December 31, 1994, the unutilized dividends allowed under these laws for the
bank, Seattle-First, and other national banking subsidiaries were $2,007
million, $62 million, and $4 million, respectively.
In addition, state-chartered banking subsidiaries are subject to dividend
limitations imposed by applicable state law. These state-chartered banking
subsidiaries could have declared dividends to their respective parent companies
without state approval of $165 million for 1994. At December 31, 1994, the
unutilized dividends allowed under these laws for the state-chartered banking
subsidiaries were $62 million.
The parent's subsidiary, Bank of America, FSB, is subject to regulatory
restrictions by the Office of Thrift Supervision on its payment of dividends.
Under these restrictions, Bank of America, FSB could have declared dividends to
its parent without regulatory approval of $76 million for 1994. At December 31,
1994, this amount was primarily unutilized.
The depository subsidiaries are also subject to certain restrictions of the
Federal Reserve Act on loans each subsidiary may extend to their respective
parent companies. Among other things, the aggregate of such loans may not exceed
10 percent of the sum of such subsidiary's capital stock and surplus. Such loans
must be secured by collateral with a value between 100 percent and 130 percent
of the loan, depending on the type of collateral. Under these restrictions, and
assuming the parent provided the collateral required, the bank, Seattle-First,
Bank of America Illinois, Bank of America National Association, and other
depository subsidiaries could have loaned to their respective parent companies a
maximum of $1,120 million, $142 million, $114 million, $84 million, and $242
million, respectively, at December 31, 1994. The net assets of depository
subsidiaries restricted from flowing to the parent by regulatory limitations
were $15,565 million at December 31, 1994.
81
<PAGE>
Statement of Cash Flows
<TABLE>
<CAPTION>
December 31
----------------------------
(in millions) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 2,176 $ 1,954 $ 1,492
Adjustments to net income to arrive at net cash provided by operating
activities:
Provision for (benefit from) deferred income taxes 215 (216) (15)
Equity in undistributed income of subsidiaries (282) (974) (1,396)
Amortization of goodwill 30 27 25
(Increase) decrease in accrued interest receivable 1 33 (81)
Increase (decrease) in accrued interest payable 2 (32) 168
Increase (decrease) in current income taxes payable (165) 216 171
Other, net 13 (73) (268)
----------------------------
Net cash provided by operating activities 1,990 935 96
Cash Flows from Investing Activities
Capital contributions to subsidiaries (700) (935) (625)
Capital returns from subsidiaries 522 395 374
Purchase of subordinated notes from banking subsidiaries (310) -- (2,900)
Redemption of subordinated capital notes from banking subsidiaries -- -- 900
Activity in available-for-sale securities:
Sales proceeds 932 98 --
Purchases (1,325) (25) --
Activity in securities held-to-maturity:
Maturities, prepayments, and calls 529 281 2,022
Purchases -- (92) (3,835)
Cash provided by (used for) acquisitions (55) -- 2,094
Collections from subsidiaries 7,185 4,224 3,350
Additional advances to subsidiaries (6,301) (2,472) (5,304)
Other, net (35) 14 (406)
----------------------------
Net cash provided (used) by investing activities 442 1,488 (4,330)
Cash Flows from Financing Activities
Proceeds from borrowings from subsidiaries 386 84 154
Payments on borrowings from subsidiaries (326) (188) (221)
Increase (decrease) in other short-term borrowings 128 235 (1,383)
Proceeds from issuance of long-term debt 3,336 3,026 5,110
Principal payments and retirements of long-term debt and subordinated capital notes (3,208) (5,214) (2,257)
Proceeds from issuance of common stock 52 268 156
Proceeds from issuance of preferred stock -- -- 1,311
Preferred stock repurchased (324) -- --
Treasury stock purchased (503) -- --
Common stock dividends (571) (497) (409)
Preferred stock dividends (248) (241) (169)
Other, net (107) (57) (117)
----------------------------
Net cash provided (used) by financing activities (1,385) (2,584) 2,175
----------------------------
Net increase (decrease) in cash and short-term investments 1,047 (161) (2,059)
Cash and short-term investments at beginning of year 1,524 1,685 3,744
----------------------------
Cash and Short-Term Investments at End of Year $ 2,571 $ 1,524 $ 1,685
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
General: For income and asset classification purposes, banking amounts include
the amounts for all of the parent's bank, bank holding company, and savings bank
subsidiaries. Certain prior-period amounts have been reclassified to conform to
the current presentation.
Balance Sheet: At December 31, 1994 and 1993, cash and short-term investments
included $2,456 million and $1,488 million, respectively, of interest-bearing
deposits with the bank.
Statement of Cash Flows: The statement of cash flows illustrates the change in
cash and short-term investments as disclosed in the Parent Company Only balance
sheet. Short-term investments have original maturities of three months or less
and are considered to be cash equivalents. During 1994, 1993, and 1992, the
parent received net income tax payments representing reimbursements from
subsidiaries of $211 million, $119 million, and $231 million, respectively. The
parent made interest payments on interest-bearing liabilities of $916 million,
$868 million, and $570 million in 1994, 1993, and 1992, respectively.
82
<PAGE>
25. Performance by Geographic Area
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
-----------------------------------------------------------------------
Net Interest
Total Assets Income and Income (Loss) Net Income
(in millions) Year at December 31 Gross Income Noninterest Income Before Income Taxes (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic 1994 $173,631 $13,262 $10,270 $3,156 $1,821
1993 152,310 13,186 10,391 2,733 1,511
1992 152,644 12,787 9,378 1,936 1,031
- ---------------------------------------------------------------------------------------------------------------------------------
Europe, Middle East, and Africa 1994 16,470 1,299 447 108 64
1993 12,677 1,126 457 232 149
1992 10,524 1,086 362 8 7
- ---------------------------------------------------------------------------------------------------------------------------------
Asia 1994 18,871 1,317 690 283 176
1993 14,976 1,059 636 273 178
1992 10,870 881 460 177 123
- ---------------------------------------------------------------------------------------------------------------------------------
Latin America and the Caribbean 1994 5,616 561 219 83 59
1993 5,994 470 197 175 106
1992 5,367 446 162 581 344
- ---------------------------------------------------------------------------------------------------------------------------------
Canada 1994 887 92 63 87 56
1993 976 59 33 15 10
1992 1,241 62 5 (20) (13)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Foreign 1994 41,844 3,269 1,419 561 355
1993 34,623 2,714 1,323 695 443
1992 28,002 2,475 989 746 461
- ---------------------------------------------------------------------------------------------------------------------------------
BankAmerica Corporation 1994 215,475 16,531 11,689 3,717 2,176
1993 186,933 15,900 11,714 3,428 1,954
1992 180,646 15,262 10,367 2,682 1,492
</TABLE>
Since BAC's operations are highly integrated, certain asset, liability,
income, and expense amounts must be allocated to arrive at total assets, gross
income, net interest and noninterest income, income or loss before income taxes,
and net income or loss. The principal allocations and underlying assumptions
used in the presentation above are as follows:
BAC's funds transfer pricing system allocates domestic sources of funds at
U.S. market rates based on the maturities of the funds. To the extent that
overseas units interact with U.S. operations, they are also included in the
funds transfer pricing system.
The allowance for credit losses is established by credit officers for each
portfolio segment. After the allowance has been established for portfolio
segments, 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. For 1994 and 1993, the unallocated portions
of the allowance and related provisions for credit losses have been allocated to
the appropriate geographic areas. For 1992, the unallocated portion of the
allowance of $404 million and related provision for credit losses were included
with domestic amounts. In 1992, the foreign allowance for credit losses was $559
million. While management has allocated reserves to various portfolio segments,
the allowance is general in nature and is available for the entire portfolio.
For 1994 and 1993, equity was assigned on a risk-adjusted basis. For 1992,
equity was assigned in proportion to total assets. For each period presented,
overhead was allocated based on each geographic area's equally weighted
operating expenses.
In 1994, 1993, and 1992, each geographic area included its respective tax
liability. BAC allocated federal and state taxes at its effective tax rates.
Translation losses, net of hedging, totaled $2 million, $4 million, and $9
million, in 1994, 1993, and 1992, respectively. These amounts, which are
reported in other income, are included in the table above.
83
<PAGE>
26. Quarterly Results (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Quarter Ended 1993 Quarter Ended
--------------------------------------------------------------------------------
(in millions, except per share data) Dec 31 Sept 30 June 30 Mar 31 Dec 31 Sept 30 June 30 Mar 31
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Results of Operations
Interest income $3,479 $3,153 $2,939 $2,813 $2,876 $2,945 $2,881 $2,925
Interest expense 1,467 1,249 1,107 1,019 1,011 1,064 1,029 1,082
--------------------------------------------------------------------------------
Net interest income 2,012 1,904 1,832 1,794 1,865 1,881 1,852 1,843
Provision for credit losses 100 110 125 125 150 178 227 248
Noninterest income 1,051 1,075 1,018 1,003 1,119 1,007 1,058 1,089
Noninterest expense 1,969 1,938 1,821 1,784 1,974 1,848 1,826 1,835
--------------------------------------------------------------------------------
Income before income taxes 994 931 904 888 860 862 857 849
Provision for income taxes 403 384 379 375 364 376 369 365
--------------------------------------------------------------------------------
Net Income $ 591 $ 547 $ 525 $ 513 $ 496 $ 486 $ 488 $ 484
Earnings per Common and Common
Equivalent Share $ 1.41 $ 1.36 $ 1.33 $ 1.27 $ 1.21 $ 1.19 $ 1.20 $ 1.19
Earnings per Common Share--Assuming Full Dilution 1.40 1.35 1.32 1.26 1.21 1.18 1.19 1.19
Stock Data
Dividends per common share 0.40 0.40 0.40 0.40 0.35 0.35 0.35 0.35
Common stock price range:/a/
High 46 1/4 49 5/8 50 1/4 48 7/8 47 3/8 49 1/8 53 7/8 55 1/2
Low 38 5/8 44 38 3/8 38 3/4 40 3/8 43 3/8 40 1/2 43
Closing common stock price/a/ 39 1/2 44 1/8 45 3/4 39 3/8 46 3/8 44 45 1/4 50 1/4
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ The principal market of BAC's common stock is the New York Stock Exchange;
the stock is also listed on the Chicago, Pacific, London, and Tokyo Stock
Exchanges. Price information represents quotations as reported in the New
York Stock Exchange consolidated transaction reporting system.
84
<PAGE>
APPENDIX INDEX
<TABLE>
<CAPTION>
BankAmerica Corporation 1994
Annual Report to Shareholders
page reference Description of omitted graphics
- ----------------------------- -------------------------------
<S> <C>
9 Consumer Banking Net Income 1994
(Pie chart in non-EDGAR version)
11 U.S. Corporate and International Banking
Net Income 1994
(Pie chart in non-EDGAR version)
13 Commercial Real Estate Net Income 1994
(Pie chart in non-EDGAR version)
15 Middle-market Banking Net Income 1994
(Pie chart in non-EDGAR version)
17 Private Banking and Investment Services Net
Income 1994
(Pie chart in non-EDGAR version)
23 Noninterest Income
(Stacked block graphs in non-EDGAR version)
24 Noninterest Expense
(Stacked block graphs in non-EDGAR version)
25 Staff Levels
(Plot point graph in non-EDGAR version)
26 Composition of Interest-Earning Assets
(Pie charts in non-EDGAR version)
29 Total Loan Outstandings by Geographic Area
(Pie charts in non-EDGAR version)
33 Total Loan Outstandings by Type
(Pie charts in non-EDGAR version)
39 Nonaccrual Assets at Year-End
(Stacked block graphs in non-EDGAR version)
40 Net Interest Rate Risk Position
(Plot point graph in non-EDGAR version)
43 Liquid Assets at Year-End
(Stacked block graphs in non-EDGAR version)
44 Common and Total Stockholders' Equity
(Plot point graph in non-EDGAR version)
</TABLE>
<PAGE>
Exhibit 21
----------
BANKAMERICA CORPORATION SUBSIDIARIES
As of December 31, 1994
-----------------------
The following list sets forth information concerning the direct
subsidiaries of BankAmerica Corporation (the Parent) and indirect subsidiaries
of the Parent. Except as otherwise indicated, each subsidiary is wholly owned
and does business under its own name.
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
054. Appold Holdings Limited..................................................... Delaware
080. Appold Japan Limited (dba: Hoare Govett Japan Limited)................... Hong Kong
086. Appold Securities Limited................................................ U.K.
095. Investat (Nominees) Ltd.................................................. U.K.
1400. Societe Nouvelle Les Dolomites Francaises (Appold .2%; SPEFI 99.8%)...... France
052. Appold Leasing, Inc......................................................... Delaware
367. BA Commercial Credit Corp................................................... Florida
368. BA Futures, Incorporated.................................................... Delaware
369. BA Insurance Holding Company................................................ Delaware
370. BA Insurance (Cayman) Ltd................................................ Cayman Islands
371. BancAmerica Insurance Company............................................ Cayman Islands
120. BA Securities, Inc.......................................................... Delaware
238. BA Security Services, Inc................................................... Delaware
240. BA Clearing Corporation.................................................. Delaware
242. BankAmerica State Trust Company.......................................... California
659. RAMCO Nominees Inc....................................................... Delaware
376. BancAmerica Commercial Corporation.......................................... Pennsylvania
016. Bank of America Alaska, N.A................................................. U.S.
382. Bank of America Arizona..................................................... Arizona
(dba Bank of America)
657. Bamerilease, Inc......................................................... Arizona
121. Bank of America Community Development Bank.................................. California
128. BA Software Services, Inc................................................ Delaware
127. SP StateBank Leasing, Incorporated....................................... California
383. Bank of America, FSB........................................................ U.S.
(dba Bank of America Hawaii and Security Pacific Financial Services)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
631. Honfed Financial Services Corp.................................................. Hawaii
636. First Collateral Services, Inc............................................... Hawaii
641. HONFED Insurance, Inc........................................................... Hawaii
644. HONOFED Ben Lomond, Corp........................................................ Hawaii
1415. Liberty Properties, Inc......................................................... Hawaii
1410. United Mortgage Holding Company................................................. Minnesota
1411. United Mortgage Corporation.................................................. Minnesota
1413. IDL Mortgage Corporation.................................................. Wisconsin
1414. U.M.C. Asset Management Corporation....................................... Minnesota
1412. Valley Mortgage Corporation............................................... Minnesota
017. Bank of America Idaho, N.A......................................................... U.S.
2011. Bank of America Illinois........................................................... Illinois
2014. C.I.N.B. Nominees (London) Limited.............................................. U.K.
2015. Continental Bank International................................ U.S. (District of Columbia)
2026. CIC Trading, S.A. (99% CIFC, 1% CBI)......................................... Argentina
2037. Continental Information & Technology Services Co., S.A. (99% CIFC, 1% CBI)... Argentina
2043. Continental Investment Company S.A. (99% CIFC, 1% CBI)....................... Argentina
2017. Continental Bank New York Trust Company ........................................ New York
2018. Continental Brokerage Services Inc.............................................. Delaware
2019. Continental Community Development Corporation................................... Delaware
2020. Continental Illinois Property Corporation No. 3................................. Delaware
2021. Continental Illinois Venture Corporation........................................ Delaware
2022. Continental International Finance Corporation................. U.S. (District of Columbia)
2024. Chicago Continental Capital Market Compania de
Assesoria Financiera Limitada................................................ Chile
2026. CIC TRADING, S.A. (99% CIFC; 1% CBI)......................................... ARGENTINA
2027. CIC Trading (Uruguay) S.A.................................................... Uruguay
2028. C.N. Investments, Inc........................................................ Cayman Islds
2029. Continental Capital Markets Limited.......................................... U.K.
2030. Lease Continental PLC..................................................... U.K.
2031. Continental Consulting Company Ltd........................................... U.K.
2032. Continental Finanziaria S.P.A................................................ Italy
2033. Continental Illinois de Mexico, S.A. de C.V.................................. Mexico
2034. Continental Illinois Servicos Ltda........................................... Brazil
2035. Continental Banco S.A. (50%).............................................. Brazil
2036. Continental Distribudora de Titulos E Valores Mobiliaros, S.A............. Brazil
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
2037. CONTINENTAL INFORMATION & TECHNOLOGY SERVICES CO., S.A. (99% CIFC; 1% CIB)... ARGENTINA
2038. Continental International Finance Corporation II Limitada.................... Chile
2040. Continental International Finance Corporation Ltda........................... Chile
2041. Continental International Securities, Limited................................ Cayman Islds
2042. Continental Illinois (Nominee) Ltd........................................ Hong Kong
2043. CONTINENTAL INVESTMENT COMPANY S.A. (99% CIFC; 1% CBI)....................... ARGENTINA
2044. Continental Servicios Corporativos S.A. de C.V............................... Mexico
2045. Destco, Ltd.................................................................. Cayman Islds
2046. Inversiones Destco Chile Limitada......................................... Chile
2098. Fundo De Conversao Capital Estrangeiro- Continental Illinois Sellas.......... Brazil
2047. Invenco, Inc................................................................. Cayman Islds
2054. Ismael I, Inc................................................................ Cayman Islds
2055. Ismael II, Inc............................................................... Cayman Islds
2057. Juliana, Inc................................................................. Cayman Islds
2059. Justin, Inc. Chile Ltda. (99% Justin, Inc., 1% Juliana, Inc.)............. Chile
2058. Justin, Inc.................................................................. Cayman Islds
2059. Justin, Inc. Chile Ltda. (99% Justin, Inc., 1% Juliana, Inc.)............. Chile
2064. Labco I, Inc................................................................. Cayman Islds
2065. Labco I Inc. Chile Limitada (99% Labco I, 1% Labco II Inc.)............... Chile
2067. Labco II, Inc................................................................ Cayman Islds
2065. Labco I Inc. Chile Limitada (99% Labco I, 1% Labco II Inc.)............... Chile
2106. Lawrence Holdings Ltd........................................................ Cayman Islds
2137. Lisco, Ltd................................................................... Cayman Islds
2068. M.A.S. Investments, Inc...................................................... Cayman Islds
2107. Moraine Ltd.................................................................. Cayman Islds
2070. Nanco, Ltd................................................................... Cayman Islds
2108. North Bay Holdings Ltd....................................................... Cayman Islds
2074. Sebastian Holdings, Ltd...................................................... Cayman Islds
2077. Valores Mercantiles Banconti, C.A......................................... Venezuela
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
2109. Summit Inc..................................................................... Cayman Islds
2075. Tanco I, Inc................................................................... Cayman Islds
2078. Venco, B.V..................................................................... Cayman Islds
2079. Continental Bank Participacoes Ltda......................................... Brazil
2081. Continental Partners Group, Inc................................................... Delaware
2082. Continental Servicing Corp........................................................ Delaware
2083. Continental Trust Company......................................................... Illinois
2090. Moorpark Holding, Inc............................................................. Delaware
2089. MWA Holding, Inc.................................................................. Delaware
2091. PDE, Inc.......................................................................... Cayman Islds
2115. Penguin Holding, Inc.............................................................. Delaware
2116. Playa Holding, Inc................................................................ California
2093. Rose Holding, Inc................................................................. Delaware
2119. VT, Inc........................................................................... Alabama
044. Bank of America National Association................................................. U.S.
386. Bank of America New Mexico, N.A...................................................... U.S.
385. Bank of America NT&SA................................................................ U.S.
(dba Security Pacific National Bank)
517. 693327 Ontario Limited (BofA 51.69%; BofA Canada 10.22%).......................... Canada
427. BA ATM Inc........................................................................ Delaware
361. BA Credit Corporation............................................................. Delaware
(dba SPFSSI-SPCC, Inc. and BankAmerica Credit Corporation)
282. BA Investment Services, Inc....................................................... Delaware
316. BA Nominees (Asing) Sdn. Bdh...................................................... Malaysia
264. BA Properties, Inc................................................................ Delaware
436. BA Properties III, Inc............................................................ Delaware
535. BANAM Broadcasting, Inc........................................................... Delaware
266. BancAmerica Auto Finance Corp..................................................... Delaware
(dba Security Pacific Auto Finance)
437. Banco Colombo Americano (BofA 95%; BIFC 5%)....................................... Colombia
526. Bank of America (Jersey) Limited.................................................. Channel Islds
506. Bank of America Australia Limited................................................. Australia
509. BA Australia Limited........................................................... Australia
707. BA Staff Superannuation Limited................................................ Australia
514. Bank of America Canada............................................................ Canada
517. 693327 ONTARIO LIMITED (B OF A CANADA 10.22% B OF A 51.69%).................... CANADA
515. Bank of America Canada Leasing Corporation..................................... Canada
516. Bank of America Canada Securities Corporation.................................. Canada
049. Security Pacific Leasing Canada Ltd. (20%-100% Voting)......................... Canada
050. Security Pacific Properties Ltd................................................ Canada
470. Bank of America International Limited............................................. U.K.
(BofA 37.9%; BA Holding Company 60.3%; BIFC 1.8%)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
473. BA Netting Limited............................................................. U.K.
476. Fenchurch Steamship Corporation................................................ Liberia
440. Bank of America S.A.(BofA 50%; BI 50%)............................................ Spain
441. BA Servicios, S.A. (99.6%)..................................................... Spain
360. BankAmerica Business Credit, Inc.................................................. Delaware
438. BankAmerica International......................................................... U.S.
440. BANK OF AMERICA S.A. (BI 50%; BofA 50%)........................................ SPAIN
441. BA SERVICIOS, S.A. (99.6%).................................................. SPAIN
498. Inversiones of America Corredores de Bolsa Limitada............................ Chile
(BI .01%; BIFC 99.99%)
443. Societe Anonyme Immobiliere.................................................... France
444. BankAmerica International Financial Corporation................................... U.S.
445. BA Asia Limited................................................................ Hong Kong
446. BA Finance (Hong Kong) Limited................................................. Hong Kong
448. BA Finance (Switzerland) Ltd................................................... Switzerland
450. BA Holding Company S.A......................................................... Luxembourg
470. BANK OF AMERICA INTERNATIONAL LIMITED....................................... U.K.
(BA HOLDING COMPANY 60.3%; BofA 37.9%; BIFC 1.8%)
473. BA NETTING LIMITED....................................................... U.K.
476. FENCHURCH STEAMSHIP CORPORATION.......................................... LIBERIA
451. BankAmerica International Trustee (B.V.I.) Limited.......................... Virgin Islds
459. BankAmerica Financial Services Ltd....................................... Virgin Islds
452. BankAmerica Trust and Banking Corporation (Bahamas) Limited................. Bahamas
453. Trunoms, Limited......................................................... Bahamas
454. Wolnoms, Limited......................................................... Bahamas
455. BankAmerica Trust and Banking Corporation (Cayman) Limited.................. Cayman Islds
1360. BankAmerica Fund Management Limited...................................... Cayman Islds
456. Harbour Nominees Ltd..................................................... Cayman Islds
(Nominee company)
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
457. BankAmerica Trust Company (Hong Kong) Limited............................... Hong Kong
458. BATCO Nominees Limited................................................... Hong Kong
(Nominee company)
(BankAmerica Trust Company (Hong Kong) Limited 50%)
(Renfrew Services Limited 50%)
461. Fiduciary Services Limited............................................ Hong Kong
460. ITG Secretaries Limited............................................... Hong Kong
(Nominee company)
(BankAmerica Trust Co. (H.K.)
Limited 50%; BATCO Nominees Limited 50%)
462. Renfrew Services Limited.............................................. Hong Kong
(Nominee company)
(BankAmerica Trust Co. (H.K.)
Limited 50%; BATCO Nominees Limited 50%)
458. BATCO NOMINEES LIMITED............................................. HONG KONG
(NOMINEE COMPANY)
BANKAMERICA TRUST COMPANY (HONG KONG) LIMITED 50%;
RENFREW SERVICES LIMITED 50%)
461. FIDUCIARY SERVICES LIMITED............................................... HONG KONG
(BANKAMERICA TRUST CO. (H.K.)
LIMITED 50%; BATCO NOMINEES LIMITED 50%)
460. ITG SECRETARIES LIMITED.................................................. HONG KONG
(NOMINEE COMPANY)
(BANKAMERICA TRUST CO. (H.K.)
LIMITED 50%; BATCO NOMINEES LIMITED 50%)
462. RENFREW SERVICES LIMITED................................................. HONG KONG
(NOMINEE COMPANY)
(BANKAMERICA TRUST CO. (H.K.)
LIMITED 50%; BATCO NOMINEES LIMITED 50%)
467. BankAmerica Trust Company (Jersey) Limited.................................. Channel Islds
468. BankAmerica Properties (Jersey) Limited.................................. Channel Islds
469. Unihouse Nominees Limited................................................ Channel Islds
(Nominee company)
449. BA Swallow Business Systems Limited............................................ U.K.
479. BamerInvest C.A................................................................ Venezuela
437. BANCO COLOMBO AMERICANO (BIFC 5%; B OF A 95%).................................. COLOMBIA
470. BANK OF AMERICA INTERNATIONAL LIMITED.......................................... U.K.
(BA HOLDING COMPANY 60.3%; BOFA 37.9%; BIFC 1.8%)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
473. BA NETTING LIMITED......................................................... U.K.
476. FENCHURCH STEAMSHIP CORPORATION............................................ LIBERIA
2140. Bank of America Malaysia Berhad............................................... Malaysia
481. BankAmerica Representacao e Servicos Limitada................................. Brazil
1003. BankAmerica Singapore Limited
628. Bunga Orkid, Ltd.............................................................. Bermuda
490. Chile Cellulose Investment Company............................................ Delaware
491. Companhia Internacional de Participacoes E
Empreedimentos (COINTER)................................................... Brazil
492. Multi Banco S.A. (MULTI BANCO)............................................. Brazil
494. Multi-Distribuidora Internacional de Titulos e Valores Ltda............. Brazil
495. Multi-Leasing International Arrendamento Mercantil S.A.................. Brazil
293. Fundo 2000 de Conversao - Capital Estrangeiro................................. Brazil
497. Hedges, S.A................................................................... Argentina
232. Inchroy Credit Corporation Limited (50%) ..................................... Hong Kong
604. Debt Recovery (Hong Kong) Limited (50%).................................... Hong Kong
(Inchroy 50%; SPC Credit Limited 50%)
294. Inversiones Financieras S.P. Chile S.A........................................ Chile
498. INVERSIONES OF AMERICA CORREDORES DE BOLSA LIMITADA........................... CHILE
(BI .01%; BIFC 99.99%)
499. Inversiones y Negocios Fiduciarios S.A........................................ Argentina
301. InvestAmerica S.A. (99%)...................................................... Chile
668. Orion Eight, Inc.............................................................. Delaware
671. Delta FSC Eight, Inc....................................................... U.S. Virgin Islds
669. Orion Nine, Inc............................................................... Delaware
672. Delta FSC Nine, Inc........................................................ U.S. Virgin Islds
670. Orion Ten, Inc................................................................ Delaware
673. Delta FSC Ten, Inc......................................................... U.S. Virgin Islds
592. PT First Indo-American Leasing (50%).......................................... Indonesia
300. SP Chile Energia S.A.......................................................... Chile
233. SPC Credit Limited............................................................ Hong Kong
604. DEBT RECOVERY (HONG KONG) LIMITED (50%).................................... HONG KONG
(INCHROY 50%; SPC CREDIT LIMITED 50%)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
302. Security Pacific Do Brazil S/C Ltda........................................... Brazil
304. Security Pacific Inversiones y Servicios S.A.................................. Chile
306. Security Pacific Overseas Investment Corporation.............................. Delaware
339. Appold Limited............................................................. U.K.
308. Bank of America (Asia) Limited (68.97%).................................... Hong Kong
312. Bank of America (Macau) Limited......................................... Macau
314. Canton Pacific Finance Ltd.............................................. Hong Kong
315. Canton Pacific Fund Managers Ltd........................................ Hong Kong
309. The Bank of Canton (Nominees) Limited................................... Hong Kong
301. INVESTAMERICA S.A.(1%)..................................................... CHILE
323. Security Pacific Australian Assets Limited................................. Australia
336. Security Pacific Financing Services Ltd.................................... U.K.
337. Security Pacific Hong Kong Holdings Limited................................ Hong Kong
308. BANK OF AMERICA (ASIA) LIMITED (30.93%)................................. HONG KONG
501. Titulos Rioplatenses S.A. (OAHI 2%; BIFC 98%)................................. Uruguay
313. BankAmerica Nominees (1993) Pte. Ltd............................................. Singapore
502. BankAmerica Nominees (Hong Kong) Ltd............................................. Hong Kong
503. BankAmerica Nominees Limited (London)............................................ U.K.
(Nominee company)
504. BankAmerica Nominees (Singapore) Pte. Ltd........................................ Singapore
(Nominee company)
250. BankAmerica Ventures ............................................................ California
278. BofA Capital Management, Inc..................................................... Delaware
(dba Intercash Capital Advisors and Pacific Century Advisors, Inc.)
533. Electronic Payments Exchange, Inc................................................ Delaware
(BofA 98%; SFNB 2%)
249. Equitable Deed Company........................................................... California
(dba Continental Auxiliary Company)
534. Golden Gate Participacoes Ltd.................................................... Brazil
252. Grant County Power Company....................................................... Delaware
253. Energy America South East, Inc................................................ Delaware
254. EASE/NMI, Inc.............................................................. Delaware
536. Lease Holding VI, Inc............................................................ Delaware
540. NADRE II, Inc.................................................................... Delaware
541. NAGSA II, Inc.................................................................... Delaware
259. PNB Securities Corporation....................................................... California
258. Pacific Southwest Realty Company................................................. Delaware
265. Security Pacific Asia Limited.................................................... Singapore
268. Security Pacific Bank & Trust Company (Bahamas) Limited.......................... Bahamas
347. Security Pacific Equipment Leasing, Inc.......................................... Delaware
(dba SPELI)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
428. BA Leasing & Capital Corporation............................................. Delaware
1324. BA FSC Holdings, Inc...................................................... Delaware
348. Aerocrane Leasing Ltd.................................................. U.S. Virgin Islds
1323. BA Swiss FSC Holdings, Inc............................................. Delaware
551. Samedan Leasing Ltd................................................. U.S. Virgin Islds
349. First Executive Sands Leasing Corp..................................... California
350. First Executive Leasing Ltd......................................... U.S. Virgin Islds
1406. Knossus, Inc........................................................... Delaware
1409. Knossus FSC, Inc.................................................... U.S. Virgin Islds
549. Marco Polo Leasing Ltd................................................. U.S. Virgin Islds
1436. Nauplia, Inc........................................................... Delaware
1438. Nauplia FSC, Inc.................................................... U.S. Virgin Islds
1407. Phaestos, Inc.......................................................... Delaware
1408. Phaestos FSC, Inc................................................... U.S. Virgin Islds
(50%; OTHER 50% OWNED BY OUTSIDE PARTY)
550. Raffles Leasing Ltd.................................................... U.S. Virgin Islds
1437. Sounion, Inc........................................................... Delaware
1439. Sounion FSC, Inc.................................................... U.S. Virgin Islds
552. Tanah Merah Leasing Ltd................................................ U.S. Virgin Islds
1419. Tiryns, Inc............................................................ Delaware
1420. Tiryns FSC, Inc..................................................... U.S. Virgin Islds
(50%; OTHER 50% OWNED BY OUTSIDE PARTY)
433. Transit Holding, Inc...................................................... Delaware
434. Asset Holding Co. Inc.................................................. Delaware
546. Balmoral Leasing Ltd......................................................... U.S. Virgin Islds
354. SPAA Leasing Corporation..................................................... Delaware
356. SPCC Leasing Corporation..................................................... Delaware
358. Security Pacific Financial Services of California Inc........................... Delaware
343. Security Pacific Trade Finance, Ltd............................................. Channel Islds
269. Security Pacific Trust (Bahamas) Limited........................................ Bahamas
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
542. Special Asset Holding Co........................................................ Delaware
543. Film Asset Holding Co........................................................ Delaware
(BofA 50%; Credit Lyonnais Bank Nederland N.V.,
a nonBankAmerica entity, 50%)
537. Wilco One, Inc.................................................................. Delaware
363. Zedd Investments, Inc........................................................... Delaware
364. Zentac Productions, Inc......................................................... Delaware
387. Bank of America Oregon............................................................. Oregon
(dba Security Pacific Bank Oregon and Oregon Bank)
031. OBTASCO, Inc.................................................................... Oregon
389. Bank of America Texas, N.A......................................................... U.S.
2008. Bank of America Trust Company of Florida, National Association..................... U.S.
139. BankAmerica Financial, Inc......................................................... Delaware
140. BankAmerica Capital Corporation................................................. Delaware
098. Security Pacific Investors, Inc.............................................. Delaware
182. BankAmerica Insurance Group, Inc................................................ Delaware
(dba SP Insurance Administrators)
190. BA Insurance Agency, Inc..................................................... Delaware
184. General Fidelity Insurance Company........................................... California
185. General Fidelity Life Insurance Company...................................... California
043. Security Pacific Southwest Insurance Agency, Inc............................. Arizona
193. Security Pacific Automotive Financial Services Corp............................. Delaware
(dba Security Pacific Auto Finance)
143. Security Pacific Business Credit Inc............................................ Delaware
144. Security Pacific Credit Corporation............................................. Delaware
145. Security Pacific Finance System Incorporated.................................... Delaware
151. BA Financial Management Services, Inc........................................ Delaware
146. Dealers Credit, Inc.......................................................... Delaware
(dba Dealer's Credit Insurance Agency Inc.)
147. First Fenwick Mortgage Corporation........................................... Virginia
148. Security Pacific Consumer Discount Company................................... Pennsylvania
(dba Security Pacific Financial Services of Pennsylvania Inc.)
149. Security Pacific Finance Credit Corp......................................... Delaware
152. Security Pacific Financial Services Inc...................................... Delaware
(dba Security Pacific Manufacturer Funding)
163. Security Pacific Executive/Professional Services Inc...................... Colorado
165. Security Pacific Financial Services of Minnesota Inc...................... Minnesota
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
166. The Midwestern Agency Corporation, Inc.................................... Iowa
154. Security Pacific Financial Services of Nevada Inc......................... Nevada
156. Security Pacific Financial Services of West Virginia Inc.................. West Virginia
160. SPF Advertising Agency, Inc............................................... Kansas
161. Security Pacific Financial Services of Des Moines Inc........................ Iowa
168. Security Pacific Housing Services, Inc.......................................... Delaware
169. Security Pacific Acceptance Corp............................................. Delaware
170. Security Pacific Acceptance Corp. II......................................... Delaware
171. Security Pacific Information Services Corporation............................... Delaware
172. Security Pacific Leasing Corporation............................................ Delaware
173. MCOG Leasing Corp............................................................ California
200. Securilease BV............................................................... Netherlands
174. Security Pacific Capital Leasing Corporation................................. Delaware
194. Security Pacific EuroFinance Holdings, Inc................................... Delaware
195. Security Pacific Equipment Finance (Europe) Inc........................... Delaware
224. Security Pacific Lease Finance (Europe) Inc............................... Delaware
218. Security Pacific International Leasfinance, Inc.............................. Delaware
049. SECURITY PACIFIC LEASING CANADA LTD. (80%)................................... CANADA
177. White Sands Leasing Corporation.............................................. Delaware
178. Pasir Mas Ltd............................................................. U.S. Virgin Islds
179. Windmill Sands Leasing Corporation........................................... Delaware
180. Windmill Leasing, Ltd..................................................... U.S. Virgin Islds
118. BankAmerica National Trust Company................................................. U.S.
380. BankAmerica Realty Services, Inc................................................... Delaware
2001. Continental Equity Capital Corporation............................................. Delaware
2003. Continental Illinois Commercial Corporation........................................ Delaware
2004. Conill Corporation.............................................................. Delaware
2005. Continental Illinois Energy Development Corporation................................ Delaware
2006. Continental Illinois Overseas Finance Corporation N.V.............................. (blank)
2007. Continental Illinois Service Corporation........................................... Delaware
2009. Geone Corporation.................................................................. Delaware
2110. LaSalle Street Natural Resources Corporation....................................... Delaware
390. Nevada First Development Corporation............................................... Nevada
554. Bank of America Nevada.......................................................... Nevada
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
029. Orbanco Real Estate Services, Co................................................... Oregon
394. Overseas Asset Holdings Inc........................................................ Delaware
104. Argentina Investment Holding Limited............................................ Argentina
109. Brazilian Financial Services, Inc............................................... Delaware
110. BFS Participacoes, Ltda...................................................... Brazil
112. Brazilian Tourism Holdings, Inc................................................. Delaware
397. Overseas Lending Corporation.................................................... Delaware
501. TITULOS RIOPLATENSES S.A. (OAHI 2%; BIFC 98%)................................... URUGUAY
400. Western America Financial, Inc.................................................. Delaware
009. Rainier Bancorporation............................................................. Washington
372. Real Estate Collateral Management Company.......................................... Delaware
2010. Repechage Partners Ltd............................................................. Delaware
401. Seafirst Corporation............................................................... Washington
011. Rainier Credit Company.......................................................... Washington
012. Rainier Mortgage Company........................................................ Washington
403. SF Leasing Corporation of Delaware.............................................. Delaware
015. Seafirst Community Service Corporation.......................................... Washington
404. Seafirst Insurance Corporation.................................................. Washington
407. Seafirst Venture Capital Corporation............................................ Washington
408. Seattle-First National Bank..................................................... U.S.
020. Centrum Properties Corporation............................................... Washington
658. DAS Holdings, Inc............................................................ Arizona
533. ELECTRONIC PAYMENTS EXCHANGE, INC. (WASH.)................................... DELAWARE
(SFNB 2%; B OF A 98%)
416. Seafirst America Corporation................................................. Washington
Seafirst Asset Holding Co.
411. Seafirst Auto Leasing, Inc................................................... Washington
027. Seafirst Investment Services, Inc............................................ Washington
413. Seafirst Leasing Company..................................................... Washington
045. Seafirst Merchant Services, Inc.............................................. Delaware
420. Seafirst Properties Corporation.............................................. Washington
421. Seafirst Services Corporation................................................ Washington
023. Security Pacific Premises Bellevue, Inc...................................... Washington
425. Yakima Properties, Incorporated.............................................. Washington
132. Security-First Company............................................................. California
133. Security-First CMO-I Corporation................................................ California
032. Security Pacific Savings Bank...................................................... Washington
042. Security Pacific Southwest Financial Services, Inc................................. Arizona
192. SP International Holdings, Inc..................................................... Delaware
235. Sec Pac Spain S.A............................................................... Spain
199. Security Pacific EuroFinance, Inc............................................... Delaware
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Org Subsidiaries Incorporation
- ---- ------------ ---------------
<C> <S> <C>
204. Securilease, Inc............................................................. Delaware
209. Securilease NV............................................................... Belgium
219. Security Pacific International Leasing GmbH.................................. Germany
1400. SOCIETY NOUVELLE DOLOMITES FRANCAISES
(SPEFI 99.8%; APPOLD HOLDINGS LIMITED .2%)................................... FRANCE
225. Security Pacific Holdings Limited............................................... U.K.
</TABLE>
13
<PAGE>
Exhibit 23
----------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
numbers 33-55225 on Form S-8 filed August 25, 1994; 33-54385 on Form S-3
filed June 30, 1994, as amended by Pre-Effective Amendment No. 1 filed August
17, 1994; 33-53919 on Form S-8 filed June 1, 1994; 33-60648 on Form S-8 filed
April 2, 1993; 33-59892 on Form S-3 filed March 23, 1993, as amended by Pre-
Effective Amendment No. 1 filed May 14, 1993 (to which the prospectus in 33-
54385 also applies); 33-51064 on Form S-3 filed August 20, 1992, as amended by
Pre-Effective Amendment No. 1 filed October 23, 1992 (to which the prospectus in
33-54385 also applies); 33-50124 on Form S-8 filed July 29, 1992; 33-65326 on
Form S-8 filed July 1, 1993; 33-43862 on Form S-3 filed November 12, 1991, as
amended by Pre-Effective Amendment No. 1 filed January 17, 1992 (to which the
prospectus in 33-54385 also applies); 33-36718 on Form S-3 filed September 7,
1990, as amended by Pre-Effective Amendment No. 1 filed November 28, 1990 (to
which the prospectus in 33-54385 also applies); 33-26755 on Form S-3 filed
January 27, 1989, as amended by Pre-Effective Amendment No. 1 filed February 16,
1989 and Post-Effective Amendment No. 1 filed November 3, 1992; 33-23192 on Form
S-3 filed July 21, 1988, as amended by Pre-Effective Amendment No. 1 filed
September 13, 1988 (to which the prospectus in 33-54385 also applies); 33-11516
on Form S-3 filed January 26, 1987, as amended by Amendment No. 1 filed March
12, 1987 and Amendment No. 2 filed April 3, 1987 (to which the prospectus in 33-
36718 also applies); 2-93664 on Form S-3 filed on October 9, 1984, as amended by
Amendment No. 1 filed November 23, 1984; 33-28252 on Form S-8 filed April 19,
1989, as amended by Post-Effective Amendment No. 1 filed August 15, 1989 and
Post-Effective Amendment No. 2 filed February 22, 1990; 33-13368 on Form S-8 (to
which the prospectus in 33-28252 also applies); 33-29646 on Form S-8 filed June
30, 1989, as amended by Post-Effective Amendment No. 1 filed August 3, 1990; and
2-82873, 2-71577, 2-64201, 2-58595, 2-57423, 2-53068, 2-47747, 2-32651 and 33-
14135 on Form S-8 (to all of which the prospectus in 33-29646 also applies), of
our report dated January 17, 1995, with respect to the consolidated financial
statements of BankAmerica Corporation incorporated by reference in this Annual
Report on Form 10-K for the year ended December 31, 1994.
/s/ ERNST & YOUNG LLP
--------------------------------
Ernst & Young LLP
San Francisco, California
March 15, 1995
<PAGE>
Exhibit 24
----------
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
------------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1994, and any amendments.
Dated: February 6, 1995
/s/ Joseph F. Alibrandi
------------------------------
Joseph F. Alibrandi
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 8, 1995
/s/Jill E. Barad
------------------------------
Jill E. Barad
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 5, 1995
/s/ Peter B. Bedford
------------------------------
Peter B. Bedford
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 6, 1995
/s/ Andrew F. Brimmer
------------------------------
Andrew F. Brimmer
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 3, 1995
/s/ Richard A. Clarke
------------------------------
Richard A. Clarke
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as the Vice Chairman of the Board and the Chief
Financial Officer of BankAmerica Corporation and file with the Securities and
Exchange Commission the Corporation's Form 10-K annual report for 1994, and any
amendments.
Dated: February 6, 1995
/s/ Lewis W. Coleman
------------------------------
Lewis W. Coleman
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 2, 1995
/s/ Timm F. Crull
------------------------------
Timm F. Crull
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 6, 1995
/s/ Kathleen Feldstein
------------------------------
Kathleen Feldstein
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 3, 1995
/s/ Donald E. Guinn
------------------------------
Donald E. Guinn
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 6, 1995
/s/ Philip M. Hawley
------------------------------
Philip M. Hawley
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 6, 1995
/s/ Frank L. Hope, Jr.
------------------------------
Frank L. Hope, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 3, 1995
/s/ Ignacio E. Lozano, Jr.
------------------------------
Ignacio E. Lozano, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 4, 1995
/s/ Cornell C. Maier
------------------------------
Cornell C. Maier
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 4, 1995
/s/ Walter E. Massey
------------------------------
Walter E. Massey
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 6, 1995
/s/ John M. Richman
------------------------------
John M. Richman
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as the Chairman of the Board and Chief Executive
Officer of BankAmerica Corporation and file with the Securities and Exchange
Commission the Corporation's Form 10-K annual report for 1994, and any
amendments.
Dated: February 5, 1995
/s/ Richard M. Rosenberg
------------------------------
Richard M. Rosenberg
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as a Director of BankAmerica Corporation and file
with the Securities and Exchange Commission the Corporation's Form 10-K annual
report for 1994, and any amendments.
Dated: February 3, 1995
/s/ A. Michael Spence
------------------------------
A. Michael Spence
<PAGE>
POWER OF ATTORNEY
-----------------
I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL
SOROKIN, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me as an Executive Vice President and the Chief
Accounting Officer of BankAmerica Corporation and file with the Securities and
Exchange Commission the Corporation's Form 10-K annual report for 1994, and any
amendments.
Dated: February 9, 1995
/s/ James H. Williams
------------------------------
James H. Williams
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
CONTAINS SUMMARY FINANCIAL INFORMATION WHICH IS INCORPORATED BY REFERENCE FROM
THE 1994 ANNUAL REPORT TO SHAREHOLDERS AND EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES, INTEREST,
AND AVERAGE RATES, NONPERFORMING ASSETS, AND ANNUAL CREDIT LOSS EXPERIENCE, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT AND
FORM 10-K FILING.
Any item provided in the schedule, in accordance with the rules governing the
schedule, will not be subject to liability under the federal securities laws,
except to the extent that the financial statements and other information from
which the data was extracted violates the federal securities laws. Also,
pursuant to Item 601(c)(1)(iv) of Regulation S-K promulgated by the Securities
and Exchange Commission (SEC), the schedule shall not be deemed filed for
purposes of Section 11 of the Securities Act of 1933, Section 18 of the Exchange
Act of 1934 and Section 323 of the Trust Indenture Act, or otherwise be subject
to the liabilities of such sections, nor shall it be deemed a part of any
registration statement to which it relates.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 13,578
<INT-BEARING-DEPOSITS> 6,371
<FED-FUNDS-SOLD> 5,899
<TRADING-ASSETS> 6,941
<INVESTMENTS-HELD-FOR-SALE> 9,849
<INVESTMENTS-CARRYING> 8,167
<INVESTMENTS-MARKET> 7,292
<LOANS> 140,912
<ALLOWANCE> 3,690
<TOTAL-ASSETS> 215,475
<DEPOSITS> 154,394
<SHORT-TERM> 13,841
<LIABILITIES-OTHER> 12,921
<LONG-TERM> 15,428<F1>
<COMMON> 581
0
3,068
<OTHER-SE> 15,242
<TOTAL-LIABILITIES-AND-EQUITY> 215,475
<INTEREST-LOAN> 9,806
<INTEREST-INVEST> 1,374
<INTEREST-OTHER> 1,204<F2>
<INTEREST-TOTAL> 12,384
<INTEREST-DEPOSIT> 3,337
<INTEREST-EXPENSE> 4,842
<INTEREST-INCOME-NET> 7,542
<LOAN-LOSSES> 460
<SECURITIES-GAINS> 24
<EXPENSE-OTHER> 7,512
<INCOME-PRETAX> 3,717
<INCOME-PRE-EXTRAORDINARY> 3,717
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,176
<EPS-PRIMARY> 5.36
<EPS-DILUTED> 5.33
<YIELD-ACTUAL> 4.50
<LOANS-NON> 2,079
<LOANS-PAST> 436
<LOANS-TROUBLED> 97
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,508
<CHARGE-OFFS> 988
<RECOVERIES> 518
<ALLOWANCE-CLOSE> 3,690
<ALLOWANCE-DOMESTIC> 2,105
<ALLOWANCE-FOREIGN> 391
<ALLOWANCE-UNALLOCATED> 1,194
<FN>
<F1>Includes subordinated capital notes of $605 million.
<F2>Includes interest income on trading account assets of $473 million.
</FN>
</TABLE>
