<PAGE>
BankAmerica Corporation Analytical Review and Form 10-Q
[Bank America Logo goes here]
1 9 9 6
2nd Q u a r t e r
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7377
Exact name of registrant as specified in its charter:
BankAmerica Corporation
State or other jurisdiction of incorporation or organization:
Delaware
I.R.S. Employer Identification Number:
94-1681731
Address of principal executive offices:
Bank of America Center
San Francisco, California 94104
Registrant's telephone number, including area code:
415-622-3530
Former name, former address, and former fiscal year, if changed since last
report:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1.5625 par value ------ 359,893,278 shares outstanding on
June 30, 1996./*/
/*/ In addition, 27,393,009 shares were held in treasury.
- --------------------------------------------------------------------------------
This document serves both as an analytical review for analysts, shareholders,
and other interested persons, and as the quarterly report on Form 10-Q of
BankAmerica Corporation to the Securities and Exchange Commission, which has
taken no action to approve or disapprove the report or to pass upon its
accuracy or adequacy. Additionally, this document is to be read in conjunction
with the consolidated financial statements and notes thereto included in
BankAmerica Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995.
<PAGE>
CONTENTS
================================================================================
PART I Item 1.
FINANCIAL Financial Statements:
INFORMATION Consolidated Statement of Operations.................... 2
Consolidated Balance Sheet.............................. 3
Consolidated Statement of Cash Flows.................... 4
Consolidated Statement of Changes in Stockholders'
Equity................................................. 5
Notes to Consolidated Financial Statements.............. 6
Item 2.
Management's Discussion and Analysis:
Highlights.............................................. 14
Business Sectors........................................ 16
Results of Operations:
Net Interest Income................................... 19
Noninterest Income.................................... 22
Noninterest Expense................................... 23
Income Taxes.......................................... 24
Operating and Financial Leverage...................... 25
Balance Sheet Review.................................... 26
Credit Risk Management:
Loan Portfolio Management............................. 28
Domestic Consumer Loans............................. 29
Foreign Loans....................................... 31
Emerging Market Exposure.............................. 31
Allowance for Credit Losses........................... 32
Nonperforming Assets.................................. 34
Foreign Exchange and Derivatives Contracts.............. 37
Interest Rate Risk Management........................... 38
Funding and Capital:
Liquidity Review...................................... 40
Capital Management.................................... 40
- --------------------------------------------------------------------------------
PART II Item 4.
OTHER INFORMATION Submission of Matters to a Vote of Security Holders....... 42
Item 6.
Exhibits and Reports on Form 8-K.......................... 43
Signatures................................................ 44
================================================================================
1
<PAGE>
FINANCIAL STATEMENTS
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
====================================================================================================================================
1996 1995 SIX MONTHS ENDED
----------------- ----------------------------- JUNE 30
SECOND FIRST FOURTH THIRD SECOND ----------------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $3,307 $3,297 $3,287 $3,244 $3,172 $6,604 $6,176
Interest-bearing deposits in banks 96 117 119 115 120 213 232
Federal funds sold 7 6 5 10 9 13 17
Securities purchased under resale agreements 176 155 147 160 176 331 311
Trading account assets 247 216 200 189 189 463 352
Available-for-sale and held-to-maturity securities 293 298 313 326 323 591 637
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 4,126 4,089 4,071 4,044 3,989 8,215 7,725
INTEREST EXPENSE
Deposits 1,307 1,314 1,307 1,262 1,240 2,621 2,354
Federal funds purchased 20 22 35 27 30 42 69
Securities sold under repurchase agreements 176 163 147 154 150 339 280
Other short-term borrowings 208 178 168 162 168 386 300
Long-term debt 249 254 265 272 266 503 530
Subordinated capital notes 7 12 12 11 12 19 23
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 1,967 1,943 1,934 1,888 1,866 3,910 3,556
- -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,159 2,146 2,137 2,156 2,123 4,305 4,169
PROVISION FOR CREDIT LOSSES 250 180 130 110 100 430 200
- -----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,909 1,966 2,007 2,046 2,023 3,875 3,969
NONINTEREST INCOME
Deposit account fees 346 344 334 329 323 690 640
Credit card fees 90 79 84 82 74 169 149
Trust fees 56 63 72 72 78 119 156
Other fees and commissions 333 320 304 323 342 653 642
Trading income 178 165 115 132 151 343 280
Venture capital activities 112 110 93 54 103 222 190
Net gain (loss) on sales of subsidiaries and operations 83 51 42 - (17) 134 (17)
Net gain on sales of assets 21 49 29 27 14 70 15
Net gain on available-for-sale securities 4 30 7 17 9 34 10
Other income 97 63 78 121 61 160 166
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 1,320 1,274 1,158 1,157 1,138 2,594 2,231
NONINTEREST EXPENSE
Salaries 814 821 819 839 842 1,635 1,651
Employee benefits 213 202 147 195 183 415 376
Occupancy 186 190 198 185 182 376 355
Equipment 175 163 169 170 165 338 324
Amortization of intangibles 93 95 99 110 110 188 219
Communications 90 92 93 89 91 182 177
Regulatory fees and related expenses 13 13 23 7 74 26 146
Other expense 413 437 418 398 406 850 794
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 1,997 2,013 1,966 1,993 2,053 4,010 4,042
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,232 1,227 1,199 1,210 1,108 2,459 2,158
PROVISION FOR INCOME TAXES 509 507 495 506 463 1,016 902
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 723 $ 720 $ 704 $ 704 $ 645 $1,443 $1,256
- -----------------------------------------------------------=========================================================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 1.84 $ 1.79 $ 1.74 $ 1.72 $ 1.56 $ 3.63 $ 3.03
EARNINGS PER COMMON SHARE--ASSUMING FULL DILUTION 1.84 1.79 1.74 1.72 1.55 3.63 3.00
DIVIDENDS DECLARED PER COMMON SHARE 0.54 0.54 0.46 0.46 0.46 1.08 0.92
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
===================================================================================================================================
1996 1995
----------------------- --------------------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 12,478 $ 12,870 $ 14,312 $ 12,532 $ 12,656
Interest-bearing deposits in banks 5,194 5,585 5,761 5,832 5,620
Federal funds sold 276 143 721 229 467
Securities purchased under resale agreements 7,001 6,198 4,962 6,811 6,131
Trading account assets 12,633 11,215 9,516 9,883 8,133
Available-for-sale securities 10,964 11,287 12,043 9,979 9,868
Held-to-maturity securities 4,280 4,523 4,656 6,927 7,186
Loans 160,640 156,155 155,373 151,212 148,766
Less: Allowance for credit losses 3,495 3,496 3,554 3,655 3,695
- -----------------------------------------------------------------------------------------------------------------------------------
Net loans 157,145 152,659 151,819 147,557 145,071
Customers' acceptance liability 2,837 2,761 2,295 2,268 2,076
Accrued interest receivable 1,451 1,469 1,458 1,448 1,335
Goodwill, net 4,066 4,115 4,192 4,263 4,303
Identifiable intangibles, net 1,708 1,753 1,806 2,134 2,172
Unrealized gains on off-balance-sheet instruments 7,297 7,551 7,801 8,843 9,323
Premises and equipment, net 3,980 4,010 3,985 4,011 4,009
Other assets 7,531 8,104 7,119 7,209 8,249
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $238,841 $234,243 $232,446 $229,926 $226,599
- -------------------------------------------------------------======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Interest-bearing $ 83,954 $ 84,314 $ 84,097 $ 84,345 $ 85,573
Noninterest-bearing 34,737 34,570 36,820 34,231 34,458
Deposits in foreign offices:
Interest-bearing 41,444 40,127 37,886 35,525 33,985
Noninterest-bearing 1,710 1,506 1,691 1,536 1,764
- -----------------------------------------------------------------------------------------------------------------------------------
Total deposits 161,845 160,517 160,494 155,637 155,780
Federal funds purchased 2,740 2,125 5,160 3,110 2,274
Securities sold under repurchase agreements 8,861 7,640 6,383 7,187 5,833
Other short-term borrowings 14,530 11,523 7,627 10,289 9,730
Acceptances outstanding 2,837 2,761 2,295 2,268 2,076
Accrued interest payable 833 842 848 811 706
Unrealized losses on off-balance-sheet instruments 7,310 7,719 8,227 9,547 9,939
Other liabilities 4,824 5,875 5,862 5,334 4,563
Long-term debt 14,597 14,718 14,723 15,277 15,473
Subordinated capital notes 356 356 605 605 605
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 218,733 214,076 212,224 210,065 206,979
STOCKHOLDERS' EQUITY
Preferred stock 2,242 2,423 2,623 2,623 2,723
Common stock 605 604 602 600 598
Additional paid-in capital 8,439 8,384 8,328 8,271 8,213
Retained earnings 10,544 10,067 9,606 9,133 8,663
Net unrealized gain (loss) on available-for-sale securities (79) (56) 1 (51) (69)
Common stock in treasury, at cost (1,643) (1,255) (938) (715) (508)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 20,108 20,167 20,222 19,861 19,620
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $238,841 $234,243 $232,446 $229,926 $226,599
- -------------------------------------------------------------======================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
===================================================================================================================================
SIX MONTHS ENDED JUNE 30
------------------------
(IN MILLIONS) 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,443 $ 1,256
Adjustments to net income to arrive at net cash provided (used) by operating
activities:
Provision for credit losses 430 200
Net gain on sales of assets and subsidiaries and operations (204) 2
Net amortization of loan fees and discounts (38) (53)
Depreciation and amortization of premises and equipment 290 266
Amortization of intangibles 188 219
Provision for deferred income taxes 168 8
Change in assets and liabilities net of effects from acquisitions
and pending dispositions:
Decrease in accrued interest receivable 6 114
Decrease in accrued interest payable (13) (125)
Increase in trading account assets (3,117) (1,192)
Increase (decrease) in current income taxes payable (36) 242
Deferred fees received from lending activities 76 70
Net cash provided (used) by loans held for sale 354 (452)
Other, net (1,381) (256)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (1,834) 299
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales proceeds 541 1,462
Maturities, prepayments, and calls 3,091 2,530
Purchases (2,602) (3,416)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 661 1,392
Purchases (320) (261)
Proceeds from sales of loans 914 712
Purchases of loans (968) (772)
Purchases of premises and equipment (328) (324)
Proceeds from sales of other real estate owned 265 293
Net cash provided (used) by:
Loan originations and principal collections (7,266) (7,591)
Interest-bearing deposits in banks 566 612
Federal funds sold 445 173
Securities purchased under resale agreements (2,039) (872)
Cash used by acquisitions (54) (2)
Other, net 291 112
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (6,803) (5,952)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,660 1,887
Principal payments and retirements of long-term debt and subordinated capital
notes (1,742) (1,228)
Proceeds from issuance of common stock 83 75
Preferred stock repurchased (391) (97)
Treasury stock purchased (693) (474)
Common stock dividends (393) (344)
Preferred stock dividends (98) (118)
Net cash provided (used) by:
Deposits 1,410 1,385
Federal funds purchased (2,420) (1,009)
Securities sold under repurchase agreements 2,478 328
Other short-term borrowings 6,903 4,385
Other, net - (81)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,797 4,709
Effect of exchange rate changes on cash and due from banks 6 22
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and due from banks (1,834) (922)
Cash and due from banks at beginning of period 14,312 13,578
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 12,478 $ 12,656
- ---------------------------------------------------------------------------------------------------------==========================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
===================================================================================================================================
1996 1995
----------------- -----------------------------
SECOND FIRST FOURTH THIRD SECOND
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of quarter $ 2,423 $ 2,623 $ 2,623 $ 2,723 $ 3,068
Preferred stock repurchased (181) (200) - (100) (97)
Convertible preferred stock converted to common stock - - - - (248)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 2,242 2,423 2,623 2,623 2,723
COMMON STOCK
Balance, beginning of quarter 604 602 600 598 587
Common stock issued 1 2 2 2 11
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 605 604 602 600 598
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of quarter 8,384 8,328 8,271 8,213 7,912
Common stock issued 55 74 57 67 301
Preferred stock repurchased - (18) - (9) -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 8,439 8,384 8,328 8,271 8,213
RETAINED EARNINGS
Balance, beginning of quarter 10,067 9,606 9,133 8,663 8,230
Net income 723 720 704 704 645
Common stock dividends (195) (198) (169) (171) (172)
Preferred stock dividends (45) (53) (53) (56) (56)
Foreign currency translation adjustments,
net of related income taxes (6) (8) (9) (7) 16
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 10,544 10,067 9,606 9,133 8,663
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES
Balance, beginning of quarter (56) 1 (51) (69) (275)
Valuation adjustments, net of related income taxes (23) (57) 52 18 206
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter (79) (56) 1 (51) (69)
COMMON STOCK IN TREASURY, AT COST
Balance, beginning of quarter (1,255) (938) (715) (508) (296)
Treasury stock purchased (385) (316) (222) (230) (210)
Treasury stock issued 1 - - 29 -
Other (4) (1) (1) (6) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter (1,643) (1,255) (938) (715) (508)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 20,108 $ 20,167 $ 20,222 $ 19,861 $ 19,620
- -------------------------------------------------------------------------------====================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. The unaudited consolidated financial statements of
FINANCIAL STATEMENT BankAmerica Corporation and subsidiaries (BAC) are
PRESENTATION prepared in conformity with generally accepted accounting
principles for Interim financial information, the
instructions to Form 10-Q, and Rule 10-01 of Regulation S-
X. In the opinion of management, all adjustments necessary
for a fair presentation of the financial position and
results of operations for the periods presented have been
included. All such adjustments are of a normal recurring
nature. These unaudited consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements included in BankAmerica
Corporation's (the Parent) Annual Report on Form 10-K for
the year ended December 31, 1995.
The unaudited consolidated financial statements of BAC
include the accounts of the Parent and companies in which
more than 50 percent of the voting stock is owned directly
or indirectly by the Parent, including Bank of America
NT&SA (the Bank), Bank of America NW, National Association
(formerly Seattle-First National Bank), Bank of America
Illinois, and other banking and nonbanking subsidiaries.
The revenues, expenses, assets, and liabilities of the
subsidiaries are included in the respective line items in
the unaudited consolidated financial statements after
elimination of intercompany accounts and transactions.
Certain amounts in prior periods have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
NOTE 2. During the six-month periods ended June 30, 1996 and 1995,
SUPPLEMENTAL BAC made interest payments on deposits and other interest-
DISCLOSURE OF CASH bearing liabilities of $3,923 million and $3,681 million,
FLOW INFORMATION respectively, and made net income tax payments of $884
million and $624 million, respectively.
During the six-month periods ended June 30, 1996 and 1995,
there were foreclosures of loans with carrying values of
$242 million and $235 million, respectively. In addition,
loans made to facilitate the sale of other real estate
owned (OREO) totaled $4 million and $3 million,
respectively.
- --------------------------------------------------------------------------------
NOTE 3. During the six-month period ended June 30, 1996, BAC sold
AVAILABLE-FOR-SALE available-for-sale securities for aggregate proceeds
AND HELD-TO-MATURITY of $541 million, resulting in gross realized gains of
SECURITIES $56 million and gross realized losses of $22 million.
During the six-month period ended June 30, 1995, BAC sold
available-for-sale securities for aggregate proceeds of
$1,462 million, resulting in gross realized gains of $88
million and gross realized losses of $78 million.
The fair values and amortized costs of available-for-sale
and held-to-maturity securities were as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
SECURITIES SECURITIES
------------------ -----------------
FAIR AMORTIZED FAIR AMORTIZED
(IN MILLIONS) VALUE COST VALUE COST
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1996 $10,964 $11,094 $3,886 $4,280
March 31, 1996 11,287 11,380 4,143 4,523
December 31, 1995 12,043 12,042 4,332 4,656
September 30, 1995 9,979 10,064 6,444 6,927
June 30, 1995 9,868 9,983 6,725 7,186
</TABLE>
6
<PAGE>
================================================================================
During the six-month periods ended June 30, 1996 and 1995,
trading income included net unrealized holding gains on
trading securities of $16 million and $42 million,
respectively. These amounts exclude the net unrealized
trading results of the Parent's securities broker and
dealer subsidiaries.
During the fourth quarter of 1995, the Financial Accounting
Standards Board allowed financial statement preparers a
one-time opportunity to reassess the classifications of
securities accounted for under Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." As a
result of this reassessment, BAC reclassified $2.1 billion
of held-to-maturity securities to available-for-sale
securities. In connection with this reclassification, gross
unrealized gains of $28 million and gross unrealized losses
of $42 million were recorded in available-for-sale
securities and in stockholders' equity (on a net-of-tax
basis).
- --------------------------------------------------------------------------------
NOTE 4. During the first quarter of 1996, BAC's Board of Directors
STOCK REPURCHASE authorized a new stock repurchase program. This new
PROGRAM program enables the Parent to buy back up to $2.0 billion
of its common stock by the end of 1997. The new program,
which replaces the stock repurchase program announced in
February 1995, also enables the Parent to buy back or
redeem up to $1.0 billion of its preferred stock by the end
of 1997. During the six months ended June 30, 1996, the
Parent repurchased 9.8 million shares of its common stock
under the current and pre-existing stock repurchase
programs at an average per-share price of $71.89. These
transactions reduced stockholders' equity by $701 million,
of which $8 million was accrued at June 30, 1996. The
remaining buyback and redemption authorities for common
stock and preferred stock under the current program totaled
$1.5 billion and $0.8 billion, respectively, at June 30,
1996.
- --------------------------------------------------------------------------------
NOTE 5. On March 31, 1996, the Parent redeemed all 400,000
PREFERRED STOCK outstanding shares of its 11% Preferred Stock, Series J
(Preferred Stock, Series J) under terms of a stock
repurchase program that was replaced during the first
quarter of 1996. This transaction reduced stockholders'
equity by $218 million. The shares were represented by 8
million depositary shares, each corresponding to a one-
twentieth interest in a share of Preferred Stock, Series J.
The redemption price was $26.375 per depositary share. The
quarterly dividend of $0.6875 per depositary share was paid
on March 31, 1996 to holders of record on March 15, 1996.
In addition, on April 16, 1996, the Parent redeemed all
7,250,000 outstanding shares of its 9 5/8% Cumulative
Preferred Stock, Series F, reducing stockholders' equity by
$181 million. The redemption price was equal to the stated
value of $25.00 per share, plus dividends of $0.30747 per
share accrued and unpaid to the redemption date.
7
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
================================================================================
NOTE 6. The following is a summary of the components of income tax
INCOME TAXES expense:
<TABLE>
<CAPTION>
1996 1995 SIX MONTHS ENDED
---------------- ------------------------- JUNE 30
SECOND FIRST FOURTH THIRD SECOND ----------------
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES
Federal $361 $362 $355 $ 354 $331 $ 723 $ 650
State and local 95 93 74 91 86 188 169
Foreign 53 52 66 61 46 105 83
--------------------------------------------------------------------------------------------
$509 $507 $495 $ 506 $463 $1,016 $ 902
----------------------------------==========================================================
</TABLE>
BAC's estimated annual effective income tax rates for the
three-month periods ended June 30, 1996 and 1995 were 41.3
percent and 41.8 percent, respectively. These rates are
higher than the federal statutory tax rate of 35.0 percent
due principally to state income taxes.
- --------------------------------------------------------------------------------
NOTE 7. Earnings per common share have been computed based on the
EARNINGS PER following:
COMMON SHARE
<TABLE>
<CAPTION>
1996 1995 SIX MONTHS ENDED
----------------- --------------------------- JUNE 30
(DOLLAR AMOUNTS IN MILLIONS, SECOND FIRST FOURTH THIRD SECOND ----------------
SHARE AMOUNTS IN THOUSANDS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income applicable to
common stock $ 678 $ 667 $ 651 $ 648 $ 589 $ 1,345 $ 1,138
Average number of common
shares outstanding 361,858 366,067 368,300 371,871 371,992 363,962 371,878
Average number of common
and common equivalent
shares outstanding 368,543 372,385 374,283 376,643 376,213 370,464 375,649
Average number of common
shares outstanding --
assuming full dilution 368,591 373,548 374,669 377,421 379,182 371,069 380,162
</TABLE>
- --------------------------------------------------------------------------------
NOTE 8. In the ordinary course of business, BAC enters into various
OFF-BALANCE-SHEET types of transactions that involve credit-related
TRANSACTIONS 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.
CREDIT-RELATED FINANCIAL INSTRUMENTS
The table on page 9 is a summary of the contractual amounts
of each significant class of credit-related financial
instruments outstanding. These amounts represent the
amounts at risk should the contract be fully drawn upon,
the client default, and the value of any existing
collateral become worthless.
8
<PAGE>
================================================================================
<TABLE>
<CAPTION>
1996 1995
------------------ ----------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $36,978 $35,982 $34,465 $34,445 $32,176
Other commitments to
extend credit/a/ 97,954 95,790 94,524 95,517 92,896
Standby letters of credit
and financial guarantees/b/ 17,121 16,344 16,336 15,675 15,598
Commercial letters of credit 4,596 4,236 4,128 4,342 4,650
---------------------------------------------------------------------------------------
</TABLE>
/a/ Represents agreements to extend credit to customers 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.
/b/ Net of participations sold of $2,619 million at June
30, 1996, $2,619 million at March 31, 1996, $2,383
million at December 31, 1995, $2,607 million at
September 30, 1995, and $2,238 million at June 30,
1995.
FOREIGN EXCHANGE AND DERIVATIVES CONTRACTS
The tables on page 10 summarize 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. These tables should be read
in conjunction with the descriptions of such products and
their risks included on pages 27-29, 38-41, and 70-79 of
BAC's 1995 Annual Report to Shareholders.
9
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
------------------------------------------------------------------------------------------------------
JUNE 30, 1996 DECEMBER 31, 1995
----------------------------------- -------------------------------------
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 $ 422,844 $ 7,137 $2,731/c/ $418,240 $ 8,647 $2,787/c/
Futures and forward rate
contracts:
Commitments to purchase 183,813 111 111 160,126 9 9
Commitments to sell 207,823 197 197 190,538 381 381
Written options 36,232 -/d/ -/d/ 35,217 -/d/ -/d/
Purchased options 46,330 393 282 45,351 494 390
-------------------------------------------------------------------------------------------------------
897,042 7,838 3,321 849,472 9,531 3,567
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures
contracts 769,945 8,962 2,564 592,441 8,781 2,553
Written options 28,316 -/d/ -/d/ 21,095 -/d/ -/d/
Purchased options 26,275 378 261 20,244 395 268
Currency swaps 24,681 1,176 1,108 23,085 1,517 1,403
-------------------------------------------------------------------------------------------------------
849,217 10,516 3,933 656,865 10,693 4,224
Stock index options and
commodity contracts 1,066 44 43 878 12 10
-------------------------------------------------------------------------------------------------------
$1,747,325/e/ $18,398 $7,297 $1,507,215/f/ $20,236 $7,801
----------------------------===========================================================================
</TABLE>
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
--------------------------------------------------------------------------------------------
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- ----------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/a/ AMOUNT RISK/a/
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $ 36,092 $187 $33,543 $155
Futures and forward rate
contracts 58,158 - 28,702 -
Purchased options 8,700 51 9,200 60
--------------------------------------------------------------------------------------------
102,950 238 71,445 215
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures
contracts 1,910 - 1,900 -
Currency swaps 535 - 430 61
--------------------------------------------------------------------------------------------
2,445 - 2,330 61
--------------------------------------------------------------------------------------------
$105,395/e/ $238 $73,775/f/ $276
------------------------------------========================================================
</TABLE>
/a/ Excluding the effects of legally enforceable master
netting agreements.
/b/ Including the effects of legally enforceable master
netting agreements.
/c/ Including the effects 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 $14.5 billion and $0.7 billion,
respectively, of intercompany hedging-related
contracts. Foreign exchange contracts in both the
trading and asset and liability management portfolios
include $2.2 billion of intercompany hedging-related
contracts.
/f/ Interest rate swaps and interest rate options in both
the trading and asset and liability management
portfolios include $14.2 billion and $0.7 billion,
respectively, of intercompany hedging-related
contracts. Foreign exchange contracts in both the
trading and asset and liability management portfolios
include $1.9 billion of intercompany hedging-related
contracts.
For most contracts, notional amounts are used solely to
determine cash flows to be exchanged. However, certain
foreign exchange contracts are designed for principal
amounts to be exchanged on a common settlement date. The
notional or contract amounts associated with foreign
exchange and derivative financial instruments are not
recorded as assets or liabilities on the balance sheet and
do not represent the potential for gain or loss associated
with such transactions. Credit risk represents BAC's
potential loss on these transactions if all counterparties
failed to perform according to the terms of the contract
10
<PAGE>
================================================================================
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.
The following tables summarize the average and period-end
fair values of each significant class of foreign exchange
and derivative contract outstanding in BAC's trading
portfolio and the period-end fair values for each
significant class of foreign exchange and derivative
contract in BAC's asset and liability management portfolio.
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. These amounts include the effects of master
netting agreements.
<TABLE>
<CAPTION>
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
--------------------------------------------------------------------------------------------
JUNE 30, 1996 DECEMBER 31, 1995
----------------------------- ---------------------------
AVERAGE AVERAGE
FAIR VALUE FAIR VALUE
FOR THE PERIOD END FOR THE PERIOD END
(IN MILLIONS) QUARTER ENDED/a/ FAIR VALUE YEAR ENDED/a/ FAIR VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps:
Assets $ 3,006 $ 2,731 $ 2,522 $ 2,787
Liabilities (2,709) (2,139) (2,258) (2,605)
Futures and forward rate contracts:
Assets 358 308 319 390
Liabilities (337) (303) (291) (373)
Written options (243) (214) (222) (237)
Purchased options 292 282 263 390
--------------------------------------------------------------------------------------------
367 665 333 352
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts:
Assets 2,649 2,564 3,979 2,553
Liabilities (3,029) (2,949) (4,429) (3,048)
Written options (394) (329) (431) (355)
Purchased options 324 261 403 268
Currency swaps:
Assets 1,178 1,108 1,762 1,403
Liabilities (1,462) (1,361) (2,062) (1,600)
--------------------------------------------------------------------------------------------
(734) (706) (778) (779)
Stock index options and commodity
contracts:
Assets 18 43 13 10
Liabilities (16) (15) (8) (9)
--------------------------------------------------------------------------------------------
2 28 5 1
--------------------------------------------------------------------------------------------
$(365) $ (13) $ (440) $ (426)
-----------------------------------------===================================================
</TABLE>
<TABLE>
<CAPTION>
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR ASSET AND
LIABILITY MANAGEMENT PURPOSES
-------------------------------------------------------------------------------------
(IN MILLIONS) JUNE 30, 1996 DECEMBER 31, 1995
-------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $(531) $ 33
Futures and forward rate contracts 14 56
Purchased options (4) 3
-------------------------------------------------------------------------------------
(521) 92
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts (35) -
Currency swaps - 47
-------------------------------------------------------------------------------------
(35) 47
-------------------------------------------------------------------------------------
$(556) $139
----------------------------------------------------=================================
</TABLE>
/a/ Average fair value amounts are calculated based on monthly balances.
11
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
================================================================================
TRADING ACTIVITIES
Trading 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 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 are considered in evaluating the overall
profitability of those activities.
<TABLE>
<CAPTION>
TRADING-RELATED INCOME
----------------------------------------------------------------------------------------------------------------
1996 1995 SIX MONTHS ENDED
------------------- ---------------------------- JUNE 30
SECOND FIRST FOURTH THIRD SECOND -----------------
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRADING INCOME
Interest rate $ 8 $ 12 $ 20 $ 13 $ 9 $ 20 $ 34
Foreign exchange 90 98 66 74 80 188 163
Debt instruments 80 55 29 45 62 135 83
----------------------------------------------------------------------------------------------------------------
$178 $165 $115 $132 $151 $343 $280
------------------------------------============================================================================
OTHER TRADING-RELATED INCOME/a/
Interest rate $ 7 $ 6 $ 18 $ 7 $ 2 $ 13 5
Foreign exchange 7 6 9 10 7 13 9
Debt instruments 59 44 38 37 49 103 77
----------------------------------------------------------------------------------------------------------------
$ 73 $ 56 $ 65 $ 54 $ 58 $129 $ 91
------------------------------------============================================================================
</TABLE>
/a/ Primarily includes the net interest revenue and expense
associated with these contracts.
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-related income from
interest rate instruments primarily includes results from
transactions using interest rate and currency swaps, 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 the results from transactions using foreign exchange
spot, forward, futures, and option contracts. Trading-related
income from debt instruments primarily represents the results
from trading activities in various debt securities, including
U.S. government and government agency securities, foreign
government securities, mortgage-backed securities, municipal
bonds, and corporate debt.
12
<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. For a detailed description of
BAC's asset and liability management objectives and
strategies used to achieve those objectives, refer to page 75
of BAC's 1995 Annual Report to Shareholders.
The expected maturities and weighted average interest rates
associated with BAC's asset and liability management interest
rate swap portfolio at June 30, 1996 were not significantly
different from those at year-end 1995.
SECURITIES LENDING
BAC has substantially divested its securities lending
portfolio following its decision in 1995 to exit the
institutional trust and securities services business.
Securities lending transactions are conducted primarily for
institutional trust customers and, at times, these customers
are indemnified 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 lent.
The following summarizes indemnified securities lending
transactions and the associated collateral:
<TABLE>
<CAPTION>
1996 1995
---------------------- -------------------------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Indemnified securities lent $ 73 $ 134 $ 207 $ 894 $4,220
Associated collateral 75 135 209 909 4,321
------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9. Congress is currently considering several proposals that
SPECIAL DEPOSIT would recapitalize the Savings Association Insurance Fund
ASSESSMENT (SAIF) to 1.25% of insured deposits as prescribed by the
Federal Deposit Insurance Corporation Improvement Act.
Included in the proposals is one that would impose a one-time
assessment on deposits insured by SAIF. At this time, it is
not possible to predict the ultimate provisions of any final
legislation or their effect on BAC.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
================================================================================
The following is a summary of second-quarter 1996 financial
information for BankAmerica Corporation and subsidiaries
(BAC).
. BAC reported second-quarter 1996 earnings per share of
$1.84, an increase of 18 percent from $1.56 for the same
period a year ago. Net income for the second quarter of
1996 was $723 million, up 12 percent from $645 million
for the second quarter of 1995.
. The return on average common equity was 15.42 percent,
an increase of 112 basis points from the amount reported
in the second quarter of 1995.
. Net interest income was $2,159 million, up $36 million,
or 2 percent, from the amount reported for the second
quarter of 1995. BAC's net interest margin for the
second quarter of 1996 was 4.27 percent, down 27 basis
points from the second quarter of 1995.
. Noninterest income increased $182 million, or 16
percent, from the second quarter of 1995. This increase
included a pre-tax gain of $82 million from the
previously announced sale of a Hong Kong consumer and
commercial finance subsidiary.
. Noninterest expense decreased $56 million, or 3 percent,
from the second quarter of 1995, primarily due to lower
regulatory fees and related expenses attributable to
reduced FDIC deposit premium assessment rates, and
decreased $16 million, or 1 percent, from the first
quarter of 1996.
. BAC's expense-to-revenue ratio decreased 69 basis points
from the previous quarter to 55.14 percent.
. Average total loans increased $11.7 billion, or 8
percent, from the second quarter of 1995, reflecting
growth primarily in the consumer loan portfolio. In
addition, average deposits for the second quarter of
1996 increased $8.6 billion, or 6 percent, from the same
quarter a year ago, primarily reflecting growth in
foreign interest-bearing deposits.
. The provision for credit losses was $250 million, up
$150 million from the second quarter of 1995. Net credit
losses were $246 million for the second quarter of 1996,
up $7 million from the first quarter of 1996, and up
$116 million from the comparable quarter a year ago.
Nonaccrual assets decreased $209 million, or 12 percent,
between March 31, 1996 and June 30, 1996.
. BAC's delinquent domestic consumer loans that are 60
days or more past due decreased $79 million, an
improvement of 8 percent, from March 31, 1996. The
delinquent domestic consumer loan ratio also decreased
12 basis points from March 31, 1996 to 1.15 percent.
. In connection with BAC's ongoing efforts to return
excess capital to its shareholders, BAC repurchased 5.1
million shares of its common stock during the second
quarter of 1996 at an average per-share price of $75.19.
. On April 16, 1996, BAC redeemed all 7,250,000
outstanding shares of its 9 5/8% Cumulative Preferred
Stock, Series F.
14
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 SIX MONTHS ENDED
------------------- ------------------------------ JUNE 30
(DOLLAR AMOUNTS IN MILLIONS, SECOND FIRST FOURTH THIRD SECOND -----------------
EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 4,126 $ 4,089 $ 4,071 $ 4,044 $ 3,989 $ 8,215 $ 7,725
Interest expense 1,967 1,943 1,934 1,888 1,866 3,910 3,556
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 2,159 2,146 2,137 2,156 2,123 4,305 4,169
Provision for credit losses 250 180 130 110 100 430 200
Noninterest income 1,320 1,274 1,158 1,157 1,138 2,594 2,231
Noninterest expense 1,997 2,013 1,966 1,993 2,053 4,010 4,042
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,232 1,227 1,199 1,210 1,108 2,459 2,158
Provision for income taxes 509 507 495 506 463 1,016 902
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 723 $ 720 $ 704 $ 704 $ 645 $ 1,443 $ 1,256
- -----------------------------------------------===============================================================================
PER SHARE DATA
Earnings per common and common
equivalent share $ 1.84 $ 1.79 $ 1.74 $ 1.72 $ 1.56 $ 3.63 $ 3.03
Earnings per common share -- assuming
full dilution 1.84 1.79 1.74 1.72 1.55 3.63 3.00
Dividends declared per common share 0.54 0.54 0.46 0.46 0.46 1.08 0.92
- -------------------------------------------------------------------------------------------------------------------------------
STOCK DATA
Book value per common share at period end $ 49.64 $ 48.74 $ 47.90 $ 46.59 $ 45.38 $ 49.64 $ 45.38
Common stock price range:
High 80 3/8 79 1/8 68 1/2 61 1/8 55 1/4 80 3/8 55 1/4
Low 69 3/4 58 3/4 57 52 1/2 48 3/8 58 3/4 39 1/2
Closing common stockprice 75 3/4 77 1/2 64 3/4 59 7/8 52 5/8 75 3/4 52 5/8
Average number of common and common
equivalent shares outstanding (in thousands) 368,543 372,385 374,283 376,643 376,213 370,464 375,649
Average number of common shares outstanding
-- assuming full dilution (in thousands) 368,591 373,548 374,669 377,421 379,182 371,069 380,162
Number of common shares outstanding at period
end (in thousands) 359,893 364,082 367,447 369,998 372,336 359,893 372,336
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Loans $160,640 $156,155 $155,373 $151,212 $148,766 $160,640 $148,766
Total assets 238,841 234,243 232,446 229,926 226,599 238,841 226,599
Deposits 161,845 160,517 160,494 155,637 155,780 161,845 155,780
Long-term debt and subordinated capital notes 14,953 15,074 15,328 15,882 16,078 14,953 16,078
Common equity 17,866 17,744 17,599 17,238 16,897 17,866 16,897
Total equity 20,108 20,167 20,222 19,861 19,620 20,108 19,620
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Expense to revenue 55.14% 55.83% 56.58% 56.38% 59.66% 55.46% 59.73%
Rate of return (based on net income) on:
Average common equity 15.42 15.19 14.96 15.09 14.30 15.31 14.09
Average total equity 14.56 14.28 14.05 14.14 13.29 14.42 13.12
Average total assets 1.21 1.22 1.20 1.21 1.13 1.21 1.13
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Ratio of common equity to total assets 7.48% 7.58% 7.57% 7.50% 7.46% 7.48% 7.46%
Ratio of total equity to total assets 8.42 8.61 8.70 8.64 8.66 8.42 8.66
Ratio of average total equity to average
total assets 8.29 8.55 8.55 8.59 8.51 8.42 8.65
==============================================================================================================================
</TABLE>
15
<PAGE>
BUSINESS SECTORS
<TABLE>
<CAPTION>
===================================================================================================================================
SELECTED BUSINESS SECTOR DATA
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30/a/
---------------------------------------------------------------------------------------
U.S. CORPORATE AND
TOTAL CONSUMER BANKING INTERNATIONAL BANKING MIDDLE MARKET BANKING
----------------- ----------------- --------------------- ---------------------
(DOLLAR AMOUNTS IN MILLIONS) 1996 1995 1996 1995 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $4,305 $4,169 $2,751 $2,614 $ 730 $ 635 $ 421 $ 433
Provision for credit losses 430 200 500 347 (38) 8 - (7)
Noninterest income 2,594 2,231 1,174 929 1,077 919 108 103
Noninterest expense 4,010 4,042 2,320 2,332 954 902 253 254
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,459 2,158 1,105 864 891 644 276 289
Provision for income taxes 1,016 902 446 354 342 252 101 105
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 1,443 1,256 659 510 549 392 175 184
Preferred stock dividends 98 118 37 44 28 35 8 9
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON EQUITY $1,345 $1,138 $ 622 $ 466 $ 521 $ 357 $ 167 $ 175
- --------------------------------------------=======================================================================================
<CAPTION>
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $156,241 $143,460 $81,733 $73,660 $40,878 $38,705 $18,864 $17,207
Earning assets 200,145 184,671 82,410 74,305 70,100 64,263 18,897 17,223
Total assets 239,069 223,258 90,552 81,567 89,921 84,122 21,463 19,603
Deposits 160,928 151,832 95,119 95,593 44,328 34,584 7,468 7,827
Common equity 17,684 16,297 6,724 6,135 5,062 4,841 1,389 1,237
SELECTED FINANCIAL RATIOS
Return on average common equity 15.31% 14.09% 18.59% 15.30% 20.71% 14.89% 24.23% 28.53%
Expense to revenue/b/ 55.46 59.73 54.17 59.39 50.73 55.37 43.97 43.61
===================================================================================================================================
</TABLE>
For reporting purposes, BAC segregates its operations
into business or operating sectors. BAC's Vice Chairmen
oversee the operations of the businesses that comprise
the sectors and are responsible for each sector's
financial performance. The Vice Chairmen regularly
review their respective businesses to evaluate past
performance and make decisions regarding the future
allocation of resources. All Vice Chairmen are
accountable to the Chief Executive Officer.
BAC determines its business sector results based on an
internal management reporting system, which allocates
revenues, expenses, assets, and liabilities to each
business sector. Furthermore, for internal business
sector monitoring, the unallocated allowance for credit
losses and related provision for credit losses are
assigned to the business sectors. Equity is assigned to
each internal business sector on a risk-adjusted basis
taking into account goodwill and tax-effected
identifiable intangibles. While BAC manages its hedging
activities centrally, the effects of hedging are
allocated to the business sectors through a transfer
pricing process. As a result, the effects of hedging
interest rate risk are reflected in the appropriate
business sectors.
The information set forth in the tables on pages 16-17
reflects the condensed income statements and selected
average balance sheet line items and financial ratios by
business sectors. The information presented does not
necessarily represent the business sectors' financial
condition and results of operations as if they were
independent entities. For a detailed discussion of the
composition of each business sector, refer to pages 6-15
of BAC's 1995 Annual Report to Shareholders.
16
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30/a/
---------------------------------------------------------------------------------
PRIVATE BANKING AND
COMMERCIAL REAL ESTATE INVESTMENT SERVICES OTHER
---------------------- ------------------- --------------------------
(DOLLAR AMOUNTS IN MILLIONS) 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $214 $237 $ 90 $ 87 $ 99 $ 163
Provision for credit losses (26) (143) (1) 1 (5) (6)
Noninterest income 17 18 196 179 22 83
Noninterest expense 39 56 216 207 228 291
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 218 342 71 58 (102) (39)
Provision for income taxes 82 135 27 21 18 35
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 136 207 44 37 (120) (74)
Preferred stock dividends 4 6 3 3 18 21
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON EQUITY $132 $201 $ 41 $ 34 $(138) $ (95)
- -----------------------------------------------------==============================================================================
<CAPTION>
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
<S> <C> <C> <C> <C> <C> <C>
Loans $10,309 $10,029 $ 4,179 $3,570 $ 278 $ 289
Earning assets 10,311 10,029 4,273 3,674 14,154 15,177
Total assets 10,255 9,631 4,781 4,150 22,097 24,185
Deposits 2,005 1,395 6,914 5,807 5,094 6,626
Common equity 838 852 466 411 3,205 2,821
SELECTED FINANCIAL RATIOS
Return on average common equity 31.62% 47.50% 17.85% 16.89% NM NM
Expense to revenue/b/ 24.37 25.37 71.16 72.91 NM NM
===================================================================================================================================
</TABLE>
/a/ For comparability purposes, both 1996 and 1995 amounts reflect BAC's
business-sector allocation methodologies at June 30, 1996.
/b/ Excludes net other real estate owned expense and amortization of
intangibles.
NM - Not meaningful.
Consumer Banking -- Consumer Banking's net income for
the first half of 1996 was up $149 million, or 29
percent, from the amount for the same period last year.
This increase largely reflected improved results in the
California residential and consumer installment loan
portfolios, and in the non-California banks, primarily
Bank of America NW, National Association and Bank of
America Arizona. Net interest income was up from the
first half of 1995 primarily due to higher average loan
balances. Noninterest income increased due to higher
revenues from service charges on deposit accounts, an
$82 million pre-tax gain on the sale of a Hong Kong
consumer and commercial finance subsidiary, and
increased gains on loan sales, reflecting the impact of
the fourth-quarter 1995 adoption of Statement of
Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights" (SFAS No. 122). The increases
in net interest and noninterest income, coupled with
reduced expenses, primarily FDIC assessments, resulted
in an expense-to-revenue ratio of 54.17 percent for the
first half of 1996, a decrease from 59.39 percent for
the first half of 1995. The provision for credit losses
increased $153 million primarily as a result of growth
in the consumer loan portfolio. Average loan
outstandings grew $8.1 billion, or 11 percent, from the
first half of 1995, primarily representing growth in the
residential first mortgage, manufactured housing, credit
card, and auto loan portfolios.
U.S. Corporate and International Banking -- U.S.
Corporate and International Banking's net income for the
first half of 1996 increased $157 million, or 40
percent, from the amount for the same period a year ago.
The increase reflected higher net interest and
noninterest income levels and a reduction in the
provision for credit losses, partially offset by higher
noninterest expense. The increase in net interest income
resulted from
17
<PAGE>
================================================================================
higher interest recoveries and increases in average
financial assets, as well as commercial and industrial
and foreign loans. The reduction in the provision for
credit losses was primarily a result of improved asset
quality in Latin America. Noninterest income was up $158
million predominantly due to higher trading related
income, venture capital distributions, and securities
gains. In addition, in the second quarter of 1995, the
investment in an overseas financial institution was
written down by $18 million. Noninterest expense
increased due to higher variable-based pay that resulted
from improved performance in BAC's global capital market
operations. This sector's expense-to-revenue ratio
decreased 464 basis points from the first half of 1995.
Middle Market Banking--Middle Market Banking's net
income for the first half of 1996 decreased $9 million,
or 5 percent, from the first half of 1995. This decrease
was primarily due to lower net interest income and an
increase in the provision for credit losses from ($7) in
the first half of 1995 to zero in the first half of
1996. Net interest income decreased $12 million from the
first half of 1995, as continued price competition
resulted in a shift from higher priced loans, such as
those tied to the reference rate, to lower priced loans,
such as those that are LIBOR-based. The provision for
credit losses increased due to growth in the loan
portfolio. Average loan outstandings increased $1.7
billion largely due to higher demand in several regions
of the U.S.
Commercial Real Estate--Commercial Real Estate's net
income for the first half of 1996 decreased $71 million,
or 34 percent, from the first half of 1996, primarily
due to an increase in the provision for credit losses
from ($143) million in the first half of 1995 to ($26)
million in the first half of 1996. Net interest income
decreased $23 million from the first half of 1995
primarily due to declining interest spreads on
construction and financial institution loans.
Private Banking and Investment Services--Private
Banking and Investment Services' net income increased
$7 million, or 17 percent, in the first half of 1996
compared to the same period a year ago. The increase
primarily resulted from higher noninterest income
partially offset by increased noninterest expense.
Noninterest income increased due to growth in mutual
fund and annuity revenues. Noninterest expense increased
primarily due to higher performance-based pay.
Other--"Other" amounts are primarily associated with
certain corporate expenses and various other support
services. "Other" also includes the results from
corporate liquidity management activities, along with
any residual differences between actual centrally
managed external hedging results and the transfer of
interest rate risk hedging to the appropriate business
sectors. The income and expenses related to the
Institutional Trust and Securities Services (ITSS)
business are included in this sector. However, the
corporation had substantially divested ITSS by the end
of the first quarter of 1996.
This sector had a net loss of $120 million in the first
half of 1996, compared with a net loss of $74 million in
the same period a year ago. The increased net loss was
primarily attributable to lower results from corporate
liquidity management activities. Partially offsetting
this decrease was the recognition of a $50 million pre-
tax gain associated with the divestiture of BAC's ITSS
business.
18
<PAGE>
RESULTS OF OPERATIONS
================================================================================
NET INTEREST Taxable-equivalent net interest income for the second
INCOME quarter and the first half of 1996 was $2,160 million and
$4,311 million, respectively, up $30 million and $129
million from corresponding periods of 1995. These
increases primarily resulted from increased earning
assets and were partially offset by decreases in the net
interest margin.
Average earning assets totaled $202.6 billion and $200.1
billion in the second quarter and first six months of
1996, respectively, up $14.5 billion and $15.5 billion
from the same periods in 1995. These increases primarily
reflected broad-based growth in the loan portfolio as
average loans increased $11.7 billion and $12.8 billion
from the second quarter and first half of 1995,
respectively. In addition, average financial assets rose
$2.8 billion and $2.7 billion from the second quarter and
first six months of 1995, respectively.
BAC's net interest margin for the second quarter and
first half of 1996 was 4.27 percent and 4.32 percent,
respectively, down 27 and 22 basis points from the
comparable periods a year ago. The yield on average
earning assets decreased 34 basis points and 19 basis
points from the second quarter and first six months of
1995, respectively, as interest rates on these assets
decreased. The decline of the yield on interest-bearing
liabilities was less than that on earning assets. This
was the result of a shift in the mix of liabilities
toward wholesale funds to support growth in average
earning assets, while the yield on interest-bearing
deposits remained essentially flat. Wholesale sources,
which include foreign interest-bearing deposits and
domestic purchased funds, are more costly than
traditional core deposits. In addition, growth in average
earning assets other than loans contributed to the
decline in the margin.
BAC's net interest income and margin include the results
of hedging with certain on- and off-balance-sheet
financial instruments. In the second quarter and first
six months of 1996, BAC's net interest income included
approximately $10 million and $30 million, respectively,
attributable to hedging with derivative instruments,
compared with approximately $20 million and $40 million,
respectively, in the corresponding periods of 1995. The
effect of the hedging amounts on the net interest margin
for both the second quarter and first half of 1996 as
well as the comparable periods of 1995 was approximately
5 basis points.
19
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- -----------------------------------------------------------------------------------------------------------------------------------
SECOND QUARTER 1996 SECOND QUARTER 1995
--------------------------------- -----------------------------------
(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 $ 5,472 $ 96 7.04% $ 5,915 $ 120 8.16%
Federal funds sold 535 7 5.43 592 9 6.11
Securities purchased under resale agreements 11,155 176 6.34 9,691 176 7.29
Trading account assets 12,492 247 7.96 9,226 189 8.23
Available-for-sale securities/cd/ 10,976 214 7.85 9,566 196 8.21
Held-to-maturity securities/c/ 4,395 82 7.41 7,186 131 7.26
Domestic loans:
Consumer-residential first mortgages 37,848 705 7.46 34,987 608 6.95
Consumer-residential junior mortgages 14,131 301 8.56 13,896 315 9.08
Consumer-credit card 9,100 330 14.52 7,964 305 15.31
Other consumer 17,071 421 9.92 13,596 337 9.95
Commercial and industrial 32,665 629 7.75 31,149 662 8.53
Commercial loans secured by real estate 11,160 251 8.99 10,575 240 9.06
Construction and development loans
secured by real estate 3,052 77 10.19 3,418 105 12.33
Financial institutions 3,039 32 4.24 2,271 35 6.21
Lease financing 1,983 38 7.72 1,815 30 6.60
Agricultural 1,567 34 8.73 1,588 38 9.61
Loans for purchasing or carrying securities 1,108 18 6.70 1,348 23 6.98
Other 1,111 22 7.47 1,423 23 6.55
-------- ------ --------- ------
Total domestic loans 133,835 2,858 8.57 124,030 2,721 8.79
Foreign loans 23,718 447 7.58 21,840 454 8.34
-------- ------ --------- ------
Total loans/d/ 157,553 3,305 8.42 145,870 3,175 8.72
-------- ------ --------- ------
Total earning assets 202,578 $4,127 8.12 188,046 $3,996 8.52
====== ======
Nonearning assets 41,974 44,445
Less: Allowance for credit losses 3,496 3,720
-------- --------
TOTAL ASSETS $241,056 $228,771
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 13,212 $ 39 1.21% $ 13,242 $ 40 1.19%
Savings 13,075 66 2.04 13,636 71 2.08
Money market 27,942 220 3.16 29,079 217 3.00
Time 30,130 367 4.89 30,098 367 4.89
-------- ------ -------- ------
Total domestic interest-bearing deposits 84,359 692 3.30 86,055 695 3.24
Foreign interest-bearing deposits:
Banks located in foreign countries 13,416 192 5.77 10,671 183 6.88
Governments and official institutions 9,798 130 5.31 6,468 95 5.89
Time, savings, and other 18,945 293 6.22 16,143 267 6.64
-------- ------ -------- ------
Total foreign interest-bearing deposits 42,159 615 5.86 33,282 545 6.57
-------- ------ -------- ------
Total interest-bearing deposits 126,518 1,307 4.15 119,337 1,240 4.17
Federal funds purchased 1,530 20 5.40 2,136 30 5.53
Securities sold under repurchase agreements 12,061 176 5.88 9,127 150 6.61
Other short-term borrowings 13,471 208 6.21 9,864 168 6.81
Long-term debt 14,819 249 6.77 15,140 266 7.06
Subordinated capital notes 356 7 7.83 605 12 7.63
-------- ------ -------- ------
Total interest-bearing liabilities 168,755 $1,967 4.69 156,209 $1,866 4.79
====== ======
Domestic noninterest-bearing deposits 34,182 32,675
Foreign noninterest-bearing deposits 1,612 1,749
Other noninterest-bearing liabilities 16,532 18,668
-------- --------
Total liabilities 221,081 209,301
Stockholders' equity 19,975 19,470
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $241,056 $228,771
======== ========
Interest income as a percentage of average earning assets 8.18% 8.52%
Interest expense as a percentage of average earning assets (3.91) (3.98)
---- ----
NET INTEREST MARGIN 4.27% 4.54%
==== ====
===================================================================================================================================
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average raises are presented on a taxable-equivalent
basis. The taxable-equivalent adjustments are based on a marginal tax
rate of 40 percent.
/c/ Refer to table on page 27 of the Balance Sheet Review section for more
detail on available-for-sale and held-to-maturity securities.
/d/ Average balances include nonaccrual assets.
20
<PAGE>
<TABLE>
<CAPTION>
=========================================================================
SIX MONTHS ENDED JUNE 30
- -------------------------------------------------------------------------
1996 1995
- ----------------------------------- ----------------------------------
BALANCE/a/ INTEREST/b/ RATE/b/ BALANCE/a/ INTEREST/b/ RATE/b/
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5,735 $ 213 7.45% $ 5,781 $ 232 8.09%
485 13 5.38 569 17 6.04
10,233 331 6.51 8,927 311 7.03
11,750 464 7.94 8.802 354 8.12
11,198 428 7.67 9,582 367 7.70
4,503 168 7.46 7,550 276 7.33
37,354 1,396 7.48 34,647 1,175 6.78
13,980 602 8.66 13,769 627 9.18
9,021 664 14.72 7,886 600 15.21
16,748 825 9.91 13,285 643 9.76
32,768 1,276 7.83 30,188 1,292 8.64
11,075 495 8.94 10,467 471 8.99
3,107 158 10.25 3,473 200 11.60
2,912 64 4.40 2,363 72 6.12
1,946 64 6.65 1,803 56 6.29
1,611 71 8.89 1,649 79 9.70
1,173 39 6.71 1,372 48 7.02
1,160 39 6.70 1,408 46 6.57
-------- ------ -------- ------
132,855 5,694 8.60 122,310 5,309 8.72
23,386 911 7.84 21,150 872 8.32
-------- ------ -------- ------
156,241 6,604 8.48 143,460 6,181 8.66
-------- ------ -------- ------
200,145 $8,221 8.24 184,671 $7,738 8.43
====== ======
42,445 42,295
3,521 3,708
-------- --------
$239,069 $223,258
======== ========
$13,221 $ 79 1.21% $ 13,367 $ 79 1.20%
13,053 133 2.05 13,714 141 2.08
27,828 437 3.15 29,718 431 2.92
29,903 738 4.96 30,301 704 4.69
-------- ------ -------- ------
84,005 1,387 3.32 87,100 1,355 3.14
13,694 408 5.99 9,303 322 6.98
8,844 233 5.29 6,259 184 5.92
18,791 593 6.35 14,879 493 6.69
-------- ------ -------- ------
41,329 1,234 6.00 30,441 999 6.62
-------- ------ -------- ------
125,334 2,621 4.20 117,541 2,354 4.04
1,596 42 5.32 2,297 69 6.01
11,440 339 5.97 8,860 280 6.38
12,619 386 6.15 8,792 300 6.87
14,834 503 6.82 15,031 530 7.12
475 19 7.99 605 23 7.65
-------- ------ -------- ------
166,298 $3,910 4.73 153,126 $3,556 4.68
====== ======
33,997 32,612
1,597 1,679
17,049 16,537
-------- --------
218,941 203,954
20,128 19,304
-------- --------
$239,069 $223,258
======== ========
8.24% 8.43%
(3.92) (3.89)
---- ----
4.32% 4.54%
==== ====
</TABLE>
================================================================================
21
<PAGE>
================================================================================
NONINTEREST Noninterest income for the second quarter and the first
INCOME half of 1996 increased $182 million and $363 million,
respectively, from the amounts reported in the
comparable periods of 1995.
Total fees and commissions for the second quarter and
first half of 1996 increased $8 million and $44 million,
respectively, from the amounts reported in the
corresponding periods in 1995. In the second quarter and
first half of 1996, retail deposit account fees
increased $30 million and $60 million, respectively, as
a result of higher transaction volume. Total credit card
fees increased $16 million and $20 million from the
second quarter and first half of 1995, respectively,
primarily due to higher credit card interchange fees
from increased sales volume. The increases discussed
above were partially offset by a decline in trust fees
of $22 million and $37 million for the second quarter
and first half of 1996, respectively. Trust fees
declined due to lower fee revenue from personal trust
activities and the divestiture of ITSS. Although loan
fees and service charges were relatively unchanged
compared to 1995 amounts, service charge revenue
increased $20 million, while loan servicing fees
declined $22 million over year-to-date 1995 amounts. The
decline in loan servicing fees resulted from
amortization expense and valuation adjustments on
mortgage servicing rights recognized in connection with
the fourth-quarter 1995 adoption of SFAS No. 122.
Trading income for the second quarter and first half of
1996 increased $27 million and $63 million,
respectively, from the same periods a year ago. Improved
performance in BAC's debt securities trading operations
was largely attributable to a strong bond market in
Europe, as well as gains on Latin American and other
emerging market debt securities. For more information on
the functional components of trading income, refer to
Note 8 of the Notes to Consolidated Financial Statements
on pages 8-13.
Other noninterest income increased $147 million and $256
million in the second quarter and first six months of
1996, respectively, compared to the same periods a year
ago. Included in the second quarter and first half of
1996 was a net gain on sales of subsidiaries and
operations of $83 million and $134 million,
respectively, compared with a net loss of $17 million
during the comparable periods in 1995. During the second
quarter of 1996, the corporation recognized a pre-tax
gain of $82 million from the sale of a Hong Kong
consumer and commercial finance subsidiary, while during
the first quarter of 1996, there was a $50 million net
pre-tax gain associated with the divestiture of BAC's
ITSS business. In addition, dividends earned on
investments increased $28 million and $35 million in the
second quarter and first six months of 1996,
respectively, compared to the same periods a year ago.
The $256 million increase in other noninterest income
for the first half of 1996 also included an increase in
the net gain on sales of assets of $55 million,
primarily due to increased gains on loan sales
reflecting the impact of the previously mentioned
adoption of SFAS No. 122. In addition, noninterest
income related to venture capital activities increased
$32 million due to realized capital gains and
partnership distributions. Furthermore, the net gain on
available-for-sale securities increased $24 million,
primarily due to the sale of Latin American debt
securities and certain domestic equity securities.
22
<PAGE>
<TABLE>
<CAPTION>
================================================================================
NONINTEREST INCOME
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
SECOND QUARTER JUNE 30
------------------ -----------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEES AND COMMISSIONS
Deposit account fees:
Retail $ 258 $ 228 $ 509 $ 449
Commercial 88 95 181 191
Credit card fees:
Membership 7 12 17 27
Other 83 62 152 122
Trust fees:
Corporate and employee benefit 4 15 13 29
Personal and other 52 63 106 127
Other fees and commissions:
Loan fees and charges 87 86 166 168
Off-balance-sheet credit-related
instrument fees 86 83 173 168
Financial services fees 46 63 88 91
Mutual fund and annuity commissions 27 20 52 39
Other 87 90 174 176
- --------------------------------------------------------------------------------
825 817 1,631 1,587
- --------------------------------------------------------------------------------
TRADING INCOME 178 151 343 280
- --------------------------------------------------------------------------------
OTHER NONINTEREST INCOME
Venture capital activities 112 103 222 190
Net gain (loss) on sales of
subsidiaries and operations 83 (17) 134 (17)
Net gain on sales of assets/a/ 21 14 70 15
Net gain on available-for-sale securities 4 9 34 10
Other income 97 61 160 166
- --------------------------------------------------------------------------------
317 170 620 364
- --------------------------------------------------------------------------------
$1,320 $1,138 $2,594 $2,231
- -----------------------------------------=======================================
</TABLE>
/a/ Net gain on sales of assets includes gains and losses from the
disposition of loans, premises and equipment, and certain other assets.
NONINTEREST Noninterest expense for the second quarter and first
EXPENSE half of 1996 decreased $56 million and $32 million
respectively, from the amounts reported in the
corresponding periods in 1995, primarily due to lower
regulatory fees and related expenses.
Personnel expense (salaries and employee benefits), for
the second quarter and first six months of 1996
increased $2 million and $23 million, respectively, from
the amounts reported in the same periods last year.
Although base salary expense for the second quarter and
first six months of 1996 decreased from the same periods
last year, largely due to reductions in staff levels,
increases in employee benefits, primarily performance-
based pay and retirement program benefits, more than
offset these decreases. The increase in retirement
program benefits was largely attributable to amendments
to BAC's employee benefit plans that became effective
January 1, 1996. BAC's staff level on a full-time-
equivalent (FTE) basis was approximately 78,300 at June
30, 1996, down from approximately 80,300 at June 30,
1995. FTE is a measurement equal to one full-time
employee working a standard day. BAC had approximately
93,200 employees at June 30, 1996, down from
approximately 95,800 at the same date a year earlier.
These amounts include both full-time and part-time
employees.
23
<PAGE>
================================================================================
Regulatory fees and related expenses for the second
quarter and first half of 1996 decreased $61 million and
$120 million, respectively, from the comparable periods
in 1995 as a result of the reduction in FDIC deposit
premium assessment rates announced last year.
Other expense for the second quarter and first half of
1996 increased $19 million and $60 million,
respectively, over the same periods last year. This
growth resulted from increased expenses related to
various categories.
<TABLE>
<CAPTION>
================================================================================
NONINTEREST EXPENSE
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
SECOND QUARTER JUNE 30
------------------ ------------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries $ 814 $ 842 $1,635 $1,651
Employee benefits 213 183 415 376
Occupancy 186 182 376 355
Equipment 175 165 338 324
Amortization of intangibles 93 110 188 219
Communications 90 91 182 177
Regulatory fees and related expenses 13 74 26 146
Other real estate owned expense (14) (2) (4) -
Other expense 427 408 854 794
- --------------------------------------------------------------------------------
$1,997 $2,053 $4,010 $4,042
- ---------------------------------------=========================================
</TABLE>
INCOME The provision for income taxes was $509 million and $463
TAXES million for the quarters ended June 30, 1996 and 1995,
respectively, reflecting forecasted annual effective
income tax rates of 41.3 percent and 41.8 percent,
respectively.
For further information concerning BAC's provision for
federal, state, and foreign income taxes for the most
recent five quarters, refer to Note 6 of the Notes to
Consolidated Financial Statements on page 8.
24
<PAGE>
================================================================================
OPERATING AND BAC's results for the second quarter and six months
FINANCIAL LEVERAGE ended June 30, 1996, demonstrated the corporation's
ability to manage its operating and financial leverage.
Operating leverage is achieved when the rate of revenue
growth exceeds that of expenses. As shown in the table
below, revenue for the second quarter and six months
ended June 30, 1996 increased by 7 percent and 8
percent, respectively, from the same periods in 1995,
while noninterest expense decreased by 3 percent and 1
percent, respectively.
Financial leverage is achieved when the rates of growth
in common shares outstanding and preferred dividends is
below that of net income. Growth in net income for the
second quarter and six months ended June 30, 1996 was 12
percent and 15 percent, respectively, compared to the
same periods in 1995. As a result of BAC's stock
repurchase program, the average number of fully diluted
shares decreased 3 percent and 2 percent, for the second
quarter and six months ended June 30, 1996,
respectively, from comparable periods in 1995.
Additionally, preferred dividends decreased by 20
percent and 17 percent for the second quarter and the
six months ended June 30, 1996, respectively, from the
same periods in the prior year.
By managing expenses and repurchasing and redeeming
stock, as discussed above, BAC's performance resulted in
increases in net income for the second quarter and six
months ended June 30, 1996 of 12 percent and 15 percent,
respectively, as well as increases in fully diluted
earnings per share of 19 percent and 21 percent,
respectively, compared to the same periods in 1995.
<TABLE>
<CAPTION>
===================================================================================================================================
OPERATING AND FINANCIAL LEVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
SECOND QUARTER JUNE 30
------------------ PERCENTAGE ------------------- PERCENTAGE
(DOLLAR AMOUNTS IN MILLIONS) 1996 1995 CHANGE 1996 1995 CHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING LEVERAGE COMPONENTS
Net interest income $2,159 $2,123 2% $ 4,305 $ 4,169 3%
Noninterest income 1,320 1,138 16 2,594 2,231 16
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenue 3,479 3,261 7 6,899 6,400 8
Noninterest expense 1,997 2,053 (3) 4,010 4,042 (1)
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME/a/ 1,482 1,208 23 2,889 2,358 23
Provision for credit losses 250 100 150 430 200 115
Provision for income taxes 509 463 10 1,016 902 13
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL LEVERAGE COMPONENTS
Net income 723 645 12 1,443 1,256 15
Average number of common shares
outstanding -- assuming full dilution 368,591 379,182 (3) 371,069 380,162 (2)
Preferred stock dividends $ 45 $ 56 (20) $ 98 $ 118 (17)
Earnings per common share --
assuming full dilution 1.84 1.55 19 3.63 3.00 21
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents net income before the provisions for credit losses and income
taxes.
25
<PAGE>
BALANCE SHEET REVIEW
================================================================================
Interest-earning assets totaled $201 billion at June 30,
1996, up $8 billion, or 4 percent from year-end 1995.
Growth in interest-earning assets, primarily the loan
portfolio, trading account assets, and securities
purchased under resale agreements, were funded by
increases in liabilities such as short-term borrowings,
foreign interest-bearing deposits, and securities sold
under resale agreements.
Total deposits at June 30, 1996, remained essentially
unchanged from December 31, 1995. However, interest-
bearing deposits in foreign offices increased $3.6
billion, while domestic noninterest-bearing deposits
declined $2.1 billion. The increase in foreign deposits
was largely due to BAC's continued participation in
certain global markets and a shift from domestic to
foreign funding sources to support balance sheet growth.
In June 1996, The Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities" (SFAS No. 125), which is effective for
fiscal years beginning after December 31, 1996 and will
be adopted by BAC effective January 1, 1997. BAC does
not expect that, at adoption, SFAS No. 125 will have a
material effect on its financial position or results of
operations.
26
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES - AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- ---------------------------------------------------------------------------------------------------------------------------------
SECOND QUARTER 1996 SECOND QUARTER 1995
--------------------------------------------- ---------------------------------------------
RATE RATE
RATE BASED ON RATE BASED ON
BASED ON AMORTIZED BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/ BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $ 1,417 $ 24 6.90% 6.83% $1,465 $ 24 6.47% 6.41%
Mortgage-backed securities 6,108 104 6.82 6.77 4,857 84 6.96 6.93
Other domestic securities 744 11 5.93 7.00 654 8 4.95 5.51
Foreign securities 2,707/c/ 75 11.20/d/ 10.55/d/ 2,590/c/ 80 12.37/d/ 11.15/d/
- ---------------------------------------------------------------------------------------------------------------------------------
$10,976 $214 7.85% 7.77% $9,566 $196 8.21% 8.00%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SECOND QUARTER 1996 SECOND QUARTER 1995
--------------------------------- ---------------------------------
(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 $ 26 $ 1 5.74% $ 442 $ 8 6.77%
Mortgage-backed securities 2,343 45 7.57 4,599 82 7.14
State, county, and
municipal securities 421 8 7.84 439 9 8.18
Other domestic securities 123 2 7.54 182 4 8.50
Foreign securities 1,482 26 7.06 1,524 28 7.33
- ---------------------------------------------------------------------------------------------------------------------------------
$4,395 $82 7.41% $7,186 $131 7.26%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED JUNE 30
-----------------------------------------------------------------------------------------------
1996 1995
---------------------------------------------- ---------------------------------------------
RATE RATE
RATE BASED ON RATE BASED ON
BASED ON AMORTIZED BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/ BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $1,427 $ 48 6.73% 6.75% $1,664 $ 55 6.67% 6.58%
Mortgage-backed securities 6,328 214 6.77 6.78 5,022 174 6.92 6.80
Other domestic securities 733 21 5.76 6.75 603 15 5.16 5.64
Foreign securities 2,710/c/ 145 10.81/d/ 10.15/d/ 2,293/c/ 123 10.81/d/ 9.51/d/
- ---------------------------------------------------------------------------------------------------------------------------------
$11,198 $428 7.67% 7.64% $9,582 $367 7.70% 7.40%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED JUNE 30
----------------------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
(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 $ 49 $ 1 4.91% $ 441 $ 15 6.80%
Mortgage-backed securities 2,390 91 7.60 4,648 166 7.13
State, county, and
municipal securities 427 17 7.70 444 18 8.16
Other domestic securities 135 5 7.45 185 7 7.84
Foreign securities 1,502 54 7.25 1,832 70 7.70
- ---------------------------------------------------------------------------------------------------------------------------------
$4,503 $168 7.46% $7,550 $276 7.33%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average rates are presented on a taxable-equivalent
basis. The taxable-equivalent adjustments are based on a marginal tax rate
of 40 percent.
/c/ Average balances include nonaccrual assets.
/d/ Rates reflect interest received on nonaccrual debt-restructuring par bonds.
27
<PAGE>
CREDIT RISK MANAGEMENT
================================================================================
LOAN PORTFOLIO Total loans at June 30, 1996 were up $5.3 billion, or 3
MANAGEMENT percent, from year-end 1995. This growth was primarily
in the domestic consumer and foreign portfolios.
<TABLE>
<CAPTION>
==================================================================================================================
LOAN OUTSTANDINGS
- ------------------------------------------------------------------------------------------------------------------
1996 1995
--------------------- -----------------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 38,012 $ 37,701 $ 36,572 $ 36,082 $ 35,564
Residential junior mortgages 14,386 13,889 13,777 14,162 14,072
Other installment 15,057 14,682 13,834 12,728 11,819
Credit card 9,342 8,919 9,139 8,622 8,237
Other individual lines of credit 1,824 1,845 1,847 1,816 1,811
Other 307 304 319 289 305
- ------------------------------------------------------------------------------------------------------------------
78,928 77,340 75,488 73,699 71,808
Commercial:
Commercial and industrial 33,097 32,193 32,745 31,896 31,436
Loans secured by real estate 11,410 11,052 10,975 10,776 10,717
Construction and development loans
secured by real estate 2,896 3,107 3,153 3,214 3,308
Financial institutions 3,075 2,705 2,834 2,561 2,520
Lease financing 2,019 1,941 1,927 1,910 1,840
Agricultural 1,581 1,585 1,737 1,591 1,607
Loans for purchasing or carrying securities 1,399 1,402 1,458 1,236 1,383
Other 1,146 1,211 1,574 1,409 1,569
- ------------------------------------------------------------------------------------------------------------------
56,623 55,196 56,403 54,593 54,380
- ------------------------------------------------------------------------------------------------------------------
135,551 132,536 131,891 128,292 126,188
FOREIGN
Commercial and industrial 15,958 15,183 15,003 15,314 14,948
Banks and other financial institutions 4,077 2,916 3,386 2,795 2,941
Governments and official institutions 1,015 1,334 1,020 1,077 1,131
Other 4,039 4,186 4,073 3,734 3,558
- ------------------------------------------------------------------------------------------------------------------
25,089 23,619 23,482 22,920 22,578
- ------------------------------------------------------------------------------------------------------------------
TOTAL LOANS 160,640 156,155 155,373 151,212 148,766
Less: Allowance for credit losses 3,495 3,496 3,554 3,655 3,695
- ------------------------------------------------------------------------------------------------------------------
$157,145 $152,659 $151,819 $147,557 $145,071
- -------------------------------------------------=================================================================
</TABLE>
28
<PAGE>
================================================================================
Domestic Consumer Loans -- Domestic consumer loans have
grown over the last three years. The growth in domestic
consumer loans for the six months ended June 30, 1996
included an increase in residential first mortgages of
$1.4 billion driven by BAC's continued efforts to
diversify its nationwide lending activities,
particularly in the southwest, northeast, and midwest
regions of the country. Continuation of this level of
loan growth will depend upon both future economic
conditions and customer demand. Other installment loans
also increased during the six months ended June 30,
1996, primarily due to growth in manufactured housing
loans in the South, reflecting strong customer demand
and BAC's continued expansion in this region.
Delinquent domestic consumer loans at June 30, 1996
decreased $117 million from the December 31, 1995 level.
The decrease is primarily due to a reduced level of
delinquencies in residential first mortgages in Southern
California. For information regarding BAC's domestic
consumer loans by geographic area and loan type and
domestic consumer loan delinquencies, refer to the
tables below.
<TABLE>
<CAPTION>
==================================================================================================================================
DOMESTIC CONSUMER LOANS BY GEOGRAPHIC AREA AND LOAN TYPE AS OF JUNE 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL RESIDENTIAL
FIRST JUNIOR CREDIT MANUFACTURED OTHER TOTAL
(IN MILLIONS) MORTGAGES MORTGAGES CARD HOUSING AUTO CONSUMER CONSUMER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $27,760 $ 9,552 $4,577 $1,094 $2,246 $2,302 $47,531
Washington 1,732 1,870 1,286 327 1,342 394 6,951
Arizona 1,285 844 315 190 538 128 3,300
Texas 807 141 426 504 595 300 2,773
Oregon 1,227 503 257 138 300 203 2,628
Other/a/ 5,201 1,476 2,481 4,831 453 1,303 15,745
- ----------------------------------------------------------------------------------------------------------------------------------
$38,012 $14,386 $9,342 $7,084 $5,474 $4,630 $78,928
- ----------------------============================================================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic consumer
loans.
<TABLE>
<CAPTION>
=================================================================================================================================
DOMESTIC CONSUMER LOAN DELINQUENCY INFORMATION/a/
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995
--------------------- --------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DELINQUENT CONSUMER LOANS
Residential first mortgages $535 $609 $ 642 $644 $616
Residential junior mortgages 70 82 90 92 95
Credit card 204 199 190 164 165
Other 96 94 100 81 65
- ---------------------------------------------------------------------------------------------------------------------------------
$905 $984 $1,022 $981 $941
- --------------------------------------------------------------===================================================================
DELINQUENT CONSUMER LOAN RATIOS/b/
Residential first mortgages 1.41% 1.61% 1.76% 1.79% 1.73%
Residential junior mortgages 0.48 0.59 0.67 0.65 0.68
Credit card 2.19 2.23 2.08 1.91 2.00
Other 0.56 0.56 0.62 0.55 0.46
- ---------------------------------------------------------------------------------------------------------------------------------
1.15% 1.27% 1.36% 1.33% 1.31%
- --------------------------------------------------------------===================================================================
</TABLE>
/a/ 60 days or more past due.
/b/ Ratios represent delinquency balances expressed as a percentage of total
loans for that loan category.
29
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
DOMESTIC COMMERCIAL LOANS SECURED BY REAL ESTATE BY GEOGRAPHIC AREA AND PROJECT
TYPE AT JUNE 30, 1996
- ---------------------------------------------------------------------------------------------------
LIGHT APARTMENT &
(IN MILLIONS) OFFICE RETAIL INDUSTRY CONDOMINIUM HOTEL OTHER TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $1,409 $1,329 $1,304 $ 893 $148 $ 782 $ 5,865
Washington 456 347 490 456 166 453 2,368
Nevada 152 187 83 180 86 178 866
Oregon 46 119 70 137 45 47 464
Arizona 61 74 55 66 69 102 427
Other/a/ 392 265 126 227 233 177 1,420
- ---------------------------------------------------------------------------------------------------
$2,516 $2,321 $2,128 $1,959 $747 $1,739 $11,410
- --------------------===============================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic commercial
loans secured by real estate.
<TABLE>
<CAPTION>
===================================================================================================
DOMESTIC CONSTRUCTION AND DEVELOPMENT LOANS BY GEOGRAPHIC AREA AND PROJECT TYPE AT JUNE 30, 1996
- ---------------------------------------------------------------------------------------------------
APARTMENT & LIGHT
(IN MILLIONS) RETAIL OFFICE SUBDIVISION CONDOMINIUM HOTEL INDUSTRY OTHER TOTAL
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $258 $324 $198 $113 $ 76 $ 60 $ 72 $1,101
Washington 97 70 216 75 12 21 72 563
Nevada 41 32 55 61 25 17 77 308
Pennsylvania - 182 - - - - - 182
Arizona 23 3 50 53 - 3 25 157
Florida 106 - - 7 - - - 113
Oregon 39 14 2 35 6 - 15 111
Texas 28 1 25 39 - 1 11 105
Other/a/ 115 13 32 51 1 7 37 256
- ---------------------------------------------------------------------------------------------------
$707 $639 $578 $434 $120 $109 $309 $2,896
- ---------------------==============================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic
construction and development loans.
30
<PAGE>
================================================================================
Foreign Loans -- Total foreign loans increased $1.6 billion,
or 7 percent, between year-end 1995 and June 30, 1996. This
growth is primarily in the commercial and industrial
portfolio as well as the banks and other financial
institutions portfolio. In particular, loans to new customers
in Asia and Canada grew by approximately $1.3 billion.
- --------------------------------------------------------------------------------
EMERGING MARKET In connection with its effort to maintain a diversified
portfolio, BAC limits its exposure to BAC monitors its
exposure to economies that are considered emerging markets.
As indicated in the table below, at June 30, 1996, BAC's
emerging market exposure totaled $9,909 million, of 4 percent
of total assets, compared to $8,843 million, or 4 percent, at
year-end 1995. This exposure represents loans, restructured
debt, which is included in the securities portfolios, and
other monetary assets. BAC's investments in emerging markets
are predominantly concentrated in Latin America and Asia. As
developing countries in these regions improve their
infrastructure and regional trade capabilities, BAC expects
to continue to expand its investment in these regions.
================================================================================
EMERGING MARKET EXPOSURE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1996
----------------------------------------------------------------------------------------------------------------------
LOANS AVAILABLE-FOR-SALE SECURITIES/a/ HELD-TO-MATURITY SECURITIES/a/ OTHER/b/
------------------ -------------------------------- ------------------------------ --------------
MEDIUM-
AND
SHORT- MEDIUM-AND SHORT- LONG-
(IN MILLIONS) TOTAL/C/ TERM LONG-TERM COLLATERALIZED UNCOLLATERALIZED COLLATERALIZED UNCOLLATERALIZED TERM TERM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mexico $2,562 $ 249 $ 568/d/ $306 $17 $ 856 $138 $ 415 $ 13
Brazil 1,334 536 11 5 10 - 19 735 18
India 987 76 70 - - - - 838 3
Argentina 969 235 30 - 2 - 44 623 35
Chile 836 175 167 - - - - 409 85
China 558 233 22 - - - - 278 25
Indonesia 533 282 23 - - - - 228 -
Philippines 506 69 18 20 32 - - 353 14
Colombia 383 122 193 - - - 5 63 -
Venezuela 378 6 8 26 - 302 7 10 19
Pakistan 259 16 8 - - - - 235 -
Other/e/ 604 65 134 131 - - - 273 1
- ------------------------------------------------------------------------------------------------------------------------------------
$9,909 $2,064/f/ $1,252/f/ $488/g/ $61/g/ $1,158/h/ $213/h/ $4,460 $213
====================================================================================================================================
</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: $33 million for Mexico, $52 million for Brazil, $278
million for India, $9 million for Argentina, $146 million for Chile, $98
million for Indonesia, $30 million for Philippines, $10 million for
Venezuela, and $111 for Pakistan.
/d/ Includes a $30 million loan that is 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 $14 million.
/g/ Total available-for-sale securities includes $6 million of nonaccrual
debt-restructuring bonds.
/h/ Total fair value of held-to-maturity securities was approximately
$1 billion.
31
<PAGE>
================================================================================
ALLOWANCE The allowance for credit losses at June 30, 1996 was $3,495
FOR CREDIT LOSSES million, or 2.18 percent of loans outstanding, compared with
$3,554 million, or 2.29 percent, at December 31, 1995. In
addition, BAC's ratio of the allowance for credit losses to
total nonaccrual assets was 235 percent at June 30, 1996, up
from 188 percent at December 31, 1995.
Management develops the allowance for credit losses using a
"building block approach" for various portfolio segments.
Significant loans, particularly those considered to be
impaired, are individually analyzed, while other loans are
analyzed by portfolio segment. In establishing the allowance
for the portfolio segments, credit officers include results
obtained from statistical models using historical loan
performance data. While management has allocated the
allowance to various portfolio segments, it is general in
nature and is available for the loan portfolio in its
entirety.
================================================================================
<TABLE>
<CAPTION>
COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES
- --------------------------------------------------------------------------------
1996 1995
----------------------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC.31 SEPT. 30 JUNE 30
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:
Historical loss experience component $ 406 $ 471 $ 506 $ 483 $ 472
Credit management allocated component 398 380 377 439 410
- --------------------------------------------------------------------------------
Total special mention and classified 804 851 883 922 882
Other:
Domestic consumer 1,333 1,288 1,247 1,189 1,143
Domestic commercial 240 237 229 231 219
Foreign 283 283 300 317 331
- --------------------------------------------------------------------------------
Total allocated 2,660 2,659 2,659 2,659 2,575
Unallocated 835 837 895 996 1,120
- --------------------------------------------------------------------------------
$3,495 $3,496 $3,554 $3,655 $3,695
- -----------------------------------------=======================================
</TABLE>
Total net credit losses for the second quarter and first six
months of 1996 increased $116 million and $278 million,
respectively, from the same periods a year ago. Domestic
commercial net credit losses increased $43 million and $110
million from the 1995 amounts, primarily in the commercial
and industrial portfolio and the financial institutions
portfolio. Domestic consumer net credit losses increased $49
million and $104 million from the 1995 amounts due to growth
in the consumer portfolio, primarily in the other consumer
and credit card categories. In the foreign portfolio, there
were net credit recoveries in both the second quarter and
first six months of 1996. However, foreign net credit
recoveries were lower in the second quarter and first half
of 1996 by $24 million and $64 million, respectively.
32
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
QUARTERLY CREDIT LOSS EXPERIENCE
- ------------------------------------------------------------------------------------------------------
1996 1995 SIX MONTHS ENDED
------------------------------------------------ JUNE 30
SECOND FIRST FOURTH THIRD SECOND ------------------
(DOLLAR AMOUNTS IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance, beginning of period $3,496 $3,554 $3,655 $3,695 $3,725 $3,554 $3,690
CREDIT LOSSES
Domestic consumer:
Residential first mortgages 12 11 12 12 11 23 25
Residential junior mortgages 16 20 19 19 19 36 36
Credit card 117 113 100 101 99 230 185
Other consumer 104 98 83 61 54 202 108
Domestic commercial:
Commercial and industrial 50 40 82 19 20 90 38
Loans secured by real estate 2 12 10 7 24 14 33
Construction and development
loans secured by real estate 16 26 6 8 11 42 22
Financial institutions 23 23 - 1 - 46 -
Lease financing - - 1 - - - -
Agricultural 1 - - - 1 1 3
Loans for purchasing or
carrying securities - - 5 - - - -
Foreign 2 4 13 27 (26)/a/ 6 (25)/a/
- ------------------------------------------------------------------------------------------------------
Total credit losses 343 347 331 255 213 690 425
CREDIT LOSS RECOVERIES
Domestic consumer:
Residential first mortgages - - - - 1 - 1
Residential junior mortgages 4 4 4 3 5 8 9
Credit card 9 10 7 10 12 19 24
Other consumer 41 37 28 18 19 78 38
Domestic commercial:
Commercial and industrial 21 28 22 13 16 49 48
Loans secured by real estate 2 4 6 3 4 6 7
Construction and development
loans secured by real estate 3 6 3 41 14 9 22
Financial institutions - 2 1 2 2 2 2
Lease financing 1 1 - 1 1 2 3
Agricultural 3 - 2 2 1 3 3
Loans for purchasing or
carrying securities 1 - - - - 1 -
Foreign 12 16 27 11 8 28 61
- -----------------------------------------------------------------------------------------------------
Total credit loss recoveries 97 108 100 104 83 205 218
- -----------------------------------------------------------------------------------------------------
Total net credit losses 246 239 231 151 130 485 207
Provision for credit losses 250 180 130 110 100 430 200
Allowance related to
mergers and acquisitions - - - - - - 3/b/
Other net additions (deductions) (5) 1 - 1 - (4) 9
- -----------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $3,495 $3,496 $3,554 $3,655 $3,695 $3,495 $3,695
- ---------------------------------====================================================================
ANNUALIZED RATIO OF NET
CREDIT LOSSES (RECOVERIES)
TO AVERAGE LOAN OUTSTANDINGS
Domestic consumer:
Residential first mortgages 0.13% 0.11% 0.13% 0.13% 0.12% 0.12% 0.14%
Residential junior mortgages 0.33 0.48 0.41 0.45 0.42 0.40 0.40
Credit card 4.76 4.62 4.20 4.28 4.41 4.69 4.13
Other consumer 1.48 1.49 1.40 1.20 1.01 1.48 1.05
Domestic commercial:
Commercial and industrial 0.34 0.15 0.76 0.07 0.06 0.25 (0.06)
Loans secured by real estate - 0.29 0.13 0.16 0.74 0.15 0.49
Construction and
development loans secured
by real estate 1.80 2.46 0.40 (3.97) (0.36) 2.13 (0.01)
Financial institutions 2.93 3.08 (0.10) (0.26) (0.31) 3.06 (0.17)
Lease financing (0.18) (0.16) 0.03 (0.17) (0.16) (0.17) (0.26)
Agricultural (0.19) - (0.31) (0.42) - (0.24) (0.10)
Loans for purchasing or
carrying securities (0.27) - 1.50 - - (0.13) -
Total domestic 0.77 0.76 0.75 0.42 0.53 0.77 0.48
Foreign (0.17) (0.21) (0.26) 0.29 (0.62) (0.19) (0.82)
TOTAL 0.63 0.62 0.60 0.40 0.36 0.62 0.29
RATIO OF ALLOWANCE TO
LOANS AT QUARTER END 2.18 2.24 2.29 2.42 2.48 2.18 2.48
EARNINGS COVERAGE OF NET
CREDIT LOSSES/c/ 6.03x 5.89x 5.77x 8.75x 9.25x 5.96% 11.37%
=====================================================================================================
</TABLE>
/a/ Represents an allocated transfer risk reserve adjustment.
/b/ Represents the addition of consumation date allowance for credit losses of
Arbor National Holdings, Inc.
/c/ Earnings coverage of net credit losses is calculated as income before income
taxes plus the provision for credit losses as a multiple of net credit
losses.
33
<PAGE>
================================================================================
NONPERFORMING Total nonaccrual assets decreased $403 million, or 21 percent,
ASSETS between year-end 1995 and June 30, 1996. This decrease
reflected improvements in most segments of the loan portfolio,
particularly in construction and development loans secured by
real estate and in commercial and industrial loans. These
improvements resulted primarily from full or partial payments
on nonaccrual loans, and, to a lesser degree, charge-offs, the
return of certain nonaccrual loans to accrual status, and
sales of nonaccrual loans.
The improvement in BAC's credit quality during the first six
months of 1996 was also reflected in BAC's nonperforming asset
ratios. At June 30, 1996, the ratio of nonaccrual loans to
total loans was 0.93 percent, down from 1.22 percent at
December 31, 1995. In addition, the ratio of nonperforming
assets (comprised of nonaccrual assets and other real estate
owned) to total assets declined 22 basis points from year-end
1995 to 0.81 percent at June 30, 1996.
For further information concerning nonaccrual assets, refer
to the tables below and on pages 35 and 36.
================================================================================
<TABLE>
<CAPTION>
ANALYSIS OF CHANGE IN NONACCRUAL ASSETS
- ---------------------------------------------------------------------------------------------
1996 1995
-------------------- ---------------------------------
SECOND FIRST FOURTH THIRD SECOND
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter $1,697 $1,891 $1,855 $1,962 $1,935
Additions:
Loans placed on nonaccrual status 129 191 532 392 333
Deductions:
Sales (26) (67) (21) (8) (1)
Restored to accrual status (37) (60) (70) (151) (86)
Foreclosures (6) (11) (32) (55) (11)
Charge-offs (77) (90) (92) (35) (42)
Other, primarily payments (192) (157) (281) (250) (166)
- ---------------------------------------------------------------------------------------------
BALANCE, END OF QUARTER $1,488 $1,697 $1,891 $1,855 $1,962
- --------------------------------------=======================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
NONACCRUAL ASSETS, RESTRUCTURED LOANS, AND LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995
-------------------- --------------------------------
(IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONACCRUAL ASSETS
Domestic consumer loans:
Residential first mortgages $ 272 $ 301 $ 311 $ 314 $ 310
Residential junior mortgages 66 69 72 67 67
Other consumer 4 3 2 3 4
Domestic commercial loans:
Commercial and industrial 381 457 511 612 576
Loans secured by real estate 245 251 280 329 336
Construction and development loans secured by real estate 346 417 495 304 451
Financial institutions 4 25 46 2 3
Lease financing 3 - - 1 1
Agricultural 34 33 29 35 32
- ------------------------------------------------------------------------------------------------------------------------------
1,355 1,556 1,746 1,667 1,780
Foreign loans, primarily commercial 130 138 142 185 182
Other interest-bearing assets 3 3 3 3 -
- ------------------------------------------------------------------------------------------------------------------------------
$1,488/a/ $1,697/a/ $1,891/a/ $1,855/a/ $1,962/a/
- ------------------------------------------------------------------------======================================================
RESTRUCTURED LOANS
Domestic commercial:
Commercial and industrial $ 29 $ 29 $ 78 $ 78 $ 72
Loans secured by real estate 55 60 18 19 16
Construction and development loans secured by real estate 15 1 15 3 1
Agricultural - - 1 1 9
- ------------------------------------------------------------------------------------------------------------------------------
99 90 112 101 98
Foreign/b/ 4 1 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------
$ 103 $ 91 $ 113 $ 102 $ 99
- ------------------------------------------------------------------------======================================================
LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
Domestic consumer:
Residential first mortgages $ 133 $ 163 $ 180 $ 181 $ 172
Residential junior mortgages 5 8 12 19 7
Other consumer 173 165 162 141 142
Domestic commercial:
Commercial and industrial 31 10 20 30 65
Loans secured by real estate 5 8 1 62 19
Construction and development loans secured by real estate 21 - - 4 33
Financial institutions 21 1 16 1 19
Lease financing - 1 1 - -
Agricultural - - - - 1
- ------------------------------------------------------------------------------------------------------------------------------
389 356 392 438 458
Foreign - 4 19 1 1
- ------------------------------------------------------------------------------------------------------------------------------
$ 389 $ 360 $ 411 $ 439 $ 459
- ------------------------------------------------------------------------======================================================
</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 $6 million at June 30, 1996, $5 million at March 31, 1996, $62
million at December 31, 1995, $189 million at September 30, 1995, and $296
million at June 30, 1995.
/b/ Excludes debt restructurings with countries that have experienced liquidity
problems of $1.6 billion at June 30, 1996, $1.6 billion at March 31, 1996,
$1.6 billion at December 31, 1995, $1.9 billion at September 30, 1995, and
$2.1 billion at June 30, 1995. The majority of these instruments were
classified as either available-for-sale or held-to-maturity securities.
35
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
INTEREST INCOME FOREGONE ON NONACCRUAL ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
(IN MILLIONS) JUNE 30, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
DOMESTIC
Interest income that would have been recognized had the assets
performed in accordance with their original terms $132
Less: Interest income included in the results of operations 40
- -------------------------------------------------------------------------------------------------------------------------------
Domestic interest income foregone 92
FOREIGN
Interest income that would have been recognized had the assets
performed in accordance with their original terms 14
Less: Interest income included in the results of operations 7
- -------------------------------------------------------------------------------------------------------------------------------
Foreign interest income foregone 7
- -------------------------------------------------------------------------------------------------------------------------------
$99
- ----------------------------------------------------------------------------------------------------------------------------===
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================================
CASH INTEREST PAYMENTS ON NONACCRUAL ASSETS BY LOAN TYPE/a/
- ------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------------------------------------------------ -------------------------------------
CASH INTEREST
PAYMENTS APPLIED
CUMULATIVE BOOK AS A AVERAGE --------------------------
CONTRACTUAL INTEREST NONACCRUAL PERCENTAGE NONACCRUAL AS
(DOLLAR AMOUNTS PRINCIPAL CUMULATIVE APPLIED BOOK OF BOOK INTEREST
IN MILLIONS) BALANCE CHARGE-OFFS TO PRINCIPAL BALANCE CONTRACTUAL BALANCE INCOME OTHER/b/ TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first
mortgages $ 275 $ 2 $ 1 $ 272 99% $ 293 $ 6 $ 1 $ 7
Residential junior
mortgages 69 3 - 66 96 69 3 - 3
Other consumer 11 5 2 4 32 2 - 1 1
Commercial:
Commercial and industrial 780 309 90 381 49 452 13 14 27
Loans secured by real
estate 382 112 25 245 64 257 7 4 11
Construction and
development loans secured
by real estate 506 136 24 346 68 420 8 10 18
Financial institutions 61 54 3 4 6 25 - - -
Lease financing 3 - - 3 100 1 - - -
Agricultural 49 9 6 34 68 33 3 1 4
- ------------------------------------------------------------------------------------------------------------------------------------
2,136 630 151 1,355 63 1,552 40 31 71
FOREIGN, PRIMARILY COMMERCIAL 266 108 25 133 50 137 7 8 15
- ------------------------------------------------------------------------------------------------------------------------------------
$2,402 $738 $176 $1,488 62% $1,689 $47 $39 $86
- -----------------------------------=================================================================================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE 10.14%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes information related to all nonaccrual loans including those that
are fully charged off or otherwise have a book balance of zero.
/b/ Primarily represents cash interest payments applied to principal. Also
includes cash interest payments accounted for as credit loss recoveries,
which are recorded as increases to the allowance for credit losses.
36
<PAGE>
FOREIGN EXCHANGE AND DERIVATIVE 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 swaps, futures, forwards, 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 others are
negotiated over the counter, with the terms tailored to meet
the needs of BAC and its customers.
BAC executes transactions to aid its customers in managing
exposures to interest rates, foreign exchange rates, prices
of securities, and financial or commodity indices.
Counterparties to BAC's foreign exchange and derivative
transactions generally include U.S. and foreign banks,
nonbank financial institutions, corporations, domestic and
foreign governments, and asset managers.
BAC generates 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 products.
As an end user, BAC employs foreign exchange and derivatives
contracts to hedge interest rate risk in connection with its
own asset and liability management activities. More
specifically, BAC primarily uses interest rate derivatives
instruments to manage the interest rate risk associated with
its assets and liabilities, including residential loans,
long-term debt, and deposits.
Similar to on-balance-sheet financial instruments such as
loans and investment securities, off-balance-sheet financial
instruments subject BAC to various types of risks. 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
may result in unexpected losses). For a detailed discussion
of these risks and how they are managed, refer to pages 27-
29, and 38-42 of BAC's 1995 Annual Report to Shareholders.
For additional information concerning foreign exchange and
derivatives contracts, including their respective notional,
credit risk, credit exposure, and fair value amounts, refer
to Note 8 of the Notes to Consolidated Financial Statements
on pages 8-13.
37
<PAGE>
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. Risk is measured in terms of
potential impact on both its economic value and reported
earnings. Economic value calculations measure changes in the
present value of future net 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.
BAC measures and manages interest rate risk by type of risk.
To minimize exposures to declines in economic value due to
gap mismatches, BAC's policy is that assets and liabilities
must have approximately equal total duration. This policy
protects against losses of economic value in the event of
major upward and downward interest rate movements. BAC uses
an internally developed model to translate the mismatch in
each repricing period (i.e., the "gap") into a one-year
mismatch with the same economic risk.
<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 12/31/95 6/30/96
<S> <C> <C> <C> <C> <C> <C>
Net Interest Rate Risk Position $ (8.1) $ (6.9) $ 1.0 $ (2.8) $ 0.0 $ (3.3)
</TABLE>
Graph indicates the composite net asset (+) or net liability
(-) repricing position measured across the entire maturity
mismatch profile and expressed as a one-year mismatch
position bearing the same aggregate level of risk.
For example, a six-month gap of $200 million is treated as
having approximately the same economic risk as a one-year gap
of $100 million. As shown in the graph above, BAC's net one-
year position has been essentially balanced throughout the
last five years.
Gap mismatches result from timing differences in the
repricing of assets, liabilities, and off-balance-sheet
financial instruments. Expected interest rate sensitivity of
individual categories of U.S. dollar-denominated assets and
liabilities as of June 30, 1996 is shown in the table on page
39.
38
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
U.S. DOLLAR DENOMINATED INTEREST RATE SENSITIVITY BY REPRICING OR MATURITY DATES
- -------------------------------------------------------------------------------------------------------------------------------
JUNE 30, 1996
----------------------------------------------------------------------------------------
(GREATER THAN) (GREATER THAN) OVER
(IN BILLIONS) 0-6 MONTHS 6-12 MONTHS 1-5 YEARS 5 YEARS TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC ASSETS
Federal funds sold and
securities purchased under resale
agreements $ 1.6 $ -- $ -- $ -- $ 1.6
Trading account securities 1.7 -- -- -- 1.7
Loans:
Prime indexed 16.8 -- -- -- 16.8
Adjustable rate residential first
mortgages 8.8 4.8 6.8 4.6 25.0
Other loans, net 44.6 6.7 18.8 11.9 82.0
Other assets 18.1 0.6 12.5 9.9 41.1
- -------------------------------------------------------------------------------------------------------------------------------
DOMESTIC ASSETS 91.6 12.1 38.1 26.4 168.2
- -------------------------------------------------------------------------------------------------------------------------------
DOMESTIC LIABILITIES AND
STOCKHOLDERS' EQUITY
Domestic deposits (62.7) (10.2) (23.0) (18.6) (114.5)
Other short-term borrowings (10.1) (1.5) (0.3) -- (11.9)
Long-term debt and subordinated
capital notes (6.2) (0.5) (3.3) (4.9) (14.9)
Other liabilities and stockholders'
equity (12.1) (0.6) (9.8) (16.7) (39.2)
- -------------------------------------------------------------------------------------------------------------------------------
Domestic Liabilities and
Stockholders' Equity (91.1) (12.8) (36.4) (40.2) (180.5)
OFFSHORE FUNDING BOOKS, NET (1.7) 0.2 0.4 1.1 --
- -------------------------------------------------------------------------------------------------------------------------------
Core Gap Before Risk Management
Positions (1.2) (0.5) 2.1 (12.7) (12.3)
- -------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE RISK MANAGEMENT
POSITIONS
- -------------------------------------------------------------------------------------------------------------------------------
Investment securities/a/ 1.4 1.1 4.2 5.6 12.3
Off-balance-sheet financial
instruments/b/ (0.5) (1.5) (4.7) 6.7 --
- -------------------------------------------------------------------------------------------------------------------------------
Total Interest Rate Risk
Management Positions 0.9 (0.4) (0.5) 12.3 12.3
- -------------------------------------------------------------------------------------------------------------------------------
Net Gap (0.3) (0.9) 1.6 (0.4) --
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative Gap $ (0.3) $ (1.2) $ 0.4 $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Available-for-sale and held-to-maturity securities.
/b/ Represents the repricing effect of off-balance-sheet positions, which
include interest rate swaps, futures contracts, and similar agreements.
At June 30, 1996, BAC had a "core" imbalance before risk
management positions as liabilities and equity exceeded assets
by approximately $12 billion. BAC's risk management activities
eliminated this imbalance while containing the size of net gap
mismatches in individual repricing periods. Investment
securities and "received fixed" swaps essentially neutralized
core gaps beyond five years.
39
<PAGE>
FUNDING AND CAPITAL
===============================================================================
LIQUIDITY BAC's liquid assets consist of cash and due from banks,
REVIEW interest bearing deposits in banks, federal funds sold,
securities purchased under resale agreements, trading
account assets, and available-for-sale securities. At
June 30, 1996, liquid assets totaled $48.5 billion, an
increase of $1.2 billion or 3 percent, from $47.3
billion at December 31,1995.
- -------------------------------------------------------------------------------
CAPITAL At June 30, 1996, total stockholders' equity totaled
MANAGEMENT $20.1 billion, a decrease of $0.1 billion from year-end
1995. This decrease is primarily due to a $0.4 billion
decline in preferred stock offset by an increase of $0.3
billion in common equity.
The decline in BAC's preferred stock of $381 million
resulted from the redemptions of all 400,000 outstanding
shares of its 11% Preferred Stock, Series J, on March
31, 1996 and all 7,250,000 outstanding shares of its
9 5/8 % Cumulative Preferred Stock, Series F, on
April 16, 1996. For additional information regarding
preferred stock, refer to Note 5 of the Notes to
Consolidated Financial Statements on page 7.
Common equity increased by $952 million during the first
six months of 1996 due to earnings net of common and
preferred stock dividends. BAC continued its efforts to
return excess capital to its shareholders by
repurchasing 5.1 million shares of its common stock
during the second quarter of 1996 at an average per-
share price of $75.19, which reduced common equity by
$385 million. The shares were repurchased on the open
market over 55 trading days and represented
approximately 8 percent of the total volume of BAC
common stock traded on those days. Year-to-date
repurchases of common stock totaled 9.8 million shares
at an average per-share price of $71.89 which reduced
common equity by $701 million. For additional
information regarding the stock repurchase program,
refer to Note 4 of the Notes to Consolidated Financial
Statements on page 7.
BAC's risk-based capital ratios continued to exceed
regulatory guidelines for "well-capitalized" status.
BAC's total risk-based capital ratio and Tier 1 risk-
based capital ratio decreased 21 basis points and 18
basis points, respectively, between December 31, 1995
and June 30, 1996. This decrease primarily resulted from
an increase in total risk-weighted assets, in
particular, standby letters of credit, loans, and
trading account assets. During the redemption and
repurchase period associated with the common and
preferred stock buyback programs, BAC's targeted Tier 1
risk-based capital ratio is approximately 7.3 percent.
However, the achievement of this objective is
necessarily uncertain and there is a risk that actual
results may differ materially due to a variety of
factors. BAC's Tier 1 leverage ratio was 6.75 percent at
June 30, 1996, compared with 6.92 percent at December
31, 1995.
40
<PAGE>
<TABLE>
============================================================================================================================
RISK-BASED CAPITAL, RISK, WEIGHTED ASSETS, AND RISK-BASED CAPITAL RATIOS
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995
------------------------- -------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RISK-BASED CAPITAL
Common stockholders' equity $ 17,945 $ 17,800 $17,598 $17,289 $16,966
Qualified perpetual
preferred stock 2,242 2,242 2,623 2,623 2,723
Less: Goodwill, nongrandfathered
core deposit other identifiable
intangibles, and other decuctions (5,068) (5,114) (5,230) (5,352) (5,409)
- ----------------------------------------------------------------------------------------------------------------------------
Tier 1 capital 15,119 14,928 14,991 14,560 14,280
Eligible portion of the
allowance for credit
losses 2,651 2,571 2, 566 2,526 2,506
Hybrid capital instruments 142 214 214 214 264
Subordinated notes and
debentures 6,072 5,934 5,798 5,865 5,717
Less: Other deductions (164) (135) (153) (148) (142)
- ----------------------------------------------------------------------------------------------------------------------------
Tier 2 capital 8,701 8,584 8,425 8,457 8,345
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL 23,820 23,512 23,416 23,017 22,625
- ----------------------------------------------------------------------------------------------------------------------------
Less: Investment in
unconsolidated
subsidiaries/b/ (48) (47) - - -
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-BASED CAPITAL $ 23,772 $ 23,465 $ 23,416 $ 23,017 $ 22,625
- ------------------------------------------==================================================================================
Risk-Weighted Assets
Balance sheet assets:
Trading account assets $ 5,289 $ 3,771 $ 3,506 $ 3,457 $ 3,384
Available-for-sale and
held-to-maturity
securities 4,769 5,029 5,007 5,238 5,314
Loans 135,403 132,256 132,504 128,826 126,437
Other assets 16,314 17,667 16,725 17,026 17,929
- ----------------------------------------------------------------------------------------------------------------------------
Total balance sheet assets 161,775 158,723 157,742 154,547 153,064
- ----------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet items:
Unused commitments 26,485 24,991 26,268 25,269 24,577
Standby letters of credit 15,832 13,675 12,888 13,138 12,675
Foreign exchange and
derivatives contracts 4,425 4,617 4,530 4,927 5,543
Other 2,390 2,474 2,567 2,783 3,190
- ----------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet
items 49,132 45,757 46,253 46,117 45,985
- ----------------------------------------------------------------------------------------------------------------------------
Total Risk-Weighted
Assets $210,907 $204,480 $203,995 $200,664 $199,049
- ------------------------------------------==================================================================================
RISK-BASED CAPITAL
RATIOS
TIER 1 CAPITAL RATIO 7.17% 7.30% 7.35% 7.26% 7.17%
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL RATIO 11.27% 11.48% 11.48% 11.47% 11.37%
- ----------------------------------------------------------------------------------------------------------------------------
TIER 1 LEVERAGE RATIO 6.75% 6.77% 6.92% 6.80% 6.68%
- ------------------------------------------==================================================================================
/a/ Includes nongrandfathered CDI and other identifiable intangibles acquired after February 19, 1992 of $814 million and
$72 million, respectively, at June 30, 1996, $830 million and $75 million, respectively, at March 31, 1996, $856 million and $78
million, respectively, at December 31, 1995, $877 million and $90 million, respectively, at September 30, 1995, and $897 million
and $93 million, respectively, at June 30, 1995. Also includes $9 million, $1 million, $24 million, and $24 million, at March
31, 1996, December 31, 1995, September 30, 1995, and June 30, 1995, respectively, of the excess of the net book value over 90
percent of the fair value of mortgage servicing rights and credit card intangibles. There was no such excess amount at June 30,
1996.
/b/ Reflects the Federal Reserve Board's adoption of the Office of the Comptroller of the Currency's treatment of investment in
unconsolidated subsidiaries. In prior periods,half of the amount for each respective period was included in other deductions
from Tier 1 Capital and half was included in other deductions from Tier 2 Capital.
</TABLE>
41
<PAGE>
Other Information
- -------------------------------------------------------------------------------
Item 4. Set forth below is information concerning each
Submission of matter submitted to a vote at the Parent's
Matters to a Vote Annual Meeting of Shareholders on May 23, 1996
of Security Holders ("Annual Meeting"):
Directors: Each of the following persons was
---------
elected as a director of the Parent, to hold
office until the 1997 Annual Meeting of
Shareholders or until earlier retirement,
resignation or removal.
<TABLE>
Number of Votes
---------------
Director's Name For Withheld
------------------------ ----------- ---------
<S> <C> <C>
Joseph F. Alibrandi 299,244,945 2,022,685
Jill E. Barad 298,630,205 2,637,425
Peter B. Bedford 299,296,434 1,971,196
Andrew F. Brimmer 299,257,852 2,009,778
Richard A. Clarke 299,394,198 1,873,432
David A. Coulter 299,415,314 1,852,316
Timm F. Crull 299,380,350 1,887,280
Kathleen Feldstein 299,390,060 1,877,570
Donald E. Guinn 299,372,163 1,895,467
Frank L. Hope, Jr. 299,310,851 1,956,779
Ignacio E. Lozano, Jr. 299,290,133 1,977,497
Walter E. Massey 299,211,218 2,056,412
John M. Richman 299,362,029 1,905,601
Richard M. Rosenberg 299,291,799 1,975,831
A. Michael Spence 297,914,974 3,352,656
Solomon D. Trujillo 299,312,126 1,955,504
</TABLE>
Auditors: The shareholders ratified the appointment
--------
of Ernst & Young LLP as independent auditors.
Number of Votes
---------------
Broker
For Against Abstentions Nonvotes
----------- --------- ------------ --------
Ernst & Young LLP as
Independent Auditors 299,677,506 717,497 872,624 -
42
<PAGE>
- -------------------------------------------------------------------------------
Item 6. (a) Exhibits:
Exhibits and
Reports on Exhibit
Form 8-K Number Exhibit
------ -----------
3.b BankAmerica Corporation
By-laws, as amended
27 Financial Data Schedule
(b) Reports on Form 8-K:
During the second quarter of 1996,
the Parent filed a report on Form 8-K
dated April 17, 1996. The April 17, 1996
report filed, pursuant to Items 5 and 7 of
the report, a copy of the Parent's press
release titled "BankAmerica First Quarter
Earnings." After the second quarter of
1996, the Parent filed a report on Form 8-
K dated July 17, 1996. The July 17, 1996
report filed, pursuant to Items 5 and 7 of
the report, a copy of the Parent's press
release titled "BankAmerica Second Quarter
Earnings."
43
<PAGE>
Signatures
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
BANKAMERICA CORPORATION
Registrant
By Principal Financial Officer and
Duly Authorized Signatory:
/s/ MICHAEL E. O'NEILL
Michael E. O'Neill
Vice Chairman and
Chief Financial Officer
August 8, 1996
By Chief Accounting Officer and
Duly Authorized Signatory:
/s/ JAMES H. WILLIAMS
James H. Williams
Executive Vice President
and Chief Accounting Officer
August 8, 1996
44
<PAGE>
[Bank America Logo goes here]
BankAmerica Corporation
Other information about BankAmerica Corporation may be found in its Annual
Report to Shareholders. This report, as well as additional copies of this
Analytical Review and Form 10-Q, may be obtained from:
Bank of America
Corporate Public Relations #13124
P.O. Box 37000
San Francisco, CA 94137
Information Online - To keep current online via the Internet, visit
BankAmerica Corporation's home page on the World Wide Web
(http://www.bankamerica.com) to view the latest information about the
corporation and its products and services, or apply for a loan or credit card.
Corporate disclosure documents filed with the Securities and Exchange
Commission by BankAmerica Corporation and other companies can be obtained from
the Securities and Exchange Commission's home page on the World Wide Web
(http://www.sec.gov).
[Recycled Paper Recycled
logo goes here] Paper
<PAGE>
GRAPHICS APPENDIX INDEX
<TABLE>
<CAPTION>
BankAmerica Corporation
Second Quarter 1996 10-Q
page reference Description of omitted graphic
- ------------------------ ------------------------------
<S> <C>
38 Net Interest Rate Risk
Position
(Plot point graph in non-EDGAR
version)
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Reference Description
- --------- -----------
3.b BankAmerica Corporation By-laws, as amended
27 Financial Data Schedule
<PAGE>
Exhibit 3.b
BANKAMERICA CORPORATION BYLAWS
LAST AMENDED: MAY 23, 1996
<PAGE>
INDEX
BANKAMERICA CORPORATION BY-LAWS
<TABLE>
<CAPTION>
ARTICLE SECTION PAGE
<S> <C> <C> <C>
Amendments...........................................XI 3 30
Capital Stock-Certificates of Stock.................VII 25
Certificates......................................VII 1 25
Dividends.........................................VII 6 26
Lost, Stolen, Mutilated or
Destroyed Certificates..........................VII 2 25
Fixing Record Date................................VII 4 25
Registered Shareholders...........................VII 5 26
Transfers of Stock................................VII 3 25
Committees............................................V 15
Action By Written Consent...........................V 9 21
Auditing and Examining Committee....................V 3 16
Delegation of Authority.............................V 12 22
Executive Committee.................................V 1 15
Executive Personnel and
Compensation Committee............................V 4 18
Meeting Requirements................................V 8 21
Nominating Committee................................V 5 19
Operating Policy Committee..........................V 2 16
Other Committees....................................V 7 20
Public Policy Committee.............................V 6 20
Reports to the Board................................V 13 22
Subcommittees.......................................V 11 21
Telephone Participation in Meetings.................V 10 21
Directors...........................................III 13
Advisory..........................................III 6 14
Compensation of Directors.........................III 5 13
General Powers....................................III 4 13
Number, Election and Term.........................III 1 13
Resignations......................................III 3 13
Vacancies and Newly Created
Directorships...................................III 2 13
Emergency.............................................X 28
Application.........................................X 1 28
Authority...........................................X 5 29
Conduct of Business.................................X 3 29
Effect on By-laws...................................X 7 29
Meetings of Board or Committee......................X 2 28
No Liability........................................X 6 29
Succession..........................................X 4 29
Termination of Emergency............................X 8 30
Fiscal Year..........................................XI 1 30
Indemnification....................................VIII 26
Insurance........................................VIII 4 28
Non-Exclusivity of Rights........................VIII 3 27
Right to Indemnification.........................VIII 1 26
Right of Claimant to Bring Suit..................VIII 2 27
Meetings of the Board of Directors...................IV 14
Action by Written Consent..........................IV 6 15
</TABLE>
-iii-
<PAGE>
INDEX
BANKAMERICA CORPORATION BY-LAWS
<TABLE>
<CAPTION>
ARTICLE SECTION PAGE
<S> <C> <C> <C>
Meetings of the Board of Directors (Cont.)........IV
Emergency........................................X 28
Organizational Meeting..........................IV 2 14
Place of Meetings...............................IV 1 14
Quorum..........................................IV 5 14
Regular Meetings................................IV 3 14
Special Meetings................................IV 4 14
Telephone Participation in Meetings.............IV 7 15
Meetings of Shareholders..........................II 9
Annual Meeting..................................II 2 9
Business........................................II 7 10
Judges of Election..............................II 11 11
Notice of Annual Meeting........................II 3 9
Notice of Shareholder Business at
Annual Meeting................................II 12 11
Notice of Shareholder Nominees..................II 13 12
Notice of Special Meetings......................II 6 10
Organization....................................II 9 10
Place of Meetings...............................II 1 9
Quorum and Adjournment..........................II 8 10
Shareholders List...............................II 4 9
Special Meetings................................II 5 10
Voting of Shareholders..........................II 10 11
Miscellaneous.....................................XI 30
Amendments......................................XI 3 30
Fiscal Year.....................................XI 1 30
Seal............................................XI 2 30
Notices...........................................IX 28
Form of Notices.................................IX 1 28
Waiver of Notice................................IX 2 28
Officers..........................................VI 22
Appointment, Term of Office.....................VI 2 23
Authority, Duties, Fidelity Bond................VI 4 23
Chairman of the Board...........................VI 5 23
Chief Executive Officer.........................VI 11 24
Chief Financial Officer.........................VI 13 24
Chief Operating Officer.........................VI 12 24
Compensation....................................VI 3 23
Number and Titles...............................VI 1 22
President.......................................VI 7 24
Secretary.......................................VI 10 24
Vice Chairmen...................................VI 8 24
Vice Chairmen of the Board......................VI 6 24
Vice Presidents.................................VI 9 24
Offices............................................I 9
Other Offices....................................I 2 9
Registered Office................................I 1 9
Seal..............................................XI 2 30
</TABLE>
-iv-
<PAGE>
INDEX
BANKAMERICA CORPORATION BY-LAWS
<TABLE>
<CAPTION>
ARTICLE SECTION PAGE
<S> <C> <C> <C>
Shareholders..................................II 9
See: Meetings of Shareholders
</TABLE>
-v-
<PAGE>
BANKAMERICA CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. All annual meetings of the
shareholders shall be held in the City and County of San Francisco, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Special meetings of shareholders may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. Annual meetings of shareholders for the
election of Directors and the transaction of such other business as may be
properly brought before the meeting shall be held in March, April or May of each
year on such business day and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. SHAREHOLDERS LIST. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of shareholders, a complete list of the shareholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each shareholder and the number of shares registered in the name of each
shareholder. Such list shall be open to the
-9-
<PAGE>
examination of any shareholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, 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
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of shareholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than fifty days before the date of the meeting, to each shareholder
entitled to vote at such meeting.
Section 7. BUSINESS. Business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
Section 8. QUORUM AND ADJOURNMENT. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting.
Section 9. ORGANIZATION. At every meeting of the shareholders the
Chairman of the Board shall preside. In the absence of such officer, any other
officer of the rank of President, Vice Chairman of the Board, Vice Chairman,
Executive Vice President or Senior Vice President present shall call such
meeting to order and preside. The Secretary, or in
-10-
<PAGE>
his or her absence, the appointee of the presiding officer of the meeting shall
act as Secretary of the meeting.
Section 10. VOTING OF SHAREHOLDERS. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Each shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such shareholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. JUDGES OF ELECTION. The Board of Directors may at any
time appoint one or more persons to serve as judges of election at any meeting
of shareholders with respect to the votes of shareholders at such meeting. If
any judge appointed is absent or refuses to act, a majority of the judges, if
present, may act. If a majority of the judges is not present, the presiding
officer of the meeting may appoint one or more persons to serve as judges for
the meeting. The judges appointed to act at any meeting of the shareholders
shall perform their duties faithfully and impartially, and shall notify the
Secretary of the Corporation in writing of the votes cast at such meeting by the
shareholders.
Section 12. NOTICE OF SHAREHOLDER BUSINESS AT ANNUAL MEETING. At an
annual meeting of the shareholders only such business shall be conducted as
shall have been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any shareholder of the Corporation entitled to vote
at the meeting who complies with the notice procedures set forth in this
Section. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty days nor more than sixty days prior to the
meeting; provided, however, that if less than forty days' notice of the date of
-------- -------
the meeting is given to shareholders, notice by the shareholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the
-11-
<PAGE>
shareholder proposing such business, (c) the class and number of shares of the
Corporation's stock which are owned by the shareholder and (d) any material
interest of the shareholder in such business. Notwithstanding anything in these
By-laws to the contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this Section. The
Chairman of an annual meeting shall, if the facts warrant, determine and declare
to the meeting that any business proposed at the meeting was not properly
brought before the meeting in accordance with the provisions of this Section,
and if he or she should so determine, he or she shall so declare to the meeting
and any such business shall not be transacted.
Section 13. NOTICE OF SHAREHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section shall be
eligible for election as Directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of shareholders
(a) by or at the direction of the Board of Directors or (b) by any shareholder
of the Corporation entitled to vote for the election of Directors at the meeting
who has complied with the notice procedures set forth in this Section. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than thirty days nor more than sixty days prior to the meeting; provided,
--------
however, that if less than forty days' notice of the date of the meeting is
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given to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the tenth day following the day
on which the notice of the date of the meeting was mailed. A shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the Corporation's proxy statement as a nominee if nominated by the Board of
Directors and to serving as a Director if elected); and (b) as to the
shareholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such shareholder and (ii) the class and number of shares
of the Corporation's stock which are owned by such shareholder; provided,
---------
however, that compliance by a shareholder with the notice provisions and other
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requirements in this Section shall not create a duty of the Corporation to
include the shareholder's nominee in the Corporation's proxy statement or proxy
if the shareholder's nominee is not nominated by the Board of Directors, and the
Corporation shall retain any discretion it has to omit the nominee from the
Corporation's proxy statement and proxy. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a Director of the
Corporation unless nominated in
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accordance with the procedures set forth in this Section. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that a
nomination made at the meeting was not made in accordance with the provisions of
this Section or with law or rules applicable to the meeting, and if he or she
should so determine, he or she shall so declare to the meeting and the
nomination shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of Directors which
shall constitute the whole Board shall be not less than three or more than
thirty-five. The first Board shall consist of three Directors. Thereafter,
within the limits above specified, the number of Directors shall be determined
by resolution of the Board of Directors or by the shareholders at the annual
meeting. The Directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 2 of this Article III, and each
Director elected shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Directors need
not be shareholders.
Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and
newly created directorships resulting from any increase in the authorized number
of Directors may be filled by a majority of the Directors then in office, though
less than a quorum, or by a sole remaining Director, and the Directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify or until their earlier resignations or removals.
If there are no Directors in office, then an election of Directors may be held
in the manner provided by statute.
Section 3. RESIGNATIONS. Any Director of the Corporation may resign
at any time by giving written notice to the Chairman of the Board or President
or to the Secretary of the Corporation. The resignation of any Director shall
take effect at the date of receipt of such notice or at any later date specified
therein; and unless otherwise specified therein the acceptance of such
resignation by the Board of Directors shall not be necessary to make it
effective.
Section 4. GENERAL POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the shareholders.
Section 5. COMPENSATION OF DIRECTORS. Fees and expenses payable to
Directors shall be in such amounts as shall be determined by the Board of
Directors, except that no Director of the Corporation who receives
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any salary as an officer or employee thereof shall receive any per diem or other
compensation for attending any meeting of the Board of Directors or of the
Executive Committee or of any other committee.
Section 6. ADVISORY DIRECTORS. The Board of Directors may appoint such
number of Advisory Directors as shall be determined by the Board from time to
time. Such Advisory Directors shall serve at the pleasure of the Board of
Directors and shall have such rights and functions as the Board shall determine.
Advisory Directors shall receive such compensation for their services as may be
fixed by the Board. No Advisory Director who receives a salary as an officer or
employee of the Corporation or any of its subsidiaries shall receive
compensation for attending any meeting of the Board of Directors or of any
committee of the Board.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. PLACE OF MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 2. ORGANIZATIONAL MEETING. The Board of Directors shall meet
for the purpose of organization, the election of officers and the transaction of
other business, on the same day as each annual meeting of shareholders at such
place as may be designated by the presiding officer of such meeting, or as may
be otherwise provided by vote of the shareholders at such meeting. Notice of
such meeting shall not be necessary.
Section 3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 4. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman of the Board or a Vice Chairman of the Board or the
President on two days' notice to each Director, either personally or by mail or
by telegram; special meetings shall be called by the Chairman of the Board or a
Vice Chairman of the Board or the President or the Secretary in like manner and
on like notice on the written request of any three Directors.
Section 5. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors the
Directors present thereat may adjourn the meeting
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from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 6. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing. The written consents shall be filed
with the minutes of proceedings of the Board or committee.
Section 7. TELEPHONE PARTICIPATION IN MEETINGS. Members of the Board
of Directors or any committees thereof may participate in a meeting of the Board
of Directors or of such committees by means of conference telephone or other
communications equipment by means of which all persons participating can hear
each other, and such participation shall constitute presence in person at such
meeting.
ARTICLE V
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. During the intervals between meetings of
the Board, all powers and authority of the Board regarding the management of the
business and affairs of the Corporation shall be exercised by the Executive
Committee of the Board; except that the committee shall have no power:
(a) To amend the Certificate of Incorporation (except that the committee
may, to the extent authorized in a resolution adopted by the Board
providing for the issuance of shares of stock, fix the designations
and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation or fix
the number of shares of any series of stock or authorize the increase
or decrease of the shares of any series).
(b) To amend the By-laws of the Corporation.
(c) To recommend to the shareholders of the Corporation the sale, lease
or exchange of all or substantially all of the Corporation's property
and assets.
(d) To adopt an agreement of merger or consolidation.
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(e) To recommend to the shareholders of the Corporation the dissolution
of the Corporation or a revocation of a dissolution.
(f) To declare a dividend.
(g) To authorize the issuance of stock, except that the committee shall
have the power to authorize the issuance of common stock of the
Corporation in one transaction or a series of related transactions
(including, without limitation, pursuant to a shelf registration),
provided that the number of shares of common stock so authorized
shall not exceed 5% of the number of shares of common stock issued
and outstanding immediately before such authorization.
(h) To appoint or remove the Chairman of the Board or the President of
the Corporation.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
The committee shall have the power and authority to adopt a certificate of
ownership and merger in connection with the merger of a parent and one or more
subsidiary corporations.
Section 2. OPERATING POLICY COMMITTEE. During intervals between meetings
of the Executive Committee, the Operating Policy Committee shall exercise the
power and authority of the Executive Committee to the extent permitted by law
and subject to the final sentence of this Section 2. The Operating Policy
Committee shall consist of such Directors or officers as the Board may from time
to time appoint by resolution passed by a majority of the whole Board. The
Operating Policy Committee shall be subject to the limitations on delegation of
authority set forth in Section 12 of this Article V and such limits as the Board
may establish from time to time by resolution.
Section 3. AUDITING AND EXAMINING COMMITTEE. The Auditing and Examining
Committee shall provide assistance to the Board in meeting its responsibilities
regarding the adequacy of internal controls, the quality and integrity of
regulatory and financial accounting and reporting and the effectiveness of the
internal and external auditing and examining functions of the Corporation and
its subsidiaries.
In carrying out its duties the committee shall:
. monitor areas of significant risk, including credit risk, market risk,
liquidity risk, cross border risk, operational risk, and compliance;
. monitor the adequacy of the Corporation's internal controls through
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reviewing reports of regulatory examinations of the Corporation,
management letters, and other assessments of the adequacy of internal
controls from the independent accountants and internal auditors, together
with any proposed responses by management of the Corporation;
. review the Corporation's annual report and other principal periodic
financial reports to the public and reports to the regulatory agencies
(including the adequacy of any of the foregoing reports' supporting
processes), in all cases to the extent deemed appropriate by the
committee;
. review significant accounting policy and reporting issues;
. recommend to the Board the firm to be employed by the Corporation as its
independent auditors, and review and make recommendations to the Board
regarding the terms and scope of such firm's engagement, and monitor its
performance and independence;
. annually review and approve the scope of the auditing and credit
examination functions of the Corporation and monitor their performance;
. review with the Chief Executive Officer any performance reports and
compensation recommendations to be made to the Executive Personnel and
Compensation Committee for the General Auditor and the Director of Credit
Examination Services;
. review and take such other actions as may be appropriate with respect to
reports and other requirements under the Federal Deposit Insurance
Corporation Improvement Act of 1991;
. inquire into such matters and review such reports and other documents
regarding subsidiaries as it deems appropriate;
. take such action as the committee deems appropriate to encourage free and
open communication among the Board, the committee, the independent
auditors and the officers of the Corporation responsible for internal
audit, credit examination, regulatory/financial accounting and reporting,
and internal controls, including the scheduling of periodic executive
sessions with the independent auditors and members of management deemed
appropriate by the committee.
The committee shall also provide assistance to the Board with respect to
the fiduciary activities of subsidiaries. The committee shall:
. review reports of examination of the fiduciary activities of any
subsidiary which has been directed to the committee by the Board or by
regulatory authorities;
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. monitor the internal fiduciary audit function and its findings for
subsidiaries;
. review reports from the Corporation's independent auditors with respect
to fiduciary activities of subsidiaries;
. have authority to make recommendations to the Board with respect to
fiduciary activities of subsidiaries as a result of audit and examination
reviews;
The committee shall also provide assistance to the Board in meeting its
fiduciary responsibilities with respect to the employee benefit plans of the
Corporation subject to the Employee Retirement Income Security Act of 1974, as
amended (ERISA). In carrying out its duties the committee shall:
. review the performance of the Employee Benefits Administrative Committee
and the Employee Benefits Investment Committee and any other fiduciary
appointed by the Board for the Corporation's employee benefit plans
subject to ERISA and review audit reports on such plans;
The committee may employ, at the Corporation's expense, independent
accountants, outside counsel and other experts as it deems necessary, and shall
have all additional powers necessary to carry out the foregoing functions and
such other functions as may be assigned by the Board from time to time.
The committee shall consist of such members as the Board may from time to
time appoint by resolution passed by a majority of the whole Board. At least
two members of the committee shall have significant executive, professional,
educational, or regulatory experience in financial, auditing, accounting, or
banking matters as shall be determined by the Board.
No member of the committee shall be, or shall have been within one year
prior to serving as a member of the committee, an officer or employee of the
Corporation or any of its subsidiaries or affiliates, and no member shall have
any relationship that, in the opinion of the Board, would interfere with the
member's exercise of independent judgment as a member of the committee,
including any significant direct or indirect credit or other relationships with
the Corporation or its subsidiaries, the termination of which likely would
materially and adversely affect the Corporation's financial condition or results
of operations.
Section 4. EXECUTIVE PERSONNEL AND COMPENSATION COMMITTEE. The Executive
Personnel and Compensation Committee shall have responsibility for, and shall
review and approve, the compensation, including salary and perquisites, of the
Corporation's executive officers, as designated for Federal securities law
purposes by the Board from time to time, and such other members of the senior
management of the Corporation as
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determined by the committee from time to time by resolution. The committee
shall also make recommendations to the Corporation's subsidiaries as to the
compensation of such members of senior management of the subsidiaries as
determined by the committee from time to time by resolution.
The committee shall also have responsibility for the administration of the
Corporation's short-term and long-term incentive plans and deferred compensation
programs established for the Executive Officers and other senior management of
the Corporation and its subsidiaries (incentive plans). The Committee shall
approve or review the designation of participants in incentive plans, the
principles and procedures used in determining grants and awards under the plans,
and with respect to grants or awards of the Company's equity securities, the
specific grants and awards within such categories of recipients as designated by
the committee from time to time by resolution. The committee shall also
recommend to the full Board such amendments or revisions to incentive plans, and
shall take such other actions with respect to incentive plans, as deemed
appropriate by the committee.
The committee shall also advise management regarding executive succession
planning and the selection, development and performance of the Executive
Officers and other senior management of the Corporation and its subsidiaries as
determined by the committee from time to time.
The committee shall have all additional powers necessary to carry out its
responsibilities and such other duties as may be assigned by the Board from time
to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
No member of the committee shall be an active officer of the Corporation
or any of its subsidiaries, and no member shall have any relationship that, in
the opinion of the Board, would interfere with the member's exercise of
independent judgment as a member of the committee.
Section 5. NOMINATING COMMITTEE. The Nominating Committee shall
recommend to the Board criteria for the selection of candidates to serve on the
Board; evaluate all proposed candidates; recommend to the Board nominees to fill
vacancies on the Board; and recommend to the Board prior to the annual meeting
of shareholders a slate of nominees for election to the Board by the
shareholders of the Corporation at the annual meeting.
The committee may also review and make recommendations to the Executive
Committee or the Board with respect to the Corporation's overall compensation
program for Directors, including salary, perquisites, deferred compensation
plans, stock or stock option plans or other incentive plans, and retirement
plans.
In carrying out its duties, the committee shall seek possible candidates
for the Board and otherwise aid in attracting qualified
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candidates to the Board. The committee shall be available to the Chairman of
the Board and the Chief Executive Officer and other members of the Board for
consultation concerning candidates for the Board. The committee shall
periodically review, assess and make recommendations to the Board with regard to
the size and composition of the Board. The committee shall have all additional
powers necessary to carry out its responsibilities and such other duties as may
be assigned by the Board from time to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
No member of the committee shall be an active officer of the Corporation
or any of its subsidiaries and no member shall have any relationship that, in
the opinion of the Board, would interfere with the member's exercise of
independent judgment as a member of the committee.
Section 6. PUBLIC POLICY COMMITTEE. The Public Policy committee shall
advise and make recommendations to the Board and management of the Corporation
and its subsidiaries concerning matters of public and social policy. The
committee shall identify and monitor the social, political and environmental
trends and issues that could affect the corporation's or its subsidiaries'
performance and the related interests of employees, shareholders, customers, and
the general public; evaluate and advise the Board and management on long range
plans and programs for adjusting operations to those trends and issues; provide
Community Reinvestment Act (CRA) oversight to ensure that the CRA activities of
all banking subsidiaries of the Corporation reflect the Corporation's commitment
to outstanding performance; and recommend to the Board and management, as
appropriate, action on specific public policy issues, and advise the Board and
management as to the committee's evaluation of related policies, practices and
procedures.
The committee shall have all additional powers necessary to carry out its
responsibilities and such other duties as may be assigned by the Board from time
to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
Section 7. OTHER COMMITTEES. The Board may, by resolution passed by
a majority of the whole Board, designate one or more other committees, each
committee to consist of one or more members as the Board determines. The Board
may designate one or more persons as alternate members of any such committee who
may replace any absent or disqualified member at any meeting of the committee.
Any such committee shall have and may exercise such powers as may be specified
in the resolution creating such committee, including, to the extent authorized
in a resolution adopted by the Board providing for the issuance of shares of
stock, the power to fix the designations and any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
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for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series. Each committee shall have such name as may be determined from time
to time by the Board. The Board may change the members of any committee, fill
vacancies and discharge any committee, with or without cause, at any time.
Section 8. MEETING REQUIREMENTS. The Board shall designate one member of
each committee to serve as chairman of the committee. Except as otherwise
stated in these By-laws or a resolution of the Board, a number equal to a
majority of the members of a committee shall be deemed to constitute a quorum
for actions of the committee. If a quorum is not present at any meeting of a
committee, the committee members present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. Except as otherwise stated in these By-laws or in a
resolution of the Board, the vote of a majority of the members of a committee
present at a meeting at which a quorum is present shall be necessary for action
to be taken by the committee, and each committee shall hold regular and special
meetings at times and places and upon notice as the committee may determine. In
the absence of any other notice requirements, meetings of a committee may be
called by the chairman of the committee or the Secretary, and must be called by
the chairman of the committee or the Secretary upon the request of any two
members of the committee, on at least 24 hours' notice to each committee member
before the hour appointed for holding such meeting. Notice shall be given
personally, or by leaving the notice at the member's place of business or
residence, or by mailing the notice in San Francisco or Los Angeles, with the
postage thereon fully prepaid, addressed to the member at his or her last known
place of business or residence, or by telegraphing or telecopying the notice to
the member at his or her last known place of business or residence. The method
of notice of a special meeting shall be entered in the minutes of the special
meeting, and the approval of the minutes at any subsequent meeting of the
committee shall be conclusive upon the question of service. Personal notice
includes telephone notice to the individual.
Section 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
these By-laws, any action required or permitted to be taken at any meeting of
any committee may be taken without a meeting, if all members of the committee
consent to the action in writing. The written consents shall be filed in the
minute book of the committee.
Section 10. TELEPHONE PARTICIPATION IN MEETINGS. Members of a committee
may participate in a meeting of the committee by means of conference telephone
or other communications equipment by means of which all persons participating
can hear each other, and such participation shall constitute presence in person
at the meeting.
Section 11. SUBCOMMITTEES. The provisions of this Section 11 with
respect to subcommittees shall be effective only to the extent permitted by
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Delaware law. Subject to the foregoing, and except as otherwise stated in these
By-laws or a resolution of the Board, each committee may appoint and discharge
subcommittees and may delegate to such subcommittees any of the power and
authority of the committee, subject to such restrictions as the committee may
determine. The committee may authorize such subcommittees to appoint their own
subcommittees and to delegate any of their power and authority. Each
subcommittee shall have such members as the committee shall appoint, provided
that at least one member of the committee shall be a member of the subcommittee.
The name of each subcommittee shall be determined by the committee or
subcommittee which appoints it. Each committee and subcommittee may designate
one or more Directors or officers as alternate members of any subcommittee, who
may replace any specified or unspecified member who is absent or disqualified at
any meeting of the subcommittee. Each subcommittee shall be subject to the same
procedural requirements as the committee or subcommittee which appointed it,
including but not limited to the requirements set forth in this Article V for
notices, quorums, action by written consent, and telephone participation in
meetings. Each subcommittee shall report its actions at the next practicable
meeting of the committee or subcommittee for its review and any action it deems
appropriate.
Section 12. DELEGATION OF AUTHORITY. The Board of Directors and each
committee and subcommittee may delegate authority to officers and employees of
the Corporation, to the fullest extent permitted by law and subject to any
restrictions and limitations the Board of Directors, the committee, or the
subcommittee, as the case may be, deems appropriate. This power shall include
delegation to committees or subcommittees whose members may include officers of
the Corporation, provided however, that discretion reserved under Delaware law
to the Board of Directors or a committee established by the Board of Directors
may be exercised only by the Board of Directors or a Board committee established
by a majority of the whole Board of Directors.
Section 13. REPORTS TO THE BOARD. Except as otherwise stated in these
By-laws or a resolution of the Board, each committee shall keep minutes of its
proceedings and shall report its actions and, at least on a quarterly basis, the
actions of its subcommittees at the next practicable Board meeting for its
review and any action it deems appropriate. Any action of the Board with
respect to the report shall be recorded in the minutes of the meeting of the
Board, as well as in the minute book of the committee.
ARTICLE VI
OFFICERS
Section 1. NUMBER AND TITLES. The officers of the Corporation may be,
and to the extent required by law shall be: a Chairman of the Board, a
President, one or more Vice Chairmen of the Board, one or more Vice
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Chairmen, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Vice Presidents, one or more Assistant Vice Presidents,
a Secretary, one or more Assistant Secretaries, a Treasurer, one or more
Assistant Treasurers, and such other officers as the Board may by resolution
create, or as may be appointed in accordance with Section 2 of this Article.
The Board of Directors shall designate one officer of the Corporation as
the Chief Executive Officer and may in its discretion confer additional
functional titles, including but not limited to Chief Operating Officer and
Chief Financial Officer.
Section 2. APPOINTMENT, TERM OF OFFICE. The officers shall be appointed
by the Board of Directors and shall serve at the pleasure of the Board, which
may demote, suspend, remove or dismiss any officer with or without cause or
notice at any time. However, any such action shall be without prejudice to any
rights of such officer under any written contract addressing employment issues
executed by an officer of the Corporation authorized to execute such a contract.
Each officer shall hold office until a successor is elected and qualified or
until the officer's earlier resignation or removal.
Section 3. COMPENSATION. The compensation of all officers and other
employees of the Corporation shall be fixed by the Board of Directors or by a
committee appointed or officers designated for that purpose or in accordance
with procedures established by the Corporation's human resources or personnel
function.
Section 4. AUTHORITY, DUTIES, FIDELITY BOND. One person may hold more
than one office, except that the offices of President and Secretary and of
Chairman of the Board and Secretary may not be held by the same person. When
the signature or approval of two officers is required, a person holding two
offices shall act only as one signer or approver. The duties and authority of
the officers of the Corporation, other than as set forth in these By-laws, may
be prescribed and established by the Board of Directors or by the Executive
Committee. Each officer shall perform the duties imposed upon the officer by
law, these By-laws, the Board of Directors or the Executive Committee. Except
as otherwise set forth in these By-laws or by the Board of Directors or the
Executive Committee, each officer shall have such authority and duties as
usually are incident to the title and office held. Authority to act on behalf
of the Corporation may be delegated to officers to the extent permitted by these
By-laws, including, without limitation, Sections 2, 11 and 12 of Article V
hereof, except to the extent such delegation is prohibited or limited by
Delaware law. The Board of Directors may provide for such bond and fidelity
insurance covering the officers of the Corporation and for the faithful and
honest discharge of their duties as they may determine.
Section 5. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors and shall
have such other duties and authority as are set forth
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in these By-laws or may be assigned by the Board of Directors.
Section 6. THE VICE CHAIRMEN OF THE BOARD. The Board of Directors may
appoint one or more Vice Chairmen of the Board. Each Vice Chairman of the Board
shall have such duties and authority as may be assigned by the Board of
Directors or by the officer to whom such Vice Chairman of the Board reports. If
more than one Vice Chairman of the Board is appointed, the Board may designate
one such Vice Chairman of the Board as Senior Vice Chairman of the Board.
Section 7. THE PRESIDENT. The President shall have such duties and
authority as are set forth in these By-laws or may be assigned by the Board of
Directors or by the Chairman of the Board.
Section 8. THE VICE CHAIRMEN. The Board of Directors may appoint one or
more Vice Chairmen. Each Vice Chairman shall have such duties and authority as
may be assigned by the Board of Directors or by the officer to whom such Vice
Chairman reports.
Section 9. THE VICE PRESIDENTS. The Board of Directors may appoint one
or more Vice Presidents. The Board may create categories of Vice Presidents,
including but not limited to Executive Vice Presidents, Senior Vice Presidents
and Assistant Vice Presidents. The Board of Directors, the Chairman of the Board
or the President may designate seniority of ranking among categories of Vice
Presidents. Each Vice President shall have such duties and authority as may be
assigned by the Board of Directors or by the officer to whom such Vice President
reports.
Section 10. THE SECRETARY. The Secretary shall have charge and custody
of the corporate seal, records and Minute Books of the Corporation, shall keep
correct written minutes of all meetings of shareholders and Directors, and shall
give or cause to be given notice of all meetings of the shareholders and of the
Board of Directors in accordance with these By-laws and as required by law. The
duties of the Secretary may be performed by any Assistant Secretary.
Section 11. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall have general executive supervision of the business and affairs of the
Corporation.
Section 12. THE CHIEF OPERATING OFFICER. The Chief Operating Officer
shall have such duties and authority as may be assigned by the Chief Executive
Officer, to whom the Chief Operating Officer shall report.
Section 13. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the principal financial officer of the Corporation.
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ARTICLE VII
CAPITAL STOCK--CERTIFICATES OF STOCK
Section 1. CERTIFICATES. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman of the Board of Directors, or the President or a Vice Chairman of
the Board of Directors, or a Vice Chairman, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
representing the number of shares registered in certificate form. Any or all
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 2. LOST, STOLEN, MUTILATED OR DESTROYED CERTIFICATES. The Board
of Directors, a committee of the Board or an officer of the Corporation may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen, mutilated or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen,
mutilated or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors, a committee of the Board or an officer of
the Corporation may, as a matter of discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, mutilated or
destroyed certificate or certificates, or such owner's legal representative, to
advertise the same in such manner as shall be required and give the Corporation
a bond in such sum as may be directed as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen, mutilated or destroyed.
Section 3. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. FIXING RECORD DATE. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting
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<PAGE>
of shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of shareholders of record entitled to notice of
or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 5. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
Section 6. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or another
person of whom such person is the legal representative, is or was a Director,
officer, or employee of the Corporation or is or was serving at the request of
the Corporation as a director, officer, or employee of, or in some other
representative capacity for, another corporation or a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a Director, officer, or employee or in any other capacity
while serving as a Director, officer, or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in
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<PAGE>
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a Director, officer, or employee and shall inure to the benefit of such
person's heirs, executors and administrators; provided, however, that except as
-------- -------
provided in Section 2 hereof with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
--------
however, that, if the Delaware General Corporation Law so requires, the payment
- -------
of such expenses incurred by a Director or officer in such person's capacity as
a Director or officer (and not in any other capacity in which service was or is
rendered by such person while a Director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such Director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such Director or
officer is not entitled to be indemnified under this Article or otherwise.
Section 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1
of this Article is not paid in full by the Corporation within ninety days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a
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<PAGE>
proceeding in advance of its final disposition conferred in this Article shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation, By-
law, agreement, vote of stockholders or disinterested Directors or otherwise.
Section 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, officer, or employee of the
Corporation serving in any capacity on behalf of the Corporation or at its
request for any other entity to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, whether
or not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
ARTICLE IX
NOTICES
Section 1. FORM OF NOTICES. Whenever, under the provisions of the
statutes or of the Certificate of Incorporation or of these By-laws, notice is
required to be given to any Director or shareholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such Director or shareholder, at his or her address as it appears
on the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to Directors may also be given by telegram.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
by law or by the Certificate of Incorporation or these By-laws, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE X
EMERGENCY
Section 1. APPLICATION. This Article shall operate during any emergency
resulting from any disaster or other emergency condition when a quorum of the
Board of Directors or a Board committee cannot readily be convened.
Section 2. MEETINGS OF BOARD OR COMMITTEE. A meeting of the Board of
Directors or Board committee may be called by any officer or Director by giving
notice to the Directors or committee members who can be reached by
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<PAGE>
any means the person calling the meeting deems feasible.
Section 3. CONDUCT OF BUSINESS. During any emergency, the quorum
requirements for all meetings of the Board of Directors and any Board committee
shall be one-fourth of the members.
(a) If no Board of Directors meeting can be held because a quorum cannot
be assembled, then those Directors who can assemble may, by majority vote,
reduce the Board of Directors to not less than five Directors and may elect
emergency Directors.
(b) If only one Director can be found, then that Director may appoint
emergency Directors.
(c) If no Director can be found, then the Chief Executive Officer or
Acting Chief Executive Officer may appoint emergency Directors.
Section 4. SUCCESSION. During any emergency when the Chief Executive
Officer becomes incapacitated, cannot be located, or otherwise is unable to
perform his or her duties, succession to the powers of the Chief Executive
Officer as Acting Chief Executive Officer shall occur in the following order:
Chairman of the Board,
President,
Vice Chairman of the Board,
Vice Chairman,
any Executive Vice President.
Priority within rank shall be set by seniority in the ranking office. If
seniority in office dates from the same day, then seniority based on total
length of service shall be determinative.
Notwithstanding the foregoing, the Board of Directors during an emergency
may appoint or replace any Acting Chief Executive Officer, or may change the
priority of succession, as the Board determines.
Section 5. AUTHORITY. During any emergency the Chief Executive Officer
or Acting Chief Executive Officer shall have all authority that officer deems
necessary to protect the interests of the Corporation, may appoint emergency
officers, and may delegate authority to them.
Section 6. NO LIABILITY. No officer, Director or employee acting in
accordance with any emergency By-laws or resolutions shall be liable except for
willful misconduct.
Section 7. EFFECT ON BY-LAWS. To the extent not inconsistent with this
emergency By-law, the By-laws of the Corporation shall remain in effect during
any emergency. Upon termination of the emergency, this By-law shall cease to be
operative and authority to act as an officer or
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<PAGE>
Director shall be determined by the other By-laws, except that Directors and
officers elected or appointed pursuant to this By-law shall remain Directors or
officers to the extent that vacancies have been caused by death or incapacity of
regular Directors or officers until their successors are appointed or elected.
Section 8. TERMINATION OF EMERGENCY. Any emergency condition which
causes this By-law to become operative shall be deemed terminated whenever one
of the following conditions is met:
(a) The Directors and emergency Directors determine by majority vote at a
meeting that the emergency condition is over; or
(b) A majority of the Directors elected or appointed pursuant to the
regular By-laws holds a meeting and determines the emergency condition is
over.
ARTICLE XI
MISCELLANEOUS
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 2. SEAL. In the execution on behalf of the Corporation of any
instrument, writing, notice or paper, it shall not be necessary to affix the
corporate seal of the Corporation thereon, and any such instrument, document,
writing, notice or paper when executed without said seal affixed thereon shall
be of the same force and effect and as binding in the Corporation as if said
corporate seal had been affixed thereon in the first instance.
Section 3. AMENDMENTS. These By-laws may be altered or repealed at any
regular meeting of the shareholders or of the Board of Directors or at any
special meeting of the shareholders or of the Board of Directors if notice of
such alteration or repeal be contained in the notice of such special meeting.
-30-
104467.03
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1996
CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE
SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES, INTEREST, AND
AVERAGE RATES, NONPERFORMING ASSETS, QUARTERLY CREDIT LOSS EXPERIENCE, AND
COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q 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 were extracted violate 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,478
<INT-BEARING-DEPOSITS> 5,194
<FED-FUNDS-SOLD> 7,277
<TRADING-ASSETS> 12,633
<INVESTMENTS-HELD-FOR-SALE> 10,964
<INVESTMENTS-CARRYING> 4,280
<INVESTMENTS-MARKET> 3,886
<LOANS> 160,640
<ALLOWANCE> 3,495
<TOTAL-ASSETS> 238,841
<DEPOSITS> 161,845
<SHORT-TERM> 26,131
<LIABILITIES-OTHER> 15,804
<LONG-TERM> 14,953<F1>
0
2,242
<COMMON> 605
<OTHER-SE> 17,261
<TOTAL-LIABILITIES-AND-EQUITY> 238,841
<INTEREST-LOAN> 6,604
<INTEREST-INVEST> 591
<INTEREST-OTHER> 1,020<F2>
<INTEREST-TOTAL> 8,215
<INTEREST-DEPOSIT> 2,621
<INTEREST-EXPENSE> 3,910
<INTEREST-INCOME-NET> 4,305
<LOAN-LOSSES> 430
<SECURITIES-GAINS> 34
<EXPENSE-OTHER> 4,010
<INCOME-PRETAX> 2,459
<INCOME-PRE-EXTRAORDINARY> 2,459
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,443
<EPS-PRIMARY> 3.63
<EPS-DILUTED> 3.63
<YIELD-ACTUAL> 4.32
<LOANS-NON> 1,488
<LOANS-PAST> 389
<LOANS-TROUBLED> 103
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,554
<CHARGE-OFFS> 690
<RECOVERIES> 205
<ALLOWANCE-CLOSE> 3,495
<ALLOWANCE-DOMESTIC> 0<F3>
<ALLOWANCE-FOREIGN> 0<F3>
<ALLOWANCE-UNALLOCATED> 835
<FN>
<F1>Includes subordinated capital notes of $356 million.
<F2>Includes interest income on trading account assets of $463 million.
<F3>These amounts are not reported in our interim filing.
</FN>
</TABLE>
