<PAGE>
BankAmerica Corporation Analytical Review and Form 10-Q
[Bank America Logo goes here]
1 9 9 6
3rd 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 September 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 ------ 358,825,724 shares outstanding on
September 30, 1996./*/
/*/ In addition, 28,465,838 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
Operating and Financial Leverage....................... 19
Results of Operations:
Net Interest Income.................................. 20
Noninterest Income................................... 24
Noninterest Expense.................................. 26
Income Taxes......................................... 27
Balance Sheet Review:.................................. 28
Credit Card Securitization........................... 29
Credit Risk Management:
Loan Portfolio Management............................ 31
Domestic Consumer Loans............................ 32
Domestic Commercial Loans.......................... 33
Foreign Loans...................................... 34
Emerging Market Exposure............................. 34
Allowance for Credit Losses.......................... 35
Nonperforming Assets................................. 37
Foreign Exchange and Derivatives Contracts............. 40
Interest Rate Risk Management.......................... 41
Funding and Capital:
Liquidity Review..................................... 43
Capital Management................................... 43
- --------------------------------------------------------------------------------
Part II Item 6.
OTHER INFORMATION Exhibits and Reports on Form 8-K....................... 45
Signatures............................................. 46
================================================================================
1
<PAGE>
FINANCIAL STATEMENTS
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
====================================================================================================================================
1996 1995 NINE MONTHS ENDED
------------------ ----------------------------- SEPTEMBER 30
THIRD SECOND FIRST FOURTH THIRD -------------------
(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 $3,371 $3,307 $3,297 $3,287 $3,244 $ 9,975 $ 9,420
Interest-bearing deposits in banks 95 96 117 119 115 308 347
Federal funds sold 9 7 6 5 10 22 27
Securities purchased under resale agreements 178 176 155 147 160 509 471
Trading account assets 268 247 216 200 189 731 541
Available-for-sale and held-to-maturity securities 285 293 298 313 326 876 963
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 4,206 4,126 4,089 4,071 4,044 12,421 11,769
INTEREST EXPENSE
Deposits 1,332 1,307 1,314 1,307 1,262 3,953 3,616
Federal funds purchased 17 20 22 35 27 59 96
Securities sold under repurchase agreements 201 176 163 147 154 540 434
Other short-term borrowings 243 208 178 168 162 629 462
Long-term debt 254 249 254 265 272 757 802
Subordinated capital notes 7 7 12 12 11 26 34
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,054 1,967 1,943 1,934 1,888 5,964 5,444
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,152 2,159 2,146 2,137 2,156 6,457 6,325
PROVISION FOR CREDIT LOSSES 235 250 180 130 110 665 310
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 1,917 1,909 1,966 2,007 2,046 5,792 6,015
NONINTEREST INCOME
Deposit account fees 345 346 344 334 329 1,035 969
Credit card fees 92 90 79 84 82 261 231
Trust fees 53 56 63 72 72 172 228
Other fees and commissions 360 333 320 304 323 1,013 965
Trading income 153 178 165 115 132 496 412
Venture capital activities 97 112 110 93 54 319 244
Net gain (loss) on sales
of subsidiaries and
operations 41 83 51 42 - 175 (17)
Net gain on sales of assets 64 21 49 29 27 134 42
Net gain on
available-for-sale
securities 7 4 30 7 17 41 27
Other income 107 97 63 78 121 267 287
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 1,319 1,320 1,274 1,158 1,157 3,913 3,388
NONINTEREST EXPENSE
Salaries 822 814 821 819 839 2,457 2,490
Employee benefits 191 213 202 147 195 606 571
Occupancy 188 186 190 198 185 564 540
Equipment 180 175 163 169 170 518 494
Amortization of intangibles 93 93 95 99 110 281 329
Communications 89 90 92 93 89 271 266
Regulatory fees and
related expenses 95 13 13 23 7 121 153
Other expense 423 413 437 418 398 1,273 1,192
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 2,081 1,997 2,013 1,966 1,993 6,091 6,035
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,155 1,232 1,227 1,199 1,210 3,614 3,368
PROVISION FOR INCOME TAXES 472 509 507 495 506 1,488 1,408
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 683 $ 723 $ 720 $ 704 $ 704 $ 2,126 $ 1,960
- -----------------------------------------------------------=======================================================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 1.75 $ 1.84 $ 1.79 $ 1.74 $ 1.72 $ 5.38 $ 4.75
EARNINGS PER COMMON SHARE -- ASSUMING FULL DILUTION 1.75 1.84 1.79 1.74 1.72 5.38 4.72
DIVIDENDS DECLARED PER COMMON SHARE 0.54 0.54 0.54 0.46 0.46 1.62 1.38
==================================================================================================================================
</TABLE>
See notes to consolidated financal statements.
2
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
=========================================================================================================================
1996 1995
----------------------------------------- -------------------------
(IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,619 $ 12,478 $ 12,870 $ 14,312 $ 12,532
Interest-bearing deposits
in banks 5,829 5,194 5,585 5,761 5,832
Federal funds sold 306 276 143 721 229
Securities purchased under
resale agreements 6,287 7,001 6,198 4,962 6,811
Trading account assets 14,000 12,633 11,215 9,516 9,883
Available-for-sale
securities 11,717 10,964 11,287 12,043 9,979
Held-to-maturity securities 4,200 4,280 4,523 4,656 6,927
Loans 161,833 160,640 156,155 155,373 151,212
Less: Allowance for credit
losses 3,511 3,495 3,496 3,554 3,655
- -------------------------------------------------------------------------------------------------------------------------
Net loans 158,322 157,145 152,659 151,819 147,557
Customers' acceptance
liability 3,165 2,837 2,761 2,295 2,268
Accrued interest receivable 1,435 1,451 1,469 1,458 1,448
Goodwill, net 4,017 4,066 4,115 4,192 4,263
Identifiable intangibles,
net 1,664 1,708 1,753 1,806 2,134
Unrealized gains on
off-balance-sheet
instruments 6,598 7,297 7,551 7,801 8,843
Premises and equipment, net 3,968 3,980 4,010 3,985 4,011
Other assets 7,826 7,531 8,104 7,119 7,209
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $242,953 $238,841 $234,243 $232,446 $229,926
- --------------------------------------------------=======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic
offices:
Interest-bearing $ 83,779 $ 83,954 $ 84,314 $ 84,097 $ 84,345
Noninterest-bearing 37,589 34,737 34,570 36,820 34,231
Deposits in foreign
offices:
Interest-bearing 42,035 41,444 40,127 37,886 35,525
Noninterest-bearing 1,498 1,710 1,506 1,691 1,536
- -------------------------------------------------------------------------------------------------------------------------
Total deposits 164,901 161,845 160,517 160,494 155,637
Federal funds purchased 1,093 2,740 2,125 5,160 3,110
Securities sold under
repurchase agreements 8,489 8,861 7,640 6,383 7,187
Other short-term borrowings 16,263 14,530 11,523 7,627 10,289
Acceptances outstanding 3,165 2,837 2,761 2,295 2,268
Accrued interest payable 868 833 842 848 811
Unrealized losses on
off-balance-sheet
instruments 6,458 7,310 7,719 8,227 9,547
Other liabilities 5,750 4,824 5,875 5,862 5,334
Long-term debt 15,099 14,597 14,718 14,723 15,277
Subordinated capital notes 355 356 356 605 605
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 222,441 218,733 214,076 212,224 210,065
STOCKHOLDERS' EQUITY
Preferred stock 2,242 2,242 2,423 2,623 2,623
Common stock 605 605 604 602 600
Additional paid-in capital 8,458 8,439 8,384 8,328 8,271
Retained earnings 10,989 10,544 10,067 9,606 9,133
Net unrealized gain (loss)
on available-for-sale
securities (27) (79) (56) 1 (51)
Common stock in treasury,
at cost (1,755) (1,643) (1,255) (938) (715)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS'
EQUITY 20,512 20,108 20,167 20,222 19,861
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $242,953 $238,841 $234,243 $232,446 $229,926
- --------------------------------------------------=======================================================================
See notes to consolidated financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================
NINE MONTHS ENDED SEPTEMBER 30
------------------------------
(IN MILLIONS) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,126 $ 1,960
Adjustments to net income to arrive at net
cash provided (used) by operating activities:
Provision for credit losses 665 310
Net gain on sales of assets and subsidiaries
and operations (309) (25)
Net amortization of loan fees and discounts (57) (80)
Depreciation and amortization of premises
and equipment 441 408
Amortization of intangibles 281 329
Provision for deferred income taxes 466 187
Change in assets and liabilities net of effects
from acquisitions and pending dispositions:
Decrease in accrued interest receivable 22 1
Increase (decrease) in accrued interest payable 22 (20)
Increase in trading account assets (4,484) (2,934)
Increase in current income taxes payable 71 287
Deferred fees received from lending activities 187 101
Net cash used by loans held for sale (553) (883)
Other, net (1,240) 1,330
- --------------------------------------------------------------------------------
Net cash provided (used) by operating activities (2,362) 971
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales proceeds 1,127 2,094
Maturities, prepayments, and calls 4,483 4,086
Purchases (5,205) (5,644)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 934 2,080
Purchases (515) (691)
Proceeds from loan sales and securitizations 3,194 1,281
Purchases of loans (2,407) (970)
Purchases of premises and equipment (479) (501)
Proceeds from sales of other real estate owned 392 392
Net cash provided (used) by:
Loan originations and principal collections (8,735) (10,093)
Interest-bearing deposits in banks (71) 400
Federal funds sold 415 411
Securities purchased under resale agreements (1,325) (1,552)
Cash used by acquisitions (54) (2)
Other, net 252 81
- --------------------------------------------------------------------------------
Net cash used by investing activities (7,994) (8,628)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 2,864 2,563
Principal payments and retirements of long-term debt
subordinated capital notes (2,442) (2,077)
Proceeds from issuance of common stock 83 117
Proceeds from issuance of treasury stock 46 --
Preferred stock repurchased (391) (206)
Treasury stock purchased (901) (704)
Common stock dividends (587) (515)
Preferred stock dividends (141) (174)
Net cash provided (used) by:
Deposits 4,466 1,242
Federal funds purchased (4,067) (173)
Securities sold under repurchase agreements 2,106 1,682
Other short-term borrowings 8,636 4,944
Other, net (18) (94)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 9,654 6,605
Effect of exchange rate changes on cash and
due from banks 9 6
- -------------------------------------------------------------------------------
Net decrease in cash and due from banks (693) (1,046)
Cash and due from banks at beginning of period 14,312 13,578
- -------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 13,619 $12,532
- --------------------------------------------------=============================
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=============================================================================================================
1996 1995
-------------------------------- ----------------------
THIRD SECOND FIRST FOURTH THIRD
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of quarter $ 2,242 $ 2,423 $ 2,623 $ 2,623 $ 2,723
Preferred stock repurchased - (181) (200) - (100)
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter 2,242 2,242 2,423 2,623 2,623
COMMON STOCK
Balance, beginning of quarter 605 604 602 600 598
Common stock issued - 1 2 2 2
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter 605 605 604 602 600
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of quarter 8,439 8,384 8,328 8,271 8,213
Common stock issued 8 55 74 57 67
Preferred stock repurchased - - (18) - (9)
Treasury stock issued 11 - - - -
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter 8,458 8,439 8,384 8,328 8,271
RETAINED EARNINGS
Balance, beginning of quarter 10,544 10,067 9,606 9,133 8,663
Net income 683 723 720 704 704
Common stock dividends (194) (195) (198) (169) (171)
Preferred stock dividends (43) (45) (53) (53) (56)
Foreign currency translation adjustments,
net of related income taxes (1) (6) (8) (9) (7)
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter 10,989 10,544 10,067 9,606 9,133
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES
Balance, beginning of quarter (79) (56) 1 (51) (69)
Valuation adjustments, net of related income taxes 52 (23) (57) 52 18
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter (27) (79) (56) 1 (51)
COMMON STOCK IN TREASURY, AT COST
Balance, beginning of quarter (1,643) (1,255) (938) (715) (508)
Treasury stock purchased (200) (385) (316) (222) (230)
Treasury stock issued 98 1 - - 29
Other (10) (4) (1) (1) (6)
- -------------------------------------------------------------------------------------------------------------
Balance, end of quarter (1,755) (1,643) (1,255) (938) (715)
- -------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $20,512 $ 20,108 $ 20,167 $ 20,222 $ 19,861
- ---------------------------------------------------==========================================================
See notes to consolidated financial statements.
5
</TABLE>
<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 nine-month periods ended September 30, 1996 and
SUPPLEMENTAL 1995, BAC made interest payments on deposits and other
DISCLOSURE OF CASH interest-bearing liabilities of $5,942 million and
FLOW INFORMATION $5,464 million, respectively, and made net income tax
payments of $951 million and $906 million, respectively.
During the nine-month periods ended September 30, 1996 and
1995, there were foreclosures of loans with carrying values
of $358 million and $380 million, respectively. In
addition, loans made to facilitate the sale of other real
estate owned totaled $10 million and $4 million,
respectively.
- --------------------------------------------------------------------------------
NOTE 3. During the nine-month period ended September 30, 1996, BAC
AVAILABLE-FOR-SALE sold available-for-sale securities for aggregate proceeds
AND HELD-TO-MATURITY of $1,127 million, resulting in gross realized gains of
SECURITIES $63 million and gross realized losses of $22 million.
During the nine-month period ended September 30, 1995,
BAC sold available-for-sale securities for aggregate
proceeds of $2,094 million, resulting in gross realized
gains of $189 million and gross realized losses of $162
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>
September 30, 1996 $11,717 $11,765 $3,892 $4,200
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
</TABLE>
6
<PAGE>
================================================================================
During the nine-month periods ended September 30, 1996 and
1995, trading income included net unrealized holding gains
on trading securities of $28 million and $34 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 nine months ended September 30, 1996, the Parent
repurchased 12.3 million shares of its common stock under
the current and pre-existing stock repurchase programs at
an average per-share price of $73.25. These transactions
reduced stockholders' equity by $901 million.
On March 31, 1996, the Parent redeemed all 400,000
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 at the redemption date.
The remaining buyback and redemption authorities for common
stock and preferred stock under the current program totaled
$1.3 billion and $0.8 billion, respectively, at September
30, 1996.
7
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
================================================================================
NOTE 5. The following is a summary of the components of income tax
INCOME TAXES expense:
<TABLE>
<CAPTION>
1996 1995 NINE MONTHS ENDED
--------------------------- ----------------- SEPTEMBER 30
THIRD SECOND FIRST FOURTH THIRD ------------------
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
--------------------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES
<S> <C> <C> <C> <C> <C> <C> <C>
Federal $301 $361 $362 $355 $354 $1,024 $1,004
State and local 90 95 93 74 91 278 260
Foreign 81 53 52 66 61 186 144
--------------------------------------------------------------------------------------------------------
$472 $509 $507 $495 $506 $1,488 $1,408
----------------------------------------================================================================
</TABLE>
BAC's estimated annual effective income tax rates for the
three-month periods ended September 30, 1996 and 1995 were
41.2 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 6. Earnings per common share have been computed based on the
EARNINGS PER following:
COMMON SHARE
<TABLE>
<CAPTION>
1996 1995 NINE MONTHS ENDED
--------------------------- ----------------- SEPTEMBER 30
(DOLLAR AMOUNTS IN MILLIONS, THIRD SECOND FIRST FOURTH THIRD ------------------
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 $640 $678 $667 $651 $648 $1,985 $1,786
Average number of common
shares outstanding 359,017 361,858 366,067 368,300 371,871 362,314 371,876
Average number of common
and common equivalent
shares outstanding 365,672 368,543 372,385 374,283 376,643 368,866 375,950
Average number of common
shares outstanding --
assuming full dilution 365,885 368,591 373,548 374,669 377,421 369,341 379,248
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7. In the ordinary course of business, BAC enters into
OFF-BALANCE-SHEET various 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 defaults, and the value of any existing
collateral become worthless.
8
<PAGE>
================================================================================
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ------------------
(IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $37,271 $36,978 $35,982 $34,465 $34,445
Other commitments to extend credit/a/ 92,965 97,954 95,790 94,524 95,517
Standby letters of credit and financial
guarantees/b/ 16,486 17,121 16,344 16,336 15,675
Commercial letters of credit 3,833 4,596 4,236 4,128 4,342
- ------------------------------------------------------------------------------------------------------------------------------
</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 $2,940 million at September 30, 1996,
$2,619 million at June 30, 1996, $2,619 million at March 31, 1996, $2,383
million at December 31, 1995, and $2,607 million at September 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 conjuction 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
------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------------------------ -----------------------------------
NOTIONAL CREDIT CREDIT NOTIONAL CREDIT CREDIT
(IN MILLIONS) AMOUNT RISK/a/ EXPOSURE/b/ AMOUNT RISK/b/ EXPOSURE/b/
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $ 443,941 $ 8,176 $3,024/c/ $ 418,240 $ 8,647 $2,787/c/
Futures and forward rate contracts:
Commitments to purchase 177,392 60 60 160,126 9 9
Commitments to sell 209,706 295 295 190,538 381 381
Written options 35,173 -/d/ -/d/ 35,217 -/d/ -/d/
Purchased options 48,926 399 291 45,351 494 390
------------------------------------------------------------------------------------------------------------------------------
915,138 8,930 3,670 849,472 9,531 3,567
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 727,551 6,165 1,603 592,441 8,781 2,553
Written options 37,466 -/d/ -/d/ 21,095 -/d/ -/d/
Purchased options 35,545 281 212 20,244 395 268
Currency swaps 26,673 1,161 1,070 23,085 1,517 1,403
------------------------------------------------------------------------------------------------------------------------------
827,235 7,607 2,885 656,865 10,693 4,224
Stock index options and
commodity contracts 1,168 51 43 878 12 10
------------------------------------------------------------------------------------------------------------------------------
$1,743,541/e/ $16,588 $6,598 $1,507,215/f/ $20,236 $7,801
----------------------------------------------================================================================================
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996 DECEMBER 31, 1995
--------------------------- -------------------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/a/ AMOUNT RISK/a/
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $33,342 $ 30 $33,543 $155
Futures and forward rate contracts 51,301 - 28,702 -
Purchased options 10,700 75 9,200 60
------------------------------------------------------------------------------------------------------------------------------
96,343 105 71,445 215
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 1,869 - 1,900 -
Currency swaps 627 - 430 61
------------------------------------------------------------------------------------------------------------------------------
2,496 - 2,330 61
------------------------------------------------------------------------------------------------------------------------------
$97,839/e/ $105 $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 $12.1 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 $2.3 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 counterparts 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
-------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 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 $ 3,062 $ 3,024 $ 2,522 $ 2,787
Liabilities (2,778) (2,614) (2,258) (2,605)
Futures and forward rate contracts:
Assets 333 355 319 390
Liabilities (323) (372) (291) (373)
Written options (244) (249) (222) (237)
Purchased options 280 291 263 390
-------------------------------------------------------------------------------------------------------------------------
330 435 333 352
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts:
Assets 2,355 1,603 3,979 2,553
Liabilities (2,718) (1,872) (4,429) (3,048)
Written options (340) (229) (431) (355)
Purchased options 284 212 403 268
Currency swaps:
Assets 1,169 1,070 1,762 1,403
Liabilities (1,397) (1,109) (2,062) (1,600)
-------------------------------------------------------------------------------------------------------------------------
(647) (325) (778) (779)
Stock index options and commodity contracts:
Assets 22 43 13 10
Liabilities (21) (13) (8) (9)
-------------------------------------------------------------------------------------------------------------------------
1 30 5 1
-------------------------------------------------------------------------------------------------------------------------
$ (316) $ 140 $ (440) $ (426)
----------------------------------------------===========================================================================
<CAPTION>
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR ASSET AND LIABILITY
MANAGEMENT PURPOSES
-------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS) SEPTEMBER 30, 1996 DECEMBER 31, 1995
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $(585) $ 33
Futures and forward rate contracts (5) 56
Purchased options (23) 3
-------------------------------------------------------------------------------------------------------------------------
(613) 92
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts (42) -
Currency swaps - 47
-------------------------------------------------------------------------------------------------------------------------
(42) 47
-------------------------------------------------------------------------------------------------------------------------
$(655) $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 NINE MONTHS ENDED
------------------------- ----------------- SEPTEMBER 30
THIRD SECOND FIRST FOURTH THIRD -----------------
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TRADING INCOME
Interest rate $ 17 $ 8 $ 12 $ 20 $ 13 $ 37 $ 47
Foreign exchange 64 90 98 66 74 252 237
Debt instruments 72 80 55 29 45 207 128
------------------------------------------------------------------------------------------------
$153 $ 178 $165 $ 115 $132 $ 496 $ 412
-------------------------------=================================================================
OTHER TRADING-RELATED INCOME/a/
Interest rate $ 5 $ 7 $ 6 $ 18 $ 7 $ 18 $ 12
Foreign exchange 4 7 6 9 10 17 19
Debt instruments 52 59 44 38 37 155 114
------------------------------------------------------------------------------------------------
$ 61 $ 73 $ 56 $ 65 $ 54 $ 190 $ 145
-------------------------------=================================================================
</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 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 September 30, 1996 were not
significantly different from those at year-end 1995.
SECURITIES LENDING
BAC completed the divestiture of its securities lending
portfolio during the third quarter of 1996 following its
decision in 1995 to exit the institutional trust and securities
services business. Securities lending transactions were
conducted primarily for institutional trust customers and, at
times, these customers were indemnified against various losses.
All securities lending transactions were 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) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Indemnified securities lent $ - $73 $ 134 $207 $894
Associated collateral - 75 135 209 909
-----------------------------------------------------------------------------------------------------
</TABLE>
Note 8. On September 30, 1996, Congress passed legislation that would
SPECIAL DEPOSIT recapitalize the Savings Association Insurance Fund (SAIF) to
ASSESSMENT 1.25 percent of insured deposits as prescribed by the Federal
Deposit Insurance Corporation Improvement Act. This legislation
imposed a one-time assessment on SAIF deposits held on March
31, 1995. BAC recognized a charge of $82 million in the third
quarter of 1996 as a result of this assessment.
In conjunction with the SAIF recapitalization, the Federal
Deposit Insurance Corporation has proposed lowering the rates
on assessments paid to the SAIF, and widening the spread of the
rates between institutions. Under the proposal, the effective
SAIF rates would be zero for well-capitalized and well-managed
institutions.
In addition, beginning January 1, 1997, Bank Insurance Fund
(BIF) member institutions will begin sharing in the cost of
funding Financing Corporation (FICO) interest payments. The
cost of funding these interest payments will be in the form of
an assessment on both BIF and SAIF insured deposits. The
assessment rate will be lower for BIF deposits than for SAIF
deposits. Actual rates will fluctuate over time depending on
the amount of deposits insured by the BIF and SAIF at the time
the assessment is made.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
================================================================================
The following is a summary of third-quarter 1996 financial
information for BankAmerica Corporation and subsidiaries (BAC).
. BAC reported third-quarter 1996 earnings per share and net
income of $1.75 and $683 million, respectively, compared
with $1.72 and $704 million for the same period a year ago.
Net income includes a one-time assessment of $82 million
associated with the recapitalization of the Savings
Association Insurance Fund (SAIF). Excluding the effect of
this assessment, earnings per share and net income for the
third quarter of 1996 would have been $1.88 and $731
million, respectively, which would represent increases of 9
percent and 4 percent compared with the same period a year
ago.
. As part of its efforts to strategically redeploy capital,
BAC entered into the following transactions in the third
quarter of 1996:
- Acquisition of approximately $1.8 billion of
lease-related financial assets from subsidiaries of
Ford Motor Company;
- Securitization of $500 million of credit card receivables
from BAC's $9.5 billion managed credit card portfolio and
the sale of $1.4 billion of conforming fixed-rate first
mortgages from BAC's $37 billion mortgage portfolio;
- Signing of definitive agreements to divest 68 branches
in Texas.
. Net interest income was down $4 million from the amount
reported in the third quarter of 1995. Excluding the effect
of the credit card securitization discussed above, net
interest income would have increased $6 million from the
third quarter of 1995. BAC's net interest margin for the
third quarter of 1996 was 4.17 percent, down 35 basis points
from the third quarter of 1995.
. Noninterest income increased $162 million, or 14 percent,
from the third quarter of 1995. Third-quarter 1996
noninterest income included gains on the liquidation of an
Australian subsidiary ($43 million) and a reduction of BAC's
equity interest in KorAm Bank, an Asian investment ($39
million).
. Excluding the effect of the one-time SAIF assessment of $82
million, noninterest expense would have been essentially
unchanged from the third quarter of 1995. BAC's expense-to-
revenue ratio, excluding the effect of the SAIF assessment,
would have been 54.47 percent in the third quarter of 1996,
a decrease of 67 basis points from 55.14 percent in the
previous quarter.
. Nonaccrual assets decreased $369 million, or 25 percent,
between June 30, 1996 and September 30, 1996. Net credit
losses were $226 million for the third quarter of 1996, a
decline of $20 million, or 8 percent, from the second
quarter of 1996, but up $75 million, or 50 percent, from the
comparable quarter a year ago. The provision for credit
losses was $235 million, down $15 million from the second
quarter of 1996, but up $125 million from the third quarter
of 1995.
. In connection with BAC's ongoing efforts to return excess
capital to its shareholders, BAC repurchased 2.5 million
shares of its common stock during the third quarter of 1996
at an average per-share price of $78.48, which reduced
stockholders' equity by $200 million.
14
<PAGE>
================================================================================
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 NINE MONTHS ENDED
----------------------------- ------------------ SEPTEMBER 30
(DOLLAR AMOUNTS IN MILLIONS, THIRD SECOND FIRST FOURTH THIRD --------------------
EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 4,206 $ 4,126 $ 4,089 $ 4,071 $ 4,044 $ 12,421 $ 11,769
Interest expense 2,054 1,967 1,943 1,934 1,888 5,964 5,444
- -------------------------------------------------------------------------------------------------------------------------------
Net interest income 2,152 2,159 2,146 2,137 2,156 6,457 6,325
Provision for credit losses 235 250 180 130 110 665 310
Noninterest income 1,319 1,320 1,274 1,158 1,157 3,913 3,388
Noninterest expense 2,081 1,997 2,013 1,966 1,993 6,091 6,035
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,155 1,232 1,227 1,199 1,210 3,614 3,368
Provision for income taxes 472 509 507 495 506 1,488 1,408
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 683 $ 723 $ 720 $ 704 $ 704 $ 2,126 $ 1,960
- -------------------------------------------------------------------------------------------------------------------------------
ADJUSTED NET INCOME/A/ $ 731 NA NA NA NA $ 2,174 NA
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Earnings per common and common equivalent share:
As reported $ 1.75 $ 1.84 $ 1.79 $ 1.74 $ 1.72 $ 5.38 $ 4.75
As adjusted/a/ 1.88 NA NA NA NA 5.51 NA
Earnings per common share -- assuming full dilution:
As reported 1.75 1.84 1.79 1.74 1.72 5.38 4.72
As adjusted/a/ 1.88 NA NA NA NA 5.51 NA
Dividends declared per common share 0.54 0.54 0.54 0.46 0.46 1.62 1.38
- -------------------------------------------------------------------------------------------------------------------------------
STOCK DATA
Book value per common share at period end $ 50.92 $ 49.64 $ 48.74 $ 47.90 $ 46.59 $ 50.92 $ 46.59
Common stock price range:
High 85 1/4 80 3/8 79 1/8 68 1/2 61 1/8 85 1/4 61 1/8
Low 72 69 3/4 58 3/4 57 52 1/2 58 3/4 39 1/2
Closing common stock price 82 1/8 75 3/4 77 1/2 64 3/4 59 7/8 82 1/8 59 7/8
Average number of common and common
equivalent shares outstanding (in thousands) 365,672 368,543 372,385 374,283 376,643 368,866 375,980
Average number of common shares outstanding
-- assuming full dilution (in thousands) 365,885 368,591 373,548 374,669 377,421 369,341 379,248
Number of common shares outstanding at period
end (in thousands) 358,826 359,893 364,082 367,447 369,998 358,826 369,998
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Loans $161,833 $160,640 $156,155 $155,373 $151,212 $161,833 $151,212
Total assets 242,953 238,841 234,243 232,446 229,926 242,953 229,926
Deposits 164,901 161,845 160,517 160,494 155,637 164,901 155,637
Long-term debt and subordinated capital notes 15,454 14,953 15,074 15,328 15,882 15,454 15,882
Common equity 18,270 17,866 17,744 17,599 17,238 18,270 17,238
Total equity 20,512 20,108 20,167 20,222 19,861 20,512 19,861
- -------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Expense to revenue/b/ 56.82% 55.14% 55.83% 56.58% 56.38% 55.92% 58.59%
Expense to revenue, as adjusted/ab/ 54.47 NA NA NA NA 55.13 NA
Rate of return (based on net income) on:
Average common equity 14.16 15.42 15.19 14.96 15.09 14.92 14.44
Average common equity, as adjusted/a/ 15.23 NA NA NA NA 15.28 NA
Average total equity 13.44 14.56 14.28 14.05 14.14 14.09 13.47
Average total equity, as adjusted/a/ 14.40 NA NA NA NA 14.41 NA
Average total assets 1.12 1.21 1.22 1.20 1.21 1.18 1.16
Average total equity, as adjusted/a/ 1.19 NA NA NA NA 1.21 NA
- -------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Ratio of common equity to total assets 7.52% 7.48% 7.58% 7.57% 7.50% 7.52% 7.50%
Ratio of total equity to total assets 8.44 8.42 8.61 8.70 8.64 8.44 8.64
Ratio of average total equity to average total assets 8.31 8.29 8.55 8.55 8.59 8.39 8.63
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Adjusted to exclude the income statement effect of the previously discussed
one-time SAIF assessment that increased noninterest expense by $82 million
in the third quarter of 1996.
/b/ Excludes net other real estate owned expense and amortization of
intangibles.
NA-Not applicable.
15
<PAGE>
BUSINESS SECTORS
================================================================================
SELECTED BUSINESS SECTOR DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30/a/
U.S. CORPORATE AND
TOTAL CONSUMER BANKING/b/ 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 $6,457 $6,325 $4,173 $4,003 $1,109 $ 986 $ 632 $ 640
Provision for credit losses 665 310 767 481 (23) 20 (25) (1)
Noninterest income 3,913 3,388 1,756 1,456 1,682 1,423 159 150
Noninterest expense 6,091 6,035 3,577 3,505 1,430 1,357 382 387
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 3,614 3,368 1,585 1,473 1,384 1,032 434 404
Provision for income taxes 1,488 1,408 670 620 532 423 178 169
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 2,126 1,960 915 853 852 609 256 235
Preferred stock dividends 141 174 54 64 40 51 12 14
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON EQUITY $1,985 $1,786 $ 861 $ 789 $ 812 $ 558 $ 244 $ 221
- ---------------------------------------=========================================================================================
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
Loans $157,421 $145,254 $82,190 $74,464 $41,501 $39,540 $18,569 $16,931
Earning assets 202,303 186,743 80,893 73,084 71,721 65,626 18,175 16,610
Total assets 240,636 225,475 90,880 82,428 90,901 85,771 20,614 19,371
Deposits 161,123 152,882 95,456 95,531 44,787 36,127 7,318 7,566
Common equity 17,777 16,542 6,832 6,084 5,082 4,848 1,468 1,295
SELECTED FINANCIAL RATIOS
Return on average common equity 14.92% 14.44% 16.83% 17.34% 21.34% 15.38% 22.19% 22.88%
Expense to revenue/c/ 55.92 58.59 55.46 58.00 49.22 53.77 44.41 44.55
================================================================================================================================
</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 that allocates
revenues, expenses, assets, and liabilities to each
business. Furthermore, for internal business sector
monitoring, the unallocated allowance for credit losses and
related provision for credit losses are assigned to the
businesses. Equity is assigned to each business 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 businesses 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 sector. 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>
- ----------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 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 $ 334 $ 359 $ 137 $ 130 $ 72 $ 207
Provision for credit losses (36) (205) 1 (2) (19) 17
Noninterest income 24 26 288 260 4 73
Noninterest expense 75 92 326 315 301 379
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 319 498 98 77 (206) (116)
Provision for income taxes 130 208 39 31 (61) (43)
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 189 290 59 46 (145) (73)
PREFERRED STOCK DIVIDENDS 7 9 4 4 24 32
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON EQUITY $ 182 $ 281 $ 55 $ 42 $ (169) $ (105)
- -----------------------------------------------------=================================================================
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
Loans $10,542 $10,331 $4,309 $3,681 $ 310 $ 307
Earning assets 9,987 9,791 4,259 3,683 17,268 17,949
Total assets 10,512 10,204 4,865 4,332 22,864 23,369
Deposits 2,122 1,568 6,935 5,670 4,505 6,420
Common equity 824 857 457 399 3,114 3,059
SELECTED FINANCIAL RATIOS
Return on average common equity 29.64% 43.80% 16.11% 13.93% NM NM
Expense to revenue/c/ 23.07 25.75 72.12 75.76 NM NM
======================================================================================================================
</TABLE>
/a/ For comparability purposes, both 1996 and 1995 amounts reflect BAC's
business-sector allocation methodologies at September 30, 1996.
/b/ Includes the income statement effect of the one-time assessment to
recapitalize SAIF, which is more fully described on page 26.
/c/ Excludes net other real estate owned expense and amortization of
intangibles.
NM - Not meaningful.
Consumer Banking--Consumer Banking's net income for the
first nine months of 1996 was up $62 million, or 7 percent,
from the amount reported for the same period last year. This
increase largely reflected growth in the residential and
consumer installment loan portfolios, as well as in the
credit card portfolio. Included in this sector's net income
is a one-time assessment of $82 million associated with the
recapitalization of the SAIF. Excluding the effect of this
assessment, net income for the nine months ended September
30, 1996 would have been $963 million, up $110 million, or
13 percent, from the same period a year ago.
Net interest income was up from the first nine months of
1995 primarily due to increased loan volumes. Noninterest
income increased due to higher revenues from service fees
and charges associated with deposit accounts, an $82 million
gain on the sale of a Hong Kong consumer and commercial
subsidiary, and increased gains on loan sales. The increases
in net interest and noninterest income, coupled with BAC's
efforts to keep noninterest expense at targeted levels,
resulted in an expense-to-revenue ratio, excluding the
effect of the one-time SAIF assessment, of 55.17 percent for
the first nine months of 1996, a decrease from 58.00 percent
for the first nine months of 1995. The provision for credit
losses increased $286 million primarily as a result of
growth in the consumer loan portfolio. Average loan
outstandings grew $7.7 billion, or 10 percent, from the
first nine months of 1995, primarily representing growth in
the residential first mortgage, manufactured housing, and
credit card portfolios.
17
<PAGE>
================================================================================
U.S Corporate and International Banking -- U.S. Corporate
and International Banking's net income for the first nine
months of 1996 increased $243 million, or 40 percent,
compared with 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 loan growth, especially
in the foreign portfolios. Noninterest income was up $259
million from the same period a year ago. This increase
resulted primarily from higher trading-related income and
venture capital distributions. In addition, the 1996 amount
included a $43 million gain on the liquidation of an
Australian subsidiary and a $39 million gain that resulted
from a reduction of BAC's equity interest in Koram Bank, an
Asian investment. The 1995 amount included a $50 million
gain on the sale of an asset received in lieu of debt
repayment. The reduction in the provision for credit losses
was primarily a result of improved credit quality.
Noninterest expense increased primarily due to higher group
variable compensation resulting from higher incentive
accruals associated with trading activities. This sector's
expense-to-revenue ratio decreased 455 basis points from the
first nine months of 1995.
Middle Market Banking -- Middle Market Banking's net income
for the first nine months of 1996 increased $21 million, or
9 percent, from the same period of 1995. This increase was
primarily attributable to a reduction in the provision for
credit losses. Net interest income decreased $8 million from
the first nine months 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
decreased due to improved credit quality in the commercial
loan portfolio. Average loan outstandings increased $1.6
billion, or 10 percent, primarily in commercial and
industrial loans.
Commercial Real Estate -- Commercial Real Estate's net
income for the first nine months of 1996 decreased $101
million, or 35 percent, from the first nine months of 1995,
largely due to the effect of lower credit recoveries on the
provision for credit losses, primarily related to
construction loans. The provision for credit losses changed
from ($205) million in the first nine months of 1995 to
($36) million in the first nine months of 1996.
Private Banking and Investment Services -- Private Banking
and Investment Services' net income increased $13 million,
or 28 percent, for the first nine months 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 as well as higher
trust-related fees. 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 allocation of interest rate risk
hedging to the appropriate businesses. 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 $145 million in the first nine
months of 1996, compared with a net loss of $73 million in
the same period a year ago. This 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
during 1996 associated with the divestiture of BAC's ITSS
business.
18
<PAGE>
================================================================================
OPERATING AND BAC's results for the third quarter and the first nine
FINANCIAL LEVERAGE months of 1996 demonstrated BAC's ability to manage its
operating and financial leverage.
By managing expenses and repurchasing and redeeming
stock, as discussed below, excluding the effect of the
SAIF assessment, BAC's performance would have resulted
in increases in net income for the third quarter and
first nine months of 1996 of 4 percent and 11 percent,
respectively, as well as increases in fully diluted
earnings per share of 9 percent and 17 percent,
respectively, compared to the same periods in 1995.
Operating Leverage is achieved when the rate of revenue
growth exceeds that of expenses. As shown in the table
below, excluding the effect of the SAIF assessment,
revenue for the third quarter and first nine months of
1996 would have increased 5 percent and 7 percent,
respectively, from the same periods in 1995, while
noninterest expense would have remained essentially
unchanged.
Financial Leverage is achieved when the rates of growth
in common shares outstanding and preferred dividends are
below that of net income. Excluding the effect of the
SAIF assessment, growth in net income for the third
quarter and first nine months of 1996 would have been 4
percent and 11 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 for both the third quarter
and the first nine months of 1996 from the comparable
periods in 1995. Additionally, preferred dividends for
the third quarter and the first nine months of 1996
decreased 23 percent and 19 percent, respectively, from
the same periods in 1995.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING AND FINANCIAL LEVERAGE
- -------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30
--------------------- PERCENTAGE ---------------------- PERCENTAGE
(DOLLAR AMOUNTS IN MILLIONS) 1996/a/ 1995 CHANGE 1996/a/ 1995 CHANGE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING LEVERAGE COMPONENTS
Net interest income $2,152 $2,156 -% $ 6,457 $6,325 2%
Noninterest income 1,319 1,157 14 3,913 3,388 15
- -------------------------------------------------------------------------------------------------------------------------------
Total revenue 3,471 3,313 5 10,370 9,713 7
Noninterest expense 1,999 1,993 - 6,009 6,035 -
- -------------------------------------------------------------------------------------------------------------------------------
Operating income/b/ 1,472 1,320 12 4,361 3,678 19
Provision for credit losses 235 110 114 665 310 115
Provision for income taxes 506 506 - 1,522 1,408 8
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL LEVERAGE COMPONENTS
Net income 731 704 4 2,174 1,960 11
Preferred stock dividends 43 56 (23) 141 174 (19)
Earnings per common share --
assuming full dilution 1.88 1.72 9 5.51 4.72 17
Average number of common shares
outstanding -- assuming full dilution 365,885 377,421 (3) 369,341 379,248 (3)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Adjusted to exclude the income statement effect of the previously discussed
one-time SAIF assessment of $82 million in the third quarter of 1996.
/b/ Represents net income before the provisions for credit losses and income
taxes.
19
<PAGE>
RESULTS OF OPERATIONS
================================================================================
NET INTEREST Taxable-equivalent net interest income for the third quarter
INCOME and first nine months of 1996 was $2,157 million and $6,468
million, respectively, a decrease of $6 million and an
increase of $123 million, compared to the same periods a
year ago. Excluding the effect of a credit card
securitization in the third quarter of 1996,
taxable-equivalent net interest income would have increased
$4 million and $133 million from the third quarter and first
nine months of 1995, respectively. The increase for the
first nine months of 1996, compared to the same period a
year ago, resulted primarily from growth in earning assets,
partially offset by a decrease in the net interest margin.
Average earning assets totaled $206.6 billion and $202.3
billion for the third quarter and first nine months of 1996,
respectively, up $15.7 billion and $15.6 billion from the
same periods in 1995. These increases primarily reflected
broad-based growth in the loan portfolio as average loans
increased $10.9 billion and $12.2 billion from the third
quarter and first nine months of 1995, respectively. In
addition, other average earning assets rose $4.8 billion and
$3.4 billion from the third quarter and first nine months of
1995, respectively.
BAC's net interest margin for the third quarter and first
nine months of 1996 was 4.17 percent and 4.26 percent,
respectively, down 35 and 27 basis points from the
comparable periods a year ago. The yield on average earning
assets declined, with no corresponding decline in the cost
of funds. The yield on average earning assets decreased 32
basis points and 23 basis points from the third quarter and
first nine months of 1995, respectively, due to lower
prevailing market rates. No corresponding decrease in the
cost of funds occurred as the rates on domestic interest-
bearing deposits, the largest component of interest-bearing
liabilities, increased. In addition, BAC has experienced a
shift in the mix of liabilities toward wholesale funding
sources, including foreign interest-bearing deposits and
domestic purchased funds, which are more costly than
traditional core deposits. Growth in lower-yielding average
earning assets other than loans also 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. Hedging with derivative financial instruments
reduced net interest income by approximately $5 million in
the third quarter and increased it by approximately $25
million in the first nine months of 1996. During the third
quarter and first nine months of 1995, hedging increased net
interest income by approximately $10 million and $50
million, respectively. The effect of the hedging amounts on
the net interest margin for both the third quarter and first
nine months of 1996 as well as the comparable periods of
1995 was less than 5 basis points.
20
<PAGE>
================================================================================
[THIS PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE>
================================================================================
Average Balances, Interest, and Average Rates
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Third Quarter 1996
---------------------------------
(dollar amounts in millions) Balance\a\ Interest\b\ Rate\b\
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest-bearing deposits in banks $ 5,518 $ 95 6.86%
Federal funds sold 664 9 5.38
Securities purchased under resale agreements 11,793 178 6.01
Trading account assets 13,270 269 8.06
Available-for-sale securities\cd\ 11,373 210 7.34
Held-to-maturity securities\c\ 4,221 78 7.40
Domestic loans:
Consumer-residential first mortgages 38,291 715 7.46
Consumer-residential junior mortgages 14,469 311 8.56
Consumer-credit card 8,967 324 14.43
Other consumer 17,635 438 9.88
Commercial and industrial 32,790 636 7.73
Commercial loans secured by real estate 11,696 254 8.69
Construction and development loans
secured by real estate 2,649 82 12.25
Financial institutions 2,742 31 4.51
Lease financing 2,106 32 5.92
Agricultural 1,574 34 8.50
Loans for purchasing or carrying securities 1,167 19 6.51
Other 1,141 19 6.91
-------- ------
Total domestic loans 135,227 2,895 8.54
Foreign loans 24,552 477 7.73
-------- ------
Total loans\d\ 159,779 3,372 8.41
-------- ------
Total earning assets 206,618 $4,211 8.12
======
Nonearning assets 40,684
Less: Allowance for credit losses 3,533
--------
Total Assets $243,769
========
Liabilities and Stockholders' Equity
Domestic interest-bearing deposits:
Transaction $ 13,091 $ 40 1.20%
Savings 12,903 66 2.04
Money market 27,732 225 3.24
Time 30,367 392 5.13
-------- ------
Total domestic interest-bearing deposits 84,093 723 3.42
Foreign interest-bearing deposits:
Banks located in foreign countries 12,120 173 5.68
Governments and official institutions 10,630 139 5.20
Time, savings, and other 18,992 297 6.22
-------- ------
Total foreign interest-bearing deposits 41,742 609 5.80
-------- ------
Total interest-bearing deposits 125,835 1,332 4.21
Federal funds purchased 1,225 17 5.33
Securities sold under repurchase agreements 13,471 201 5.92
Other short-term borrowings 16,104 243 6.01
Long-term debt 14,819 254 6.83
Subordinated capital notes 355 7 8.15
-------- ------
Total interest-bearing liabilities 171,809 $2,054 4.76
======
Domestic noninterest-bearing deposits 34,081
Foreign noninterest-bearing deposits 1,598
Other noninterest-bearing liabilities 16,076
--------
Total liabilities 223,564
Stockholders' equity 20,205
--------
Total Liabilities and Stockholders' Equity $243,769
========
Interest income as a percentage of average earning assets 8.12%
Interest expense as a percentage of average earning assets (3.95)
------
Net Interest Margin 4.17%
======
<CAPTION>
Third Quarter 1995
---------------------------------
(dollar amounts in millions) Balance\a\ Interest\b\ Rate\b\
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest-bearing deposits in banks $ 5,887 $ 115 7.73%
Federal funds sold 663 10 5.87
Securities purchased under resale agreements 9,232 160 6.89
Trading account assets 9,252 191 8.19
Available-for-sale securities\cd\ 9,957 200 8.02
Held-to-maturity securities\c\ 7,055 129 7.30
Domestic loans:
Consumer-residential first mortgages 35,972 651 7.24
Consumer-residential junior mortgages 14,099 319 8.98
Consumer-credit card 8,399 312 14.86
Other consumer 14,395 368 10.14
Commercial and industrial 31,392 660 8.34
Commercial loans secured by real estate 10,642 245 9.21
Construction and development loans
secured by real estate 3,285 89 10.80
Financial institutions 2,531 37 5.76
Lease financing 1,858 29 6.18
Agricultural 1,607 40 9.84
Loans for purchasing or carrying securities 1,184 22 7.24
Other 1,351 22 6.48
-------- ------
Total domestic loans 126,715 2,794 8.78
Foreign loans 22,127 452 8.10
-------- ------
Total loans\d\ 148,842 3,246 8.68
======== ======
Total earning assets 190,888 $4,051 8.44
======
Nonearning assets 42,689
Less: Allowance for credit losses 3,668
Total Assets $229,909
========
Liabilities and Stockholders' Equity
Domestic interest-bearing deposits:
Transaction $ 13,063 $ 39 1.19%
Savings 13,557 71 2.08
Money market 28,576 219 3.03
Time 29,630 382 5.12
-------- ------
Total domestic interest-bearing deposits 84,826 711 3.33
Foreign interest-bearing deposits:
Banks located in foreign countries 10,520 162 6.10
Governments and official institutions 7,417 107 5.74
Time, savings, and other 17,081 282 6.54
-------- ------
Total foreign interest-bearing deposits 35,018 551 6.24
======== ======
Total interest-bearing deposits 119,844 1,262 4.18
Federal funds purchased 1,800 27 6.02
Securities sold under repurchase agreements 9,670 154 6.31
Other short-term borrowings 9,966 162 6.48
Long-term debt 15,463 272 6.98
Subordinated capital notes 605 11 7.52
-------- ------
Total interest-bearing liabilities 157,348 $1,888 4.76
======
Domestic noninterest-bearing deposits 33,515
Foreign noninterest-bearing deposits 1,623
Other noninterest-bearing liabilities 17,670
--------
Total liabilities 210,156
Stockholders' equity 19,753
--------
Total Liabilities and Stockholders' Equity $229,909
========
Interest income as a percentage of average earning assets 8.44%
Interest expense as a percentage of average earning assets (3.92)
------
Net Interest Margin 4.52%
======
- ----------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
----------------------------------
1996
---------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE\A\ INTEREST\B\ RATE\B\
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,662 $ 308 7.26%
Federal funds sold 545 22 5.39
Securities purchased under resale agreements 10,753 509 6.33
Trading account assets 12,257 733 7.99
Available-for-sale securities\cd\ 11,256 638 7.56
Held-to-maturity securities\c\ 4,409 246 7.44
DOMESTIC LOANS:
Consumer-residential first mortgages 37,666 2,111 7.47
Consumer-residential junior mortgages 14,143 913 8.62
Consumer-credit card 9,003 988 14.62
Other consumer 17,043 1,263 9.90
Commercial and industrial 32,775 1,912 7.80
Commercial loans secured by real estate 11,282 749 8.85
Construction and development loans
secured by real estate 2,955 240 10.85
Financial institutions 2,856 95 4.44
Lease financing 2,000 96 6.40
Agricultural 1,599 105 8.76
Loans for purchasing or carrying securities 1,171 58 6.64
Other 1,153 58 6.77
-------- -------
Total domestic loans 133,646 8,588 8.58
Foreign loans 23,775 1,388 7.80
-------- -------
Total loans\d\ 157,421 9,976 8.46
-------- -------
Total earning assets 202,303 $12,432 8.20
=======
Nonearning assets 41,858
Less: Allowance for credit losses 3,525
--------
TOTAL ASSETS $240,636
========
LIABILITIES AND STOCKHOLDERS' EQUITY
DOMESTIC INTEREST-BEARING DEPOSITS:
Transaction $ 13,178 $ 119 1.20%
Savings 13,003 199 2.05
Money market 27,796 662 3.18
Time 30,057 1,130 5.02
-------- -------
Total domestic interest-bearing
deposits 84,034 2,110 3.36
FOREIGN INTEREST-BEARING DEPOSITS:
Banks located in foreign countries 13,169 581 5.89
Governments and official institutios 9,440 372 5.26
Time, savings, and other 18,858 890 6.31
-------- -------
Total foreign interest-bearing deposits 41,467 1,843 5.94
-------- -------
Total interest-bearing deposits 125,501 3,953 4.21
Federal funds purchased 1,472 59 5.32
Securities sold under repurchase agreements 12,117 540 5.95
Other short-term borrowings 13,780 629 6.10
Long-term debt 14,829 757 6.82
Subordinated capital notes 436 26 8.03
-------- -------
Total interest-bearing liabilities 168,135 $ 5,964 4.74
Domestic noninterest-bearing deposits 34,025 =======
Foreign noninterest-bearing deposits 1,597
Other noninterest-bearing liabilities 16,725
--------
Total liabilities 220,482
Stockholders' equity 20,154
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $240,636
========
INTEREST INCOME AS A PERCENTAGE OF AVERAGE EARNING ASSETS 8.20%
INTEREST EXPENSE AS A PERCENTAGE OF AVERAGE EARNING ASSETS (3.94)
-----
NET INTEREST MARGIN 4.26%
=====
<CAPTION>
1995
---------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE\A\ INTEREST\B\ RATE\B\
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,816 $ 347 7.97%
Federal funds sold 600 27 5.98
Securities purchased under resale agreements 9,029 471 6.98
Trading account assets 8,952 545 8.14
Available-for-salesecurities\cd\ 9,707 568 7.81
Held-to-maturity securities\c\ 7,385 405 7.32
DOMESTIC LOANS
Consumer-residential first mortgages 35,089 1,826 6.94
Consumer-residential junior mortgages 13,879 946 9.12
Consumer-credit card 8,057 912 15.09
Other consumer 13,655 1,011 9.89
Commercial and industrial 30,590 1,953 8.53
Commercial loans secured by real estate 10,525 716 9.07
Construction and development loans
secured by real estate 3,410 289 11.34
Financial institutions 2,419 108 5.99
Lease financing 1,821 85 6.25
Agricultural 1,635 119 9.75
Loans for purchasing or carrying securities 1,309 69 7.08
Other 1,389 68 6.54
-------- -------
Total domestic loans 123,778 8,102 8.74
Foreign loans 21,476 1,324 8.24
-------- -------
Total loans\d\ 145,254 9,426 8.67
-------- -------
Total earning assets 186,743 $ 11,789 8.43
Nonearning assets 42,426 =======
Less: Allowance for credit losses 3,694
--------
TOTAL ASSETS $ 225,475
========
LIABILITIES AND STOCKHOLDERS' EQUITY
DOMESTIC INTEREST-BEARING DEPOSITS:
Transaction $ 13,266 $ 118 1.20%
Savings 13,662 212 2.08
Money market 29,337 649 2.96
Time 30,077 1,087 4.83
-------- -------
Total domestic interest-bearing
deposits 86,342 2,066 3.20
FOREIGN INTEREST-BEARING DEPOSITS:
Banks located in foreign countries 9,709 484 6.66
Governments and official institutions 6,645 291 5.85
Time, savings, and other 15,613 775 6.64
-------- -------
Total foreign interest-bearing deposits 31,967 1,550 6.48
-------- -------
Total interest-bearing deposits 118,309 3,616 4.09
Federal funds purchased 2,131 96 6.01
Securities sold under repurchase agreements 9,130 434 6.36
Other short-term borrowings 9,183 462 6.73
Long-term debt 15,175 802 7.07
Subordinated capital notes 605 34 7.60
-------- -------
Total interest-bearing liabilities 154,533 $ 5,444 4.71
Domestic noninterest-bearing deposits 32,913 =======
Foreign noninterest-bearing deposits 1,660
Other noninterest-bearing liabilities 16,915
--------
Total liabilities 206,021
Stockholders' equity 19,454
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 225,475
========
Interest income as a percentage of average earning assets 8.43%
Interest expense as a percentage of average earning assets (3.90)
-----
NET INTEREST MARGIN 4.53%
=====
- ------------------------------------------------------------------------------------------------------
</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/ Refer to the table on page 30 of the Balance Sheet Review section for
more detail on available-for-sale and held-to-maturity securities.
/d/ Average balances include nonaccrual assets.
23
<PAGE>
================================================================================
NONINTEREST Noninterest income for the third quarter and first nine
INCOME months of 1996 was $1,319 million and $3,913 million,
respectively, up $162 million and $525 million from the
comparable periods in 1995. The increases were reflected in
higher fees and commissions, trading income, and other
noninterest income.
Total fees and commissions for the third quarter and first
nine months of 1996 increased $44 million and $88 million,
respectively, from the corresponding periods in 1995,
reflecting BAC's focus on fee-generating activities.
Revenues from retail deposit account fees rose $23 million
and $83 million in the third quarter and first nine months
of 1996,respectively, compared to the same periods in 1995,
primarily due to service fees and charges associated with
deposit accounts. Total credit card fees increased $10
million and $30 million from the third quarter and first
nine months of 1995, respectively, largely due to higher
interchange fees from the introduction of the
VERSATEL(R)Check Card this year. Other fees and commissions
increased by $37 million and $48 million from the third
quarter and first nine months of 1995, respectively,
primarily due to higher loan fees and charges and financial
services fees. Loan fees and charges, net of amortization
expense and valuation adjustments on mortgage servicing
rights, increased $18 million and $16 million from the third
quarter and first nine months of 1995, respectively,
reflecting BAC's expanded mortgage banking activities.
Financial services fees, which include syndication and
brokerage fees, increased $12 million and $9 million from
the third quarter and first nine months of 1995. The
increases in the above categories were partially offset by a
decline in trust fees of $19 million and $56 million for the
third quarter and first nine months of 1996, respectively.
Trust fees declined due to the divestiture of ITSS, and
lower fee revenue from personal trust activities.
Trading income for the third quarter and first nine months
of 1996 increased $21 million and $84 million, respectively,
from the same periods a year ago. The improvement in the
current year is attributable to BAC's 1995 investments in
Latin America and other emerging market debt securities as
well as European securities. For more information on the
functional components of trading income, refer to Note 7 of
the Notes to Consolidated Financial Statements on pages 8-
13.
Other noninterest income increased $97 million and $353
million in the third quarter and first nine months of 1996,
respectively, compared to the same periods a year ago.
Higher income related to venture capital activities, net
gains on sales of subsidiaries and operations, and net gains
on sales of assets, contributed to the increase and were
partially offset by declines in other income.
Noninterest income related to venture capital activities
increased $43 million and $75 million in the third quarter
and first nine months of 1996, respectively, from the
comparable periods in 1995. These increases were primarily
due to realized capital gains and partnership distributions.
The net gain on sales of subsidiaries and operations
increased $41 million and $192 million in the third quarter
and first nine months of 1996, respectively, compared to the
same periods a year ago. Third quarter and year-to-date 1996
amounts included a $39 million gain that resulted from a
reduction of BAC's equity interest in KorAm Bank, an Asian
investment, while year-to-date 1996 included a gain of $82
million from the sale of a Hong Kong consumer and commercial
finance subsidiary and a net gain of $50 million associated
with the divestiture of BAC's ITSS business.
24
<PAGE>
<TABLE>
<CAPTION>
================================================================================
NONINTEREST INCOME
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30
------------------- -------------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEES AND COMMISSIONS
Deposit account fees:
Retail $ 261 $ 238 $ 770 $ 687
Commercial 84 91 265 282
Credit card fees:
Membership 6 12 29 39
Other 86 70 238 192
Trust fees:
Corporate and employee benefit 2 12 15 41
Personal and other 51 60 157 187
Other fees and commissions:
Loan fees and charges 92 74 258 242
Off-balance-sheet
credit-related instrument fees 91 88 264 256
Financial services fees 64 52 152 143
Mutual fund and annuity
commissions 23 21 75 60
Other 90 88 264 264
- --------------------------------------------------------------------------------
850 806 2,481 2,393
- --------------------------------------------------------------------------------
Trading income 153 132 496 412
- --------------------------------------------------------------------------------
OTHER NONINTEREST INCOME
Venture capital activities 97 54 319 244
Net gain (loss) on sales of
subsidiaries and operations 41 - 175 (17)
Net gain on sales of assets/a/ 64 27 134 42
Net gain on available-for-sale
securities 7 17 41 27
Other income 107 121 267 287
- --------------------------------------------------------------------------------
316 219 936 583
- --------------------------------------------------------------------------------
$1,319 $1,157 $3,913 $3,388
================================================================================
</TABLE>
/a/ Net gain on sales of assets includes gains and losses from the
disposition of loans, premises and equipment, and certain other assets.
- --------------------------------------------------------------------------------
Net gain on sales of assets increased $37 million and $92
million in the third quarter and first nine months of 1996,
respectively, compared to the same periods a year ago. These
increases included higher gains on loan sales and gains on sales
of leased personal property, primarily airplanes.
Other income decrease $14 million and $20 million in the third
quarter and first nine months of 1996, respectively, compared to
the same periods a year ago. Third quarter and year-to-date 1996
amounts included a $43 million gain on the liquidation
Australian subsidiary, while year-to-date 1995 included higher
other earnings of $75 million, primarily due to a $50 million
gain from the sale of an asset received in lieu of debt
repayment. In addition, equity income decreased $18 million from
the first nine months of 1995. These decreases were partially
offset by $39 million in higher dividends earned on investments
in the first nine months of 1996.
25
<PAGE>
- --------------------------------------------------------------------------------
NONINTEREST Noninterst expense for the third quarter and first nine months
EXPENSE of 1996 was $2,081 million and $6,091 million, respectively, up
$88 million and $56 million from the comparable periods in
1995. Noninterest expense in the third quarter and first nine
months of 1998 included a one-time assessment associated with
the recapitalization of the SAIF of $82 million, while the
third quarter and first nine months of 1995 included a $65
million refund received from the Federal Deposit Insurance
Corporation (FDIC), both of which are discussed in more detail
below.
Personnel expense (salaries and employee benefits) for the
third quarter of 1996 was $1,013 million, down $21 million from
the third quarter of 1995. Personnel expense for the first nine
months of 1996 was $3,063 million, essentially unchanged from
the same period in 1995. Salary expense decreased by $17
million and $33 million for the third quarter and first nine
months of 1996, respectively, compared to the same periods a
year ago, primarily due to reduced staff levels. The decline in
year-to-date 1996 salaries was more than offset by an increase
of $35 million in employee benefits, primarily attributable to
retirement plan enhancements that became effective January 1,
1996. BAC's staff level on a full-time-equivalent (FTE) basis
was approximately 78,200 at September 30, 1996, down from
approximately 80,200 at September 30, 1995. FTE is a
measurement equal to one full-time employee working a standard
day. BAC had approximately 92,700 employees at September 30,
1996, down from approximately 95,500 at the same date a year
earlier. These amounts include both full-time and part-time
employees.
Regulatory fees and related expenses were $95 million and $121
million for the third quarter and first nine months of 1996,
respectively, up $65 million and down $32 million from the same
periods a year ago. Regulatory fees in the third quarter and
first nine months of 1996 included a one-time assessment of $82
million associated with the recapitalization of the SAIF.
Regulatory fees in the third quarter and first nine months of
1995 include a $85 million refund received from the FDIC.
Approximately $50 million of this refund related to a reduction
of third quarter 1995 insurance rates, while the remaining
portion was applicable to payments made in the second quarter
of 1995 for the month of June. This refund resulted from a
reduction in the FDIC assessment rate announced in 1995. Under
the new rate structure, the well-capitalized and highest rated
banks only pay a membership fee for BIF Insurance, effective
January 1996.
26
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Other expense for the third quarter and first nine months of 1996 increased by $25 million
and $85 million, respectively, compared to the same periods in 1995 and included increases to
litigation and other reserves.
- --------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
- --------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30
------------------------ ------------------------
(IN MILLIONS) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries $ 822 $ 839 $ 2,457 $ 2,490
Employee benefits 191 195 606 571
Occupancy 188 185 564 540
Equipment 180 170 518 494
Amortization of intangibles 93 110 281 329
Communications 89 89 271 266
Regulatory fees and related expenses 95 7 121 153
Other real estate owned expense 15 15 11 15
Other expense 408 383 1,262 1,177
- --------------------------------------------------------------------------------------------------------------------------
$ 2,081 $ 1,993 $ 6,091 $ 6,035
==========================================================================================================================
Full-time-equivalent staff at period end 78,200 80,200 78,200 80,200
Employees at period end 92,700 95,500 92,700 95,500
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCOME The provision for income taxes was $472 million and $506 million
TAXES for the quarters ended September 30, 1996 and 1995, respectively,
reflecting forecasted annual effective income tax rates of 41.2
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 5 of the Notes to Consolidated Financial
Statements on page 8.
27
<PAGE>
Balance Sheet Review
================================================================================
Interest-earning assets totaled $204 billion at September 30,
1996, up $11 billion, or 6 percent, from year-end 1995. Growth
in interest-earning assets, primarily loans, trading account
assets, and securities purchased under resale agreements, was
funded by increases in liabilities, such as short-term
borrowings, foreign interest-bearing deposits, and securities
sold under repurchase agreements.
Total deposits at September 30, 1996 increased $4.4 billion from
December 31, 1995. The growth was primarily attributable to a
$4.0 billion increase in foreign deposits that resulted from
BAC's continued participation in selected global markets.
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.
However, the FASB has since issued an Exposure Draft that, if
implemented, would delay the adoption of SFAS No. 125 as it
applies to securities lending, repurchase agreements, dollar
rolls, and other similar secured financing transactions until
after December 31, 1997. BAC does not expect that, at adoption,
SFAS No. 125 will have a material effect on its financial
position or results of operations.
28
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================
CREDIT CARD During the third quarter of 1996, $0.5 billion of credit card
SECURITIZATION receivables was securitized and sold. The securitization
affects, among other things, the manner and time period in
which revenue is reported in the statement of operations. The
amounts that would otherwise be included in net interest
revenue are instead included in noninterest income as fees and
commissions, net of any credit losses on the securitized
portion of the credit card portfolio.
- ----------------------------------------------------------------------------------------------------
IMPACT OF CREDIT CARD SECURITIZATION
- ----------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996
-----------------------------------------------------
BEFORE
CREDIT CARD CREDIT CARD
(DOLLAR AMOUNTS IN MILLIONS) SECURITIZATION SECURITIZATION REPORTED
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Results
Net interest income $ 2,162 $ (10) $ 2,152
Noninterest income 1,314 5 1,319
- ----------------------------------------------------------------------------------------------------
Total revenue 3,476 (5) 3,471
Noninterest expense 2,081 - 2,081
- ----------------------------------------------------------------------------------------------------
Income before provision for credit
losses and income taxes 1,395 (5) 1,390
Provision for credit losses 240 (5)/a/ 235
- ----------------------------------------------------------------------------------------------------
Income before income taxes $ 1,155 $ - $ 1,155
====================================================================================================
NET INTEREST MARGIN 4.18% (0.01)% 4.17%
- ----------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Credit card loans outstanding $ 9,521 $ (500) $ 9,021
Total assets 243,453 (500) 242,953
- ----------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Credit card loans 9,370 (403) 8,967
Earning assets 207,021 (403) 206,618
Total assets 244,172 (403) 243,769
- ----------------------------------------------------------------------------------------------------
NET CREDIT LOSSES 116 (5) 111
- ----------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Annualized ratio of net credit losses to
average credit card loans outstanding 4.96% (0.01)% 4.95%
Delinquent credit card loan ratio 2.30 (0.01) 2.29
====================================================================================================
</TABLE>
/a/ Represents the investors' share of charge-offs.
29
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES - AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- ------------------------------------------------------------------------------------------------------------------------------------
THIRD QUARTER 1996 THIRD 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 $ 1,559 $ 26 6.69% 6.59% $1,644 $ 26 6.31% 6.30%
Mortgage-backed securities 5,995 103 6.91 6.82 4,877 85 7.00 7.01
Other domestic securities 753 11 5.64 6.57 714 9 5.24 5.97
Foreign securities 3,066/c/ 70 8.96/d/ 8.54/d/ 2,722/c/ 80 11.62/d/ 10.77/d/
- ------------------------------------------------------------------------------------------------------------------------------------
$11,373 $210 7.34% 7.25% $9,957 $200 8.02% 7.93%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THIRD QUARTER 1996 THIRD 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 $ 16 $ - 4.65% $ 381 $ 7 6.78%
Mortgage-backed securities 2,262 43 7.59 4,494 80 7.16
State, county, and municipal securities 408 7 7.33 441 8 7.26
Other domestic securities 66 1 6.75 177 3 7.37
Foreign securities 1,469 27 7.18 1,562 31 7.82
- ------------------------------------------------------------------------------------------------------------------------------------
$4,221 $ 78 7.40% $7,055 $ 129 7.30%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 $ 1,471 $ 74 6.72% 6.69% $1,658 $ 81 6.55% 6.48%
Mortgage-backed securities 6,217 317 6.81 6.79 4,973 259 6.95 6.87
Other domestic securities 740 32 5.72 6.69 640 25 5.19 5.76
Foreign securities 2,828/c/ 215 10.14/d/ 9.58/d/ 2,436/c/ 203 11.12/d/ 9.97/d/
- ------------------------------------------------------------------------------------------------------------------------------------
$11,256 $638 7.56% 7.51% $9,707 $ 568 7.81% 7.58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 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 $ 38 $ 1 4.86% $ 421 $ 21 6.79%
Mortgage-backed securities 2,347 134 7.60 4,597 246 7.14
State, county, and municipal securities 421 24 7.58 443 26 7.86
Other domestic securities 112 6 7.31 182 11 7.68
Foreign securities 1,491 81 7.23 1,742 101 7.73
- ------------------------------------------------------------------------------------------------------------------------------------
$4,409 $ 246 7.44% $7,385 $ 405 7.32%
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
30
<PAGE>
Credit Risk Management
================================================================================
Loan Portfolio Total Loans at September 30, 1996 were up $6.5 billion,
Management or 4 percent, from year-end 1995. This growth was
primarily in the domestic consumer and foreign
portfolios.
<TABLE>
<CAPTION>
======================================================================================================
LOAN OUTSTANDINGS
- ------------------------------------------------------------------------------------------------------
1996 1995
--------------------------------- --------------------
(IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 37,445 $ 38,012 $ 37,701 $ 36,572 $ 36,082
Residential junior mortgages 14,525 14,386 13,889 13,777 14,162
Other installment 15,998 15,057 14,682 13,834 12,728
Credit card 9,021 9,342 8,919 9,139 8,622
Other individual lines of credit 1,845 1,824 1,845 1,847 1,816
Other 303 307 304 319 289
- ------------------------------------------------------------------------------------------------------
79,137 78,928 77,340 75,488 73,699
Commercial:
Commercial and industrial 33,076 33,097 32,193 32,745 31,896
Loans secured by real estate 12,062 11,410 11,052 10,975 10,776
Construction and development loans
secured by real estate 2,530 2,896 3,107 3,153 3,214
Financial institutions 2,537 3,075 2,705 2,834 2,561
Lease financing 2,682 2,019 1,941 1,927 1,910
Agricultural 1,561 1,581 1,585 1,737 1,591
Loans for purchasing or carrying securities 1,328 1,399 1,402 1,458 1,236
Other 1,253 1,146 1,211 1,574 1,409
- ------------------------------------------------------------------------------------------------------
57,029 56,623 55,196 56,403 54,593
- ------------------------------------------------------------------------------------------------------
136,166 135,551 132,536 131,891 128,292
FOREIGN
Commercial and industrial 16,257 15,958 15,183 15,003 15,314
Banks and other financial institutions 3,480 4,077 2,916 3,386 2,795
Governments and official institutions 943 1,015 1,334 1,020 1,077
Other 4,987 4,039 4,186 4,073 3,734
- ------------------------------------------------------------------------------------------------------
25,667 25,089 23,619 23,482 22,920
- ------------------------------------------------------------------------------------------------------
Total loans 161,833 160,640 156,155 155,373 151,212
Less: Allowance for credit losses 3,511 3,495 3,496 3,554 3,655
- ------------------------------------------------------------------------------------------------------
$158,322 $157,145 $152,659 $151,819 $147,557
- --------------------------------------------==========================================================
</TABLE>
31
<PAGE>
<TABLE>
=========================================================================================================
<S> <C>
Domestic Consumer Loans -- During the nine months ended
September 30, 1996, domestic consumer loans rose by $3.6
billion, or 5 percent, particularly in the southwest, midwest,
and southeast regions of the country, reflecting increased
diversification in BAC's lending activities. The rise in loans
included an increase of $2.2 billion in other installment
loans, primarily due to growth in manufactured housing loans
in the South, reflecting strong customer demand and BAC's
continued expansion in this region. In addition, residential
first mortgages increased $0.9 billion and residential junior
mortgages increased by $0.7 billion. Continuation of this
level of loan growth will depend upon both future economic
conditions and customer demand.
==========================================================================================================
</TABLE>
DOMESTIC CONSUMER LOANS BY GEOGRAPHIC AREA AND LOAN TYPE AS OF SEPTEMBER 30,
1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
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 $26,764 $ 9,635 $4,401 $1,066 $2,307 $2,244 $46,417
Washington 1,705 1,862 1,281 337 1,373 506 7,064
Arizona 1,307 879 301 206 563 150 3,406
Texas 892 137 417 563 648 305 2,962
Oregon 1,113 503 254 146 289 197 2,502
Nevada 702 347 144 95 192 107 1,587
Other/a/ 4,962 1,162 2,223 5,214 431 1,207 15,199
--------------------------------------------------------------------------------------------------------
$37,445 $14,525 $9,021 $7,627 $5,803 $4,716 $79,137
========================================================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic
consumer loans.
Delinquent domestic consumer loans that are 60 days or more
past due totaled $902 million at September 30, 1996, a
decrease of $120 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.
<TABLE>
===========================================================================================================
DOMESTIC CONSUMER LOAN DELINQUENCY INFORMATION/a/
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1996 1995
-------------------------------- -------------------------
(DOLLAR AMOUNTS IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DELINQUENT CONSUMER LOANS
Residential first mortgages $518 $535 $609 $642 $644
Residential junior mortgages 64 70 82 90 92
Credit card 207 204 199 190 164
Other 113 96 94 100 81
- -----------------------------------------------------------------------------------------------------------
$902 $905 $984 $1,022 $ 981
- -----------------------------------------------------------------------------------------------------------
DELINQUENT CONSUMER LOAN RATIOS/b/
Residential first mortgages 1.38% 1.41% 1.61% 1.76% 1.79%
Residential junior mortgages 0.44 0.48 0.59 0.67 0.65
Credit card 2.29 2.19 2.23 2.08 1.91
Other 0.63 0.56 0.56 0.62 0.55
Total 1.14 1.15 1.27 1.36 1.33
- ---------------------------------------------==============================================================
</TABLE>
/a/ 60 days or more past due.
/b/ Ratios represent delinquency balances expressed as a percentage of total
loans for that loan category.
32
<PAGE>
================================================================================
Domestic Commercial Loans -- Domestic commercial loans increased
$0.6 billion, or 1 percent, during the nine months ended
September 30, 1996. Loans secured by real estate increased by
$1.1 billion and lease financing increased by $0.8 billion,
primarily due to the acquisition of a transportation and
industrial lease financing portfolio during the third quarter of
1996. These increases were partially offset by decreases in most
other commercial loan categories.
================================================================================
Domestic Commercial Loans Secured by Real Estate by Geographic Area and Project
Type at September 30, 1996
================================================================================
<TABLE>
<CAPTION>
Light Apartment &
(in millions) Office Retail Industry Condominium Hotel Other Total
==============================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
California $1,478 $1,409 $1,370 $ 941 $146 $ 776 $ 6,120
Washington 483 354 503 440 161 531 2,472
Nevada 154 182 69 196 107 186 894
Oregon 137 127 68 150 44 44 570
Arizona 58 98 56 90 41 111 454
Other/a/ 520 244 133 214 221 220 1,552
- ------------------------------------------------------------------------------
$2,830 $2,414 $2,199 $2,031 $720 $1,868 $12,062
- -----------------=============================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic commercial
loans secured by real estate.
==============================================================================
Domestic Construction and Development Loans by Geographic Area and Project
Type at September 30, 1996
<TABLE>
<CAPTION>
========================================================================================
Apartment & Light
(in millions) Subdivision Retail Condominium Office Industry Hotel Other Total
========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $253 $244 $101 $137 $ 86 $ 74 $ 73 $ 968
Washington 227 62 64 67 24 15 66 525
Nevada 69 41 84 32 26 33 61 346
Arizona 48 11 57 1 3 - 16 136
Texas 17 23 54 1 - - 9 104
Oregon 6 17 29 12 - 3 16 83
Georgia 15 53 11 - - 1 - 80
Other/a/ 21 118 37 12 22 - 78 288
- ----------------------------------------------------------------------------------------
$656 $569 $437 $262 $161 $126 $319 $2,530
- ------------------======================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic
construction and development loans.
33
<PAGE>
================================================================================
Foreign Loans -- Foreign loans increased $2.2 billion, or 9
percent, between year-end 1995 and September 30, 1996.
Commercial and industrial loans grew by $1.3 billion. In
addition, other loans increased by $0.9 billion, primarily due
to the acquisition of a transportation and industrial lease
financing portfolio during the third quarter of 1996.
- --------------------------------------------------------------------------------
EMERGING MARKET In connection with its effort to maintain a diversified
EXPOSURE portfolio, BAC limits its exposure to any one country.
In particular, BAC monitors its exposure to economies that are
considered to be emerging markets. As indicated in the table
below, at September 30, 1996, BAC's emerging market exposure
totaled $10.5 billion, or 4 percent of total assets, compared
to $8.8 billion, 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
areas improve their economic performance, business environment,
infrastructure, and regional trade capabilities, BAC expects to
continue to expand its investment in these regions.
================================================================================
<TABLE>
<CAPTION>
EMERGING MARKET EXPOSURE
- -------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996
------------------------------------------------------------------------------------------------
LOANS AVAILABLE-FOR-SALE SECURITIES/a/ HELD-TO-MATURITY SECURITIES/a/
--------------------- -------------------------------- --------------------------------
MEDIUM-AND
(IN MILLIONS) TOTAL/c/ SHORT-TERM LONG-TERM COLLATERALIZED UNCOLLATERALIZED COLLATERALIZED UNCOLLATERALIZED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mexico $2,740 $ 265 $ 575/d/ $325 $18 $ 856 $161
Brazil 1,435 588 - 6 10 - 30
India 1,158 96 103 - - - -
Chile 1,020 155 172 - - - -
Argentina 935 238 64 - 2 - 38
China 646 274 21 - - - -
Indonesia 433 248 44 - - - -
Philippines 432 62 23 21 32 - -
Colombia 417 120 212 - 15 - 3
Venezuela 395 20 9 19 - 288 21
Other/e/ 893 73 155 136 - - -
- --------------------------------------------------------------------------------------------------------------------
$10,504 $2,139/f/ $1,378/f/ $507/g/ $77/g/ $1,144/h/ $253/h/
- ------------------==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OTHER/B/
----------------------
MEDIUM-AND
SHORT-TERM LONG-TERM
- ---------------------------------
<S> <C> <C>
Mexico $ 527 $ 13
Brazil 784 17
India 956 3
Chile 608 85
Argentina 559 34
China 337 14
Indonesia 140 1
Philippines 279 15
Colombia 66 1
Venezuela 19 19
Other/e/ 529 -
- ---------------------------------
$4,804 $202
- ---------------==================
</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: $46 million for Mexico, $54 million for Brazil, $280
million for India, $82 million for Chile, $11 million for Argentina, $99
million for Indonesia, $56 million for the Philippines, and $9 million for
Venezuela.
/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 $46 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 $1.1
billion.
34
<PAGE>
================================================================================
Allowance For The allowance for credit losses at September 30, 1996 was
Credit Losses $3,511 million, or 2.17 percent of loans outstanding, compared
with $3,554 million, or 2.29 percent, at December 31, 1995. The
ratio of the allowance for credit losses to total nonaccrual
assets was 314 percent at September 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) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:
Historical loss experience component $ 393 $ 406 $ 471 $ 506 $ 483
Credit management allocated component 375 398 380 377 439
- ----------------------------------------------------------------------------------------------------------------------
Total special mention and classified 768 804 851 883 922
Other:
Domestic consumer 1,366 1,333 1,288 1,247 1,189
Domestic commercial 255 240 237 229 231
Foreign 288 283 283 300 317
- ----------------------------------------------------------------------------------------------------------------------
Total allocated 2,677 2,660 2,659 2,659 2,659
Unallocated 834 835 837 895 996
- ----------------------------------------------------------------------------------------------------------------------
$3,511 $3,495 $3,496 $3,554 $3,655
- -------------------------------------------------=====================================================================
</TABLE>
Net credit losses for the third quarter and first nine months
of 1996 were $226 million and $711 million, up $75 million and
$353 million, respectively, from the same periods a year ago.
These increases were largely in the domestic commercial and
consumer portfolios.
Domestic commercial net credit losses for the third quarter and
first nine months of 1996 increased $54 million and $164
million, respectively, from the comparable periods in 1995,
primarily in the construction and development, commercial and
industrial, and financial institutions portfolios. The increase
in net charge-offs of construction and development loans was
due to lower credit recoveries in 1996. Higher charge-offs on
loans to large corporate borrowers accounted for the rise in
the commercial and industrial sector. Increased charge-offs on
loans to financial institutions resulted primarily from a
decline in the collateral value of a loan to a particular
borrower.
Domestic consumer net credit losses for the third quarter and
first nine months of 1996 increased $36 million and $140
million, respectively, from the amounts reported in the same
periods a year ago. This increase was primarily in the consumer
installment and credit card categories. Higher charge-offs of
consumer installment loans were driven by growth in the
manufactured housing portfolio. Loan growth coupled with higher
levels of personal bankruptcy filings contributed to increased
charge-offs in the credit card portfolio.
Foreign net credit losses in the third quarter of 1996
decreased $15 million from the comparable period in 1995. Net
credit recoveries for the nine months ended September 30, 1996
were lower by $49 million compared to the same period a year
ago as a result of significant recoveries on loans to borrowers
in Brazil and Equador in 1995.
35
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
QUARTERLY CREDIT LOSS EXPERIENCE
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 NINE MONTHS ENDED
-------------------------------------- ------------------------ SEPTEMBER 30
THIRD SECOND FIRST FOURTH THIRD ------------------
(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 $3,495 $3,496 $3,554 $3,655 $3,695 $3,554 $3,690
Credit losses
Domestic consumer:
Residential first mortgages 12 12 11 12 12 35 37
Residential junior
mortgages 17 16 20 19 19 53 55
Credit card 119 117 113 100 101 349 286
Other 114 104 98 83 61 316 169
Domestic commercial:
Commercial and industrial 20 50 40 82 19 110 57
Loans secured by real
estate 5 2 12 10 7 19 40
Construction and
development loans
secured by real estate 17 16 26 6 8 59 30
Financial institutions - 23 23 - 1 46 1
Lease financing 1 - - 1 - 1 -
Agricultural - 1 - - - 1 3
Loans for purchasing or
carrying securities - - - 5 - - -
Foreign 18 2 4 13 27 24 2
- ------------------------------------------------------------------------------------------------------------------------------------
Total credit losses 323 343 347 331 255 1,013 680
Credit loss recoveries
Domestic consumer:
Residential first
mortgages 1 - - - - 1 1
Residential junior
mortgages 4 4 4 4 3 12 12
Credit card 8 9 10 7 10 27 34
Other 51 41 37 28 18 129 56
Domestic commercial:
Commercial and industrial 11 21 28 22 13 60 61
Loans secured by real
estate 3 2 4 6 3 9 10
Construction and
development loans
secured by real estate 1 3 6 3 41 10 63
Financial institutions - - 2 1 2 2 4
Lease financing 1 1 1 - 1 3 4
Agricultural - 3 - 2 2 3 5
Loans for purchasing or
carrying securities - 1 - - - 1 -
Foreign 17 12 16 27 11 45 72
- ------------------------------------------------------------------------------------------------------------------------------------
Total credit loss recoveries 97 97 108 100 104 302 322
- ------------------------------------------------------------------------------------------------------------------------------------
Total net credit losses 226 246 239 231 151 711 358
Provision for credit losses 235 250 180 130 110 665 310
Allowance related to
mergers and acquisitions - - - - - - 3/a/
Other net additions
(deductions) 7 (5) 1 - 1 3 10
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, End of Period $3,511 $3,495 $3,496 $3,554 $3,655 $3,511 $3,655
- ----------------------------------==================================================================================================
Annualized Ratio of Net
Credit Losses (Recoveries)
to Average Loan Outstandings
Domestic consumer:
Residential first mortgages 0.12% 0.13% 0.11% 0.13% 0.13% 0.12% 0.14%
Residential junior mortgages 0.35 0.33 0.48 0.41 0.45 0.38 0.42
Credit card 4.95 4.76 4.62 4.20 4.28 4.78 4.18
Other 1.44 1.48 1.49 1.40 1.20 1.47 1.11
Domestic commercial:
Commercial and industrial 0.11 0.34 0.15 0.76 0.07 0.20 (0.02)
Loans secured by real estate 0.07 - 0.29 0.13 0.16 0.12 0.38
Construction and
development loans
secured by real estate 2.34 1.80 2.46 0.40 (3.97) 2.20 (1.30)
Financial institutions - 2.93 3.08 (0.10) (0.26) 2.08 (0.20)
Lease financing - (0.18) (0.16) 0.03 (0.17) (0.12) (0.23)
Agricultural - (0.19) - (0.31) (0.42) (0.18) (0.20)
Loans for purchasing or
carrying securities - (0.27) - 1.50 - (0.12) -
Total domestic 0.66 0.77 0.76 0.75 0.42 0.73 0.46
Foreign 0.01 (0.17) (0.21) (0.26) 0.29 (0.12) (0.43)
Total 0.56 0.63 0.62 0.60 0.40 0.60 0.33
Ratio of Allowance to
Loans at Quarter End 2.17 2.18 2.24 2.29 2.42 2.17 2.42
Earnings Coverage of Net
Credit Losses/b/ 6.15x 6.03x 5.89x 5.77x 8.75x 6.02x 10.27x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents the addition of consummation date allowance for credit losses of
Arbor National Holdings, Inc.
/b/ 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.
36
<PAGE>
================================================================================
Nonperforming Total nonaccrual assets decreased $772 million, or 41
Assets percent, between year-end 1995 and September 30, 1996.
This decrease reflected improvements in most segments of
the loan portfolio, particularly in construction and
development loans and in commercial and industrial
loans. These improvements resulted primarily from full
or partial payments on nonaccrual loans. Other
significant factors that contributed to the decrease
were charge-offs and the restoration of nonaccrual loans
to accrual status in most loan categories, including a
large construction and development real estate loan. The
decrease in nonaccruals also reflects low levels of
loans being placed on nonaccrual status.
The improvement in BAC's credit quality during the first
nine months of 1996 was also reflected in BAC's
nonperforming asset ratios. At September 30, 1996, the
ratio of nonaccrual loans to total loans was 0.69
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 41 basis points from year-end 1995
to 0.62 percent at September 30, 1996.
For further information concerning nonaccrual assets,
refer to the tables below and on pages 38 and 39.
================================================================================
<TABLE>
<CAPTION>
ANALYSIS OF CHANGE IN NONACCRUAL ASSETS
- --------------------------------------------------------------------------------------------------------------------------
1996 1995
----------------------------------------- ------------------------
THIRD SECOND FIRST FOURTH THIRD
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter $1,488 $1,697 $1,891 $1,855 $1,962
Additions:
Loans placed on nonaccrual
status 66 129 191 532 392
Leases acquired 34 - - - -
Deductions:
Sales (4) (26) (67) (21) (8)
Restored to accrual status (229) (37) (60) (70) (151)
Foreclosures (5) (6) (11) (32) (55)
Charge-offs (51) (77) (90) (92) (35)
Other, primarily payments (180) (192) (157) (281) (250)
- --------------------------------------------------------------------------------------------------------------------------
Balance, End of Quarter $1,119 $1,488 $1,697 $1,891 $1,855
-----------------------------------------================================================================================
</TABLE>
37
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NONACCRUAL ASSETS, RESTRUCTURED LOANS, AND LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
- -----------------------------------------------------------------------------------------------------------------------------
1996 1995
------------------------------------------ --------------------------
(IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Assets
Domestic consumer loans:
Residential first mortgages $ 233 $ 272 $ 301 $ 311 $ 314
Residential junior mortgages 55 66 69 72 67
Other consumer 3 4 3 2 3
Domestic commercial loans:
Commercial and industrial 323 381 457 511 612
Loans secured by real estate 229 245 251 280 329
Construction and development loans
secured by real estate 119 346 417 495 304
Financial institutions 5 4 25 46 2
Lease financing 1 3 - - 1
Agricultural 28 34 33 29 35
- -----------------------------------------------------------------------------------------------------------------------------
996 1,355 1,556 1,746 1,667
Foreign loans, primarily commercial 122 130 138 142 185
Other interest-bearing assets 1 3 3 3 3
- ------------------------------------------------------------------------------------------------------------------------------
$1,119/a/ 1,488/a/ 1,697/a/ 1,891/a/ 1,855/a/
- -------------------------------------------------=============================================================================
Restructured Loans
Domestic commercial:
Commercial and industrial $ 21 $ 29 $ 29 $ 78 $ 78
Loans secured by real estate 236 55 60 18 19
Construction and development loans
secured by real estate 16 15 1 15 3
Agricultural - - - 1 1
- ------------------------------------------------------------------------------------------------------------------------------
273 99 90 112 101
Foreign/b/ 1 4 1 1 1
- ------------------------------------------------------------------------------------------------------------------------------
$ 274 $ 103 $ 91 $ 113 $ 102
- -------------------------------------------------=============================================================================
Loans Past Due 90 Days or More and Still
Accruing Interest
Domestic consumer:
Residential first mortgages $ 145 $ 133 $ 163 $ 180 $ 181
Residential junior mortgages 8 5 8 12 19
Other consumer 179 173 165 162 141
Domestic commercial:
Commercial and industrial 11 31 10 20 30
Loans secured by real estate 9 5 8 1 62
Construction and development loans
secured by real estate 4 21 - - 4
Financial institutions - 21 1 16 1
Lease financing - - 1 1 -
Agricultural 4 - - - -
- ------------------------------------------------------------------------------------------------------------------------------
360 389 356 392 438
Foreign 3 - 4 19 1
- ------------------------------------------------------------------------------------------------------------------------------
$ 363 $ 389 $ 360 $ 411 $ 439
- -------------------------------------------------=============================================================================
</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 $62 million at September 30, 1996, $6 million at June 30,
1996, $5 million at March 31, 1996, $62 million at December 31, 1995, and
$189 million at September 30, 1995.
/b/ Excludes debt restructurings with countries that have experienced liquidity
problems of $1.6 billion at September 30, 1996, $1.6 billion at June 30,
1996, $1.6 billion at March 31, 1996, $1.6 billion at December 31, 1995, and
$1.9 billion at September 30, 1995. The majority of these instruments were
classified as either available-for-sale or held-to-maturity securities.
38
<PAGE>
<TABLE>
<CAPTION>
================================================================================
INTEREST INCOME FOREGONE ON NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
NINE MONTHS ENDED
(IN MILLIONS) SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
DOMESTIC
<S> <C>
Interest income that would have been recognized had
the assets performed in accordance with their
original terms $187
Less: Interest income included in the results of operations 53
- --------------------------------------------------------------------------------
Domestic interest income foregone 134
FOREIGN
Interest income that would have been recognized had the
assets performed in accordance with their original terms 19
Less: Interest income included in the results of operations 9
- --------------------------------------------------------------------------------
Foreign interest income foregone 10
- --------------------------------------------------------------------------------
$144
- ----------------------------------------------------------------------------====
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================================
CASH INTEREST PAYMENTS ON NONACCRUAL ASSETS BY LOAN TYPE/a/
- ------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996
------------------------------------------------------------------------------
CUMULATIVE BOOK AS A
CONTRACTUAL INTEREST NONACCRUAL PERCENTAGE
PRINCIPAL CUMULATIVE APPLIED BOOK OF
(DOLLAR AMOUNTS IN MILLIONS) BALANCE CHARGE-OFFS TO PRINCIPAL BALANCE CONTRACTUAL
- ------------------------------------------------------------------------------------------------------------------------------
DOMESTIC
<S> <C> <C> <C> <C> <C>
Consumer:
Residential first mortgages $ 236 $ 2 $ 1 $ 233 99%
Residential junior mortgages 55 - - 55 100
Other consumer 10 6 1 3 31
Commercial:
Commercial and industrial 649 249 77 323 50
Loans secured by real estate 359 107 23 229 64
Construction and development
loans secured by real estate 267 131 17 119 44
Financial institutions 56 50 1 5 8
Lease financing 1 - - 1 100
Agricultural 45 11 6 28 62
- ------------------------------------------------------------------------------------------------------------------------------
1,678 556 126 996 59
FOREIGN, PRIMARILY COMMERCIAL 247 100 24 123 50
- ------------------------------------------------------------------------------------------------------------------------------
$1,925 $656 $150 $1,119 58%
- -----------------------------------------------------=========================================================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
---------------------------------------------------
CASH INTEREST
AVERAGE PAYMENTS APPLIED
NONACCRUAL -----------------------------------
BOOK AS INTEREST
(DOLLAR AMOUNTS IN MILLIONS) BALANCE INCOME OTHER/b/ TOTAL
- --------------------------------------------------------------------------------------------------------
DOMESTIC
<S> <C> <C> <C> <C>
Consumer:
Residential first mortgages $ 278 $ 9 $ 1 $ 10
Residential junior mortgages 66 4 - 4
Other consumer 2 - 1 1
Commercial:
Commercial and industrial 417 17 17 34
Loans secured by real estate 250 9 5 14
Construction and development
loans secured by real estate 325 11 10 21
Financial institutions 18 - - -
Lease financing 1 - - -
Agricultural 32 3 1 4
- --------------------------------------------------------------------------------------------------------
1,389 53 35 88
FOREIGN, PRIMARILY COMMERCIAL 131 9 13 22
- --------------------------------------------------------------------------------------------------------
$1,520 $62 $48 $110
- ---------------------------------------------------------===============================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE 9.68%
- --------------------------------------------------------------------------------------------------------
</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.
39
<PAGE>
FOREIGN EXCHANGE AND DERIVATIVES CONTRACTS
================================================================================
BAC uses foreign exchange and derivatives contracts in both
its trading and its asset and liability management
activities. Foreign exchange and derivatives contracts
include 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 contracts to
hedge foreign exchange risk and derivatives contracts to
hedge interest rate risk and foreign exchange 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 7 of the Notes to Consolidated Financial Statements
on pages 8-13.
40
<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.
[GRAPH OF NET INTEREST RATE RISK POSITION APPEARS HERE]
<TABLE>
<CAPTION>
Net Interest Rate Risk Position
(IN BILLIONS OF DOLLARS) 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 9/30/96
<S> <C> <C> <C> <C> <C> <C>
Net Interest Rate Risk Position $(8.1) $(6.9) $ 1.0 $(2.8) $0.0 $(1.7)
</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 September 30, 1996 is shown in the
table on page 42.
41
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
U.S. Dollar Denominated Interest Rate Sensitivity by Repricing or Maturity Dates
- ---------------------------------------------------------------------------------------------------------------------------
September 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 $ 1.5 $ - $ - $ - $ 1.5
Trading account securities 1.6 - - - 1.6
Loans:
Prime indexed 16.9 - - - 16.9
Adjustable rate residential first mortgages 9.0 5.3 5.9 4.3 24.5
Other loans, net 45.7 7.7 18.7 13.0 85.1
Other assets 12.3 0.9 13.9 8.8 35.9
--------------------------------------------------------------------------------------------------------------------------
Domestic Assets 87.0 13.9 38.5 26.1 165.5
--------------------------------------------------------------------------------------------------------------------------
Domestic Liabilities and Stockholders' Equity
Domestic deposits (64.6) (9.8) (22.7) (18.4) (115.5)
Other short-term borrowings (11.5) (1.5) (0.2) - (13.2)
Long-term debt and subordinated capital notes (11.2) (0.4) (3.1) (4.8) (19.5)
Other liabilities and stockholders' equity (4.0) (0.8) (9.0) (16.3) (30.1)
- ----------------------------------------------------------------------------------------------------------------------------
Domestic Liabilities and Stockholders' Equity (91.3) (12.5) (35.0) (39.5) (178.3)
Offshore Funding Books, net (1.8) 0.4 0.3 1.1 -
- ----------------------------------------------------------------------------------------------------------------------------
Core Gap Before Risk Management Positions (6.1) 1.8 3.8 (12.3) (12.8)
- ----------------------------------------------------------------------------------------------------------------------------
Interest Rate Risk Management Positions
Investment securities/a/ 1.9 1.5 4.0 5.4 12.8
Off-balance-sheet financial instruments/b/ 3.7 (4.1) (6.2) 6.6 -
- ----------------------------------------------------------------------------------------------------------------------------
Total Interest Rate Risk Management Positions 5.6 (2.6) (2.2) 12.0 12.8
- ----------------------------------------------------------------------------------------------------------------------------
Net Gap (0.5) (0.8) 1.6 (0.3) -
- ----------------------------------------------------------------------------------------------------------------------------
Cumulative Gap $(0.5) $ (1.3) $ 0.3 $ - $ -
- ----------------------------------------------------------------------------------------------------------------------------
</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 September 30, 1996, BAC had a "core" imbalance before risk management
positions as liabilities and equity exceeded assets by approximately $13
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.
42
<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. Liquid assets
totaled $51.8 billion at September 30, 1996, up $4.4 billion,
or 9 percent, from year-end 1995. The growth in liquid assets
was primarily attributable to increases in trading account
assets and securities purchased under resale agreements.
- --------------------------------------------------------------------------------
CAPITAL At September 30, 1996, total stockholders' equity totaled
MANAGEMENT $20.5 billion, an increase of $0.3 billion from year-end 1995
primarily due to an increase of $0.7 billion in common equity
partially offset by a $0.4 billion decline in preferred stock.
Common equity rose $0.7 billion during the first nine months
of 1996 primarily due to earnings net of common and preferred
stock dividends of $1.4 billion and shares issued in
connection with restricted stock bonus plans and other
employee benefit related plans of $0.2 billion. Partially
offsetting these increases was a reduction of $0.9 billion due
to repurchases of common stock. During the first nine months
of 1996, BAC repurchased 12.3 million shares of its common
stock at an average price per share of $73.25, reflecting the
corporation's ongoing efforts to return excess capital to its
shareholders. This included the repurchase of 2.5 million
shares during the third of 1996 at an average price per share
of $78.48, which reduced third-quarter common equity by $0.2
billion. The shares were repurchased on the open market over
31 trading days and represented approximately seven percent of
the total volume of BAC common stock traded on those days. For
additional information regarding the stock repurchase program,
refer to Note 4 of the Notes to Consolidated Financial
Statements on page 7.
The decline in BAC's preferred stock of $0.4 billion 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 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 13 basis points and 5 basis points, respectively,
between December 31, 1995 and September 30, 1996. This
decrease primarily resulted from an increase in total risk-
weighted assets, in particular, loans, trading account
assets, and standby letters of credit. 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 6.90
percent at September 30, 1996, compared with 6.92 percent at
December 31, 1995.
43
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
RISK-BASED CAPITAL, RISK-WEIGHTED ASSETS, AND RISK-BASED CAPITAL RATIOS
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995
--------------------------------------- -----------------------
(DOLLAR AMOUNTS IN MILLIONS) SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RISK-BASED CAPITAL
Common stockholders' equity $ 18,297 $ 17,945 $ 17,800 $ 17,598 $ 17,289
Qualified perpetual preferred stock 2,242 2,242 2,242 2,623 2,623
Less: Goodwill, nongrandfathered core deposit and
other identifiable intangibles, and other deductions/a/ (5,007) (5,068) (5,114) (5,230) (5,352)
- ---------------------------------------------------------------------------------------------------------------------------------
Tier 1 capital 15,532 15,119 14,928 14,991 14,560
Eligible portion of the allowance for credit losses 2,673 2,651 2,571 2,566 2,526
Hybrid capital instruments 142 142 214 214 214
Subordinated notes and debentures 6,001 6,072 5,934 5,798 5,865
Less: Other deductions (174) (164) (135) (153) (148)
- ---------------------------------------------------------------------------------------------------------------------------------
Tier 2 capital 8,642 8,701 8,584 8,425 8,457
- ---------------------------------------------------------------------------------------------------------------------------------
Total 24,174 23,820 23,512 23,416 23,017
Less: Investments in unconsolidated banking
and finance subsidiaries/b/ (49) (48) (47) - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-BASED CAPITAL $ 24,125 $ 23,772 $ 23,465 $ 23,416 $ 23,017
- ---------------------------------------------------------------------------------------------------------------------------------
RISK-WEIGHTED ASSETS
Balance sheet assets:
Trading account assets $ 5,257 $ 5,289 $ 3,771 $ 3,506 $ 3,457
Available-for-sale and held-to-maturity securities 4,812 4,769 5,029 5,007 5,238
Loans 137,360 135,403 132,256 132,504 128,826
Other assets 17,435 16,314 17,667 16,725 17,026
- ---------------------------------------------------------------------------------------------------------------------------------
Total balance sheet assets 164,864 161,775 158,723 157,742 154,547
- ---------------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet items:
Unused commitments 26,721 26,485 24,991 26,268 25,269
Standby letters of credit 14,518 15,832 13,675 12,888 13,138
Foreign exchange and derivatives contracts 4,535 4,425 4,617 4,530 4,927
Other 1,990 2,390 2,474 2,567 2,783
- ---------------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet items 47,764 49,132 45,757 46,253 46,117
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-WEIGHTED ASSETS $212,628 $210,907 $204,480 $203,995 $200,664
- ---------------------------------------------------------------------------------------------------------------------------------
RISK-BASED CAPITAL RATIOS
TIER 1 CAPITAL RATIO 7.30% 7.17% 7.30% 7.35% 7.26%
TOTAL CAPITAL RATIO 11.35 11.27 11.48 11.48 11.47
TIER 1 LEVERAGE RATIO 6.90 6.75 6.77 6.92 6.80
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes nongrandfathered CDI and other identifiable intangibles acquired
after February 19, 1992 of $795 million and $69 million, respectively, at
September 30, 1996, $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, and $877
million and $90 million, respectively, at September 30, 1995. Also includes
$9 million, $1 million, and $24 million, at March 31, 1996, December 31,
1995, and September 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 subsequent to
March 31, 1996.
/b/ Effective in the first quarter of 1996, the Federal Reserve Board adopted
the Office of the Comptroller of the Currency's treatment of deducting
investments in unconsolidated banking and finance subsidiaries from total
capital. Prior to March 31, 1996, this amount was included in "other
deductions," with half of the investment deducted from Tier 1 and the other
half deducted from Tier 2 capital.
44
<PAGE>
OTHER INFORMATION
============================================================================
ITEM 6. (a) Exhibits:
EXHIBITS AND
REPORTS ON Exhibit
FORM 8-K Number Exhibit
------ -------
10 BankAmerica Corporation 1992
Management Stock Plan, as amended*
27 Financial Data Schedule
- ----------------------------------------------------------------------------
*Management contract or compensatory plan, contract, or
arrangement.
(b) Reports on Form 8-K:
During the third 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." After the third quarter of 1996, the
Parent filed a report on Form 8-K dated October 16, 1996.
The October 16, 1996 report filed, pursuant to Items 5 and
7 of the report, a copy of the Parent's press release
titled "BankAmerica Third Quarter Earnings."
45
<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
November 13, 1996
By Chief Accounting Officer and
Duly Authorized Signatory:
/s/ JOHN J. HIGGINS
-------------------------------
John J. Higgins
Executive Vice President
and Controller
November 13, 1996
46
<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
Third Quarter 1996 10-Q
page reference Description of omitted graphic
- -------------------------- ------------------------------
<S> <C>
41 Net Interest Rate Risk
Position
(Plot point graph in non-EDGAR
version)
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Reference Description
- --------- -----------
10 BankAmerica Corporation 1992 Management Stock Plan, as amended*
27 Financial Data Schedule
- ---------
* Management contract or compensatory plan, contract, or arrangement.
<PAGE>
Exhibit 10
[LOGO OF BANKAMERICA CORPORATION APPEARS HERE]
BankAmerica Corporation
1992 MANAGEMENT STOCK PLAN
As adopted March 2, 1992 and
amended through February 5, 1996
<PAGE>
BANKAMERICA CORPORATION
1992 MANAGEMENT STOCK PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
GENERAL................................................................ 1
1.1 Background of Plan............................................... 1
1.2 Purpose of the Plan.............................................. 1
1.3 Definitions...................................................... 1
1.4 Administration of Plan........................................... 5
1.5 Eligibility to Receive Grants and Awards......................... 6
1.6 Types of Grants and Awards Under Plan............................ 6
1.7 Limitation on Available Shares................................... 6
1.8 Effective Date and Term of Plan.................................. 7
1.9 Limitation on Options and SARS Awardable to Any
Single Participant............................................... 8
ARTICLE II
INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS................ 8
2.1 Grant of Stock Options........................................... 8
2.2 Award Agreements................................................. 8
2.3 Option Price..................................................... 9
2.4 Option Period.................................................... 9
2.5 Limitation on ISOs............................................... 9
2.6 Manner of Paying Option Price.................................... 10
2.7 Exercise of Option............................................... 10
2.8 Cancellation of SARs............................................. 10
2.9 Cancellation and Regrant of Options.............................. 10
ARTICLE III
STOCK APPRECIATION RIGHTS.............................................. 10
3.1 Grant of Stock Appreciation Rights............................... 10
3.2 Form and Timing of Payment....................................... 11
3.3 Cancellation of Related Options.................................. 11
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK UNITS............................ 12
4.1 Introduction..................................................... 12
4.2 Award of Restricted Stock and Restricted Stock
Units............................................................ 12
4.3 Minimum Restrictions on Disposition.............................. 12
4.4 Optional Restrictions............................................ 13
4.5 Termination of Employment of Restricted Stockholder
for Gross Misconduct............................................. 13
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
4.6 Termination of Employment of Restricted Stockholder
not Involving Gross Misconduct................................... 13
4.7 Registration and Escrow.......................................... 14
4.8 Payment in Respect of Restricted Stock Units..................... 14
4.9 Dividends on Restricted Stock.................................... 15
4.10 Voting Rights.................................................... 15
ARTICLE V
OTHER STOCK-BASED AWARDS............................................... 15
5.1 Other Stock-Based Awards......................................... 15
ARTICLE VI
MISCELLANEOUS.......................................................... 15
6.1 Notices.......................................................... 15
6.2 Amendments of Plan............................................... 16
6.3 Leaves of Absence................................................ 16
6.4 Dilution and Other Adjustments................................... 16
6.5 General Restriction.............................................. 17
6.6 Change in Control................................................ 17
6.7 Withholding Taxes................................................ 18
6.8 Non-Assignability................................................ 18
6.9 No Right to Employment........................................... 19
6.10 Rights as Shareholder............................................ 19
6.11 Entire Plan...................................................... 20
6.12 Governing Law.................................................... 20
6.13 Delegation....................................................... 20
6.14 Foreign Employees................................................ 20
</TABLE>
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BANKAMERICA CORPORATION
1992 MANAGEMENT STOCK PLAN
ARTICLE I
GENERAL
1.1 Background of Plan. BankAmerica Corporation hereby establishes the
BankAmerica Corporation 1992 Management Stock Plan (the "Plan"). The Plan
provides for the grant of stock options on BankAmerica Corporation Common Stock,
and for the grant of restricted stock, restricted stock units, stock
appreciation rights, and other stock-based awards. The Plan is the successor to
the BankAmerica Corporation 1987 Management Stock Plan.
1.2 Purpose of the Plan. The purpose of the Plan is to provide contingent
financial incentive to key executive officers of BankAmerica Corporation and its
present and future Subsidiaries (as defined below) and other employees whose
participation in the Plan is deemed to be in the best interests of BankAmerica
Corporation. The Plan will offer competitive levels of incentive compensation
related to long-term corporate financial performance to those key officers and
other employees of the Company who, by virtue of their position and efforts,
contribute to or substantially influence the financial success of BankAmerica
Corporation over multiple-year periods. The Plan is also intended as a means of
increasing officer shareholdings, thereby strengthening the commonality of
interest between BankAmerica shareholders and key officers and other employees
in the Company's management, and as an aid in attracting, retaining and
motivating key officers and other employees of outstanding abilities and
specialized skills.
1.3 Definitions. As used in the Plan and the related Award Agreements,
the following terms, when written with initial capital letters, will have the
meanings stated below:
(a) Award means any grant or award of an Option, Restricted Stock,
Restricted Stock Unit, SAR or Other Stock-Based Award under the Plan.
(b) Award Agreement means any written agreement between BankAmerica
and an employee of the Company pursuant to which a grant or award is made
under the Plan. The Committee shall determine the provisions of each Award
Agreement subject to the provisions hereof.
(c) BankAmerica means BankAmerica Corporation, a Delaware corporation.
(d) Board means Board of Directors of BankAmerica.
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(e) Change in Control means that one of the following events has
occurred:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of BankAmerica (the "Outstanding
BankAmerica Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of BankAmerica entitled to vote
generally in the election of directors (the "Outstanding BankAmerica
Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from BankAmerica, (B)
any acquisition by BankAmerica, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or (D) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii)
below.
(ii) Individuals who, as of August 7, 1995, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to August 7, 1995 whose election, or nomination
for election by BankAmerica's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
BankAmerica or any of its subsidiaries (a "Business Combination"), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding BankAmerica Common
Stock and Outstanding BankAmerica Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 70% (80% in the case of any Award
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made prior to February 5, 1996) of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
BankAmerica or all or substantially all of BankAmerica's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding BankAmerica Common Stock and
Outstanding BankAmerica Voting Securities, as the case may be,
(provided, however, that, for the purposes of this clause (A), any
shares of common stock or voting securities of such resulting
corporation received by such beneficial owners in such Business
Combination other than as the result of such beneficial owners'
ownership of Outstanding BankAmerica Common Stock or Outstanding
BankAmerica Voting Securities immediately prior to such Business
Combination shall not be considered to be owned by such beneficial
owners for the purposes of calculating their percentage of ownership
of the outstanding common stock and voting power of the resulting
corporation), (B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation unless such Person owned 20% or more of the Outstanding
BankAmerica Common Stock or Outstanding BankAmerica Voting Securities
immediately prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination.
(iv) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
(f) Committee means the Executive Personnel and Compensation Committee
of the Board.
(g) Common Stock means shares of BankAmerica's common stock, $1.5625
par value per share.
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(h) Company means BankAmerica and its Subsidiaries, collectively.
(i) The Fair Market Value of a share of Common Stock on any date means
the average of the high and low sales prices of a share of Common Stock as
reflected in the report of consolidated trading of New York Stock Exchange
listed securities for that day (or, if no shares were publicly traded on
that day, the immediately preceding day that shares were so traded)
published in The Wall Street Journal or in any other publication selected
by the Committee; provided, however, that if shares of Common Stock shall
not have been publicly traded for more than ten days immediately preceding
such date, then the fair market value of a share of Common Stock shall be
determined by the Committee in such manner as it may deem appropriate.
(j) Major Combination means a merger, acquisition or other business
combination in which the number of shares of Common Stock outstanding as of
the close of business on the effective date of the combination is at least
10% greater than the number of shares of Common Stock outstanding prior to
the effective date of the combination.
(k) 1987 Plan means the plan adopted by the Board of Directors of
BankAmerica Corporation on April 6, 1987, as amended, pursuant to which
BankAmerica Corporation has issued non-qualified stock options, incentive
stock options, performance stock options, and restricted stock to key
officers and other employees of BankAmerica and to other individuals whose
participation in the 1987 Plan was deemed to be in the best interests of
BankAmerica.
(l) Option means an option to purchase shares of the Common Stock, and
shall be one of two kinds: (i) Incentive Stock Options ("ISOs") and (ii)
Non-Qualified Stock Option ("NQSOs"). The Company intends the ISOs shall
meet the requirements of Section 422A of the Internal Revenue Code and the
regulations thereunder applicable to incentive stock options, and that
NQSOs shall not meet such requirements.
(m) Optionee means the holder of an Option.
(n) Other Stock-Based Award means an Award granted pursuant to Section
5.1 of the Plan.
(o) Participant means an officer or employee designated to receive a
grant or award under the Plan.
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(p) Restricted Stock means Common Stock issued or delivered pursuant
to Article IV with the restrictions set forth therein.
(q) Restricted Stock Unit means any right granted pursuant to Article
IV that is denominated in shares of Common Stock.
(r) Retirement means, with respect to grants and awards made on or
after August 2, 1993, the last day of employment with BankAmerica or one of
its subsidiaries prior to the employee's retirement at normal retirement
age under a retirement program of BankAmerica or one of its Subsidiaries;
and, with respect to grants and awards made before August 2, 1993, the last
day of employment with BankAmerica or one of its subsidiaries prior to the
employee's retirement under a retirement program of BankAmerica or one of
its subsidiaries.
(s) Stock Appreciation Right ("SAR") has the meaning set forth in
Section 3.1.
(t) Subsidiary means any corporation of which BankAmerica owns,
directly or indirectly, twenty percent or more of the voting stock.
(u) Window Period means the time period described in Section 3.2
hereof.
1.4 Administration of Plan. (a) The Plan shall be administered by the
Committee. The Committee shall consist of at least three members of the Board,
none of whom shall be, while serving on the Committee, eligible to receive a
grant or award under the Plan or under any other plan of the Company or its
affiliates under which the participants are entitled to acquire Common Stock,
stock options, restricted stock, restricted stock units, and related rights,
stock appreciation rights or other stock-based awards of the Company or any of
its affiliates. Members of the Committee shall serve at the pleasure of the
Board. Notwithstanding the foregoing, all grants and awards under the Plan to
the Chief Executive Officer of BAC shall be approved or ratified by the Board.
(b) Subject to the provisions of the Plan, the Committee shall have
sole, final, and conclusive authority to determine:
(i) the employees to whom Awards shall be made;
(ii) the number of shares of Common Stock to be optioned, granted
or awarded to each such employee;
(iii) whether and to what extent an Optionee may use already-owned
shares of Common Stock to exercise Options;
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(iv) the restrictions to be imposed on each share of Restricted
Stock and on Restricted Stock Units awarded pursuant to Article IV of
this Plan, which shall not be less than the minimum restrictions set
forth therein;
(v) which Options granted shall be Incentive Stock Options, and
which shall be Non-Qualified Stock Options;
(vi) the price to be paid for the shares upon the exercise of
each Option, which shall be not less than 100% of the Fair Market
Value per share, as determined by the Committee, of the Common Stock
at the time of granting the Option;
(vii) the period within which each Option shall be exercised;
(viii) the terms and conditions of each Award Agreement between
BankAmerica and an employee to whom the Committee has made an Award,
which, however, shall be in accordance with the provisions of the
Plan; and
(ix) subject to the provisions of Section 6.13, the Committee shall
have the power, authority, and sole discretion to construe, interpret
and administer the Plan. The Committee's decisions construing,
interpreting and administering the Plan shall be conclusive and
binding on all parties.
1.5 Eligibility to Receive Grants and Awards. Employees of BankAmerica or
of any of its Subsidiaries who shall, in the judgment of the Committee be
qualified by position, training or ability to contribute substantially to the
progress of BankAmerica, shall be eligible to receive grants and awards under
the Plan.
1.6 Types of Grants and Awards Under Plan. Grants and awards under the
Plan may be in the form of any one or more of the following: (i) Incentive
Stock Options, (ii) Non-Qualified Stock Options, (iii) Stock Appreciation
Rights, (iv) Restricted Stock Units, (v) Restricted Stock or (vi) Other Stock-
Based Awards.
1.7 Limitation on Available Shares. For each calendar year from and
including 1995 a number of shares of Common Stock in an amount of up to one and
one-half percent (1.5%) of the number of shares of Common Stock outstanding as
reported in the annual report to shareholders of BankAmerica for the preceding
year shall become available for delivery with respect to Awards under the Plan,
provided, however, that as of the effective date of any Major Combination (as
- -------- -------
defined in Section 1.3) the number of shares available for delivery in that year
with respect to Awards under the Plan shall be increased to one and one-half
percent (1.5%) of the number of shares of Common Stock outstanding as of the
close of
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business on the effective date of that Major Combination. Shares of Common
Stock delivered under the Plan may be original issue shares, shares purchased in
the open market or otherwise or other treasury stock.
In addition, (a) any shares of Common Stock which as of the effective date
of the Plan are reserved for delivery under the 1987 Plan and which are not
thereafter delivered, and (b) any shares of Common Stock available for delivery
under the Plan in previous years but not actually delivered, shall be added to
the aggregate number of shares of Common Stock available for delivery in that
calendar year under the Plan; provided, however, that no more than 30 percent
-------- -------
(30%) of the shares of Common Stock available for delivery under the Plan in any
calendar year shall be delivered in respect of Restricted Stock or Restricted
Stock Units. Notwithstanding the foregoing, but subject to adjustment as
provided in Section 6.4, no more than 5,000,000 shares shall be cumulatively
available under the Plan for delivery upon the exercise of ISOs. The Committee
shall have no obligation to grant or award all or any portion of the shares
available for delivery in any year. The Board may, by resolution, limit the
number of shares that may be available for delivery with respect to Awards under
the Plan in any calendar year to a number of shares lower than would otherwise
be available for delivery hereunder.
Shares of Common Stock subject to Awards under the Plan that for any reason
are cancelled or terminated, or expire, shall again be available for delivery
under the Plan.
Shares of Restricted Stock and Restricted Stock Units that for any reason
are reacquired by BankAmerica pursuant hereto shall again be available for
delivery under the Plan; provided, however, that shares of Restricted Stock or
-------- -------
Restricted Stock Units as to which dividends or payments equivalent to dividends
have been paid to or reinvested for the account of the Restricted Stockholder
prior to reacquisition by BankAmerica shall not again be available for delivery
under the Plan after such reacquisition.
Notwithstanding the foregoing, neither (i) shares of Common Stock
transferred or relinquished to the Company upon the exercise of an Option or in
satisfaction of any withholding obligation, nor (ii) shares of Common Stock
subject to an Award denominated in shares of Common Stock but settled by the
payment of cash in accordance with the Plan, shall again be available for
delivery under the Plan.
1.8 Effective Date and Term of Plan. (a) The Plan shall become
effective on March 2, 1992 and the Committee may, in its discretion, make grants
and awards to eligible key officers and other employees of the Company as of
that date, subject, however, to the approval of the Plan by the shareholders of
BankAmerica at the 1992 annual meeting of shareholders. In the event the Plan
is
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not approved at such meeting, the Plan and all grants and awards hereunder shall
be void, and the Company shall have no obligation to any recipients of such
grants and awards.
(b) The Committee may make grants and awards under the Plan beginning
March 2, 1992 and during each subsequent year until such time as the Plan may be
terminated by the Board in its sole discretion, or as hereinafter provided.
(c) Unless the shareholders of BankAmerica shall approve an extension
or renewal of the Plan for such new or additional term as they may determine, no
grants and awards shall be made after March 2, 2002. However, all grants and
awards made under the Plan prior to such date shall remain in effect until such
grants and awards shall have been satisfied, terminated, or paid out, or expire,
in accordance with the Plan and the terms of such grants and awards.
1.9 Limitation on Options and SARs Awardable to Any Single Participant.
The maximum number of shares of Common Stock underlying Options and SARs that
may be awarded under the Plan to any single Participant during the period from
March 2, 1992, the effective date of the Plan, through March 2, 2002, is
10,000,000. The minimum price at which each Option is exercisable and the
minimum grant price of each SAR are specified in Sections 2.3 and 3.1,
respectively, of the Plan.
ARTICLE II
INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS
2.1 Grant of Stock Options. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to any eligible employee Incentive Stock Options
("ISOs" or "Options") and/or Non-Qualified Stock Options ("NQSOs" or "Options")
(as these terms are defined in Section 1.3) to purchase, for cash and/or for
already-owned shares of Common Stock, such number of shares of Common Stock as
the Committee shall determine.
2.2 Award Agreements. The grant of an ISO or NQSO shall be evidenced by a
written Award Agreement in such form as the Committee may from time to time
determine in accordance with the provisions of the Plan, executed by
BankAmerica. Each Award Agreement pursuant to which Options are granted shall
state the number of shares of Common Stock subject to the Option, the Option
price, the Option Period, and any limitations on the Option, the restrictions on
assigning and transferring the Option described in Section 6.8, the manner of
payment for shares of Common Stock, and such other terms as the Committee shall
determine.
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2.3 Option Price. The purchase price per share of Common Stock which the
Optionee must deliver upon the exercise of an ISO or NQSO shall be fixed by the
Committee, but shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is granted.
2.4 Option Period. (a) Each Option granted as an ISO or NQSO shall
become exercisable in part or in full at such time or times as the Committee may
determine and specify in each Award Agreement; provided, however, that no Option
-------- -------
will be exercisable before the date six months after the date the Option was
granted and no ISO shall be exercisable after the expiration of 10 years from
the date the ISO was granted.
(b) Each Award Agreement shall set forth the extent to which the
Optionee shall have the right to exercise the Option following the Optionee's
retirement, death or termination of the Optionee's employment with the Company
(including termination that, pursuant to the Award Agreement, may be deemed to
occur upon a change in ownership of the Optionee's employer such that the
Optionee's employer ceases to be BankAmerica or one of its Subsidiaries). Such
provisions shall be determined in the sole discretion of the Committee and need
not be uniform among all Options issued pursuant to the Plan.
(c) The Committee may determine in its sole discretion from time to
time to permit the Optionee to purchase all shares of Common Stock covered by
the Optionee's Options, upon or after the Optionee's death, retirement, or
termination of employment with the Company (including termination that, in the
sole discretion of the Committee, may be deemed to occur upon a change in
ownership of the Optionee's employer such that the Optionee's employer ceases to
be BankAmerica or one of its Subsidiaries), without regard to whether the
Options were fully exercisable upon death, retirement or termination of
employment under the terms of the Award Agreements with respect to such Options.
2.5 Limitation on ISOs. Notwithstanding any other provisions in the Plan
or in any ISO agreement, to the extent the aggregate Fair Market Value
(determined at the time the option is granted) of stock with respect to which
ISOs granted after December 31, 1986 are exercisable for the first time by an
Optionee during any calendar year under all plans of BankAmerica and its
subsidiaries exceeds $100,000, such options shall be treated as NQSOs. This
rule shall be applied by taking options into account in the order in which they
were granted so that options with the earliest grant date will receive ISO
treatment.
No ISO shall be granted to any person who at the time owns more than ten
percent of total combined voting power of all classes of stock of BankAmerica or
of any Subsidiaries.
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2.6 Manner of Paying Option Price. On exercise of each ISO or NQSO, the
Option Price shall be paid as follows: (a) in cash, (b) in already-owned shares
of Common Stock, or (c) in some combination of cash and shares, as specified in
the Award Agreement or as otherwise permitted by the Committee. Already-owned
shares of Common Stock must have been owned by the Optionee at the time of
exercise for at least the period of time specified in the Award Agreement, and
shall be valued at their Fair Market Value on the date of exercise.
2.7 Exercise of Option. The Committee shall establish, and shall set
forth in each Award Agreement, the procedures governing the exercise of an ISO
or NQSO. In general, subject to such specific provisions, an ISO or NQSO shall
be exercised as follows:
(a) the Optionee shall deliver written notice that he or she intends
to exercise the Option to the Company department or officer designated in
the Award Agreement;
(b) the Optionee shall pay the full Option Price at the time of
exercise, according to Section 2.6 above; and
(c) as soon as practicable after receipt of such notice and payment,
the Company shall direct BankAmerica's transfer agent to register the
shares of Common Stock in the name of the Optionee.
2.8 Cancellation of SARs. Each Award Agreement shall specify whether the
exercise of an ISO or NQSO with respect to a share of Common Stock shall cancel
any SAR related to such share.
2.9 Cancellation and Regrant of Options. The Committee may cancel
particular NQSOs and regrant to the same Optionee NQSOs to purchase the same or
a different number of shares of Common Stock, only (i) with the consent of the
Optionee, and (ii) if the Option Price for the NQSOs so regranted is no less
than the higher of (A) the Option Price for the NQSOs so cancelled, or (B) the
Fair Market Value of the Common Stock on the date of regrant.
ARTICLE III
STOCK APPRECIATION RIGHTS
3.1 Grant of Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights ("SARs") to Participants. The
terms and conditions of the SARs shall be as provided in the Award Agreement
with respect to such SARs. Each Award Agreement shall specify the grant price,
term, methods of exercise, methods of settlement, disposition of the SARs on
retirement, death or termination of employment of the holder of the SARs, and
such other terms and conditions of the SARs as shall be determined by the
Committee. The Committee may impose such
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conditions or restrictions on the exercise of any SAR as it may deem
appropriate. SARs may be granted either alone or in tandem with grants of
Options under the Plan. SARs granted in tandem with Options are referred to
herein as "Tandem SARs".
The Committee shall not grant an SAR in tandem with an ISO unless, pursuant
to applicable law and rules and regulations of the Internal Revenue Service, the
SAR may be attached to the ISO without causing the ISO to fail to meet the
requirements of Section 422A of the Internal Revenue Code.
Subject to the terms of the Plan and the applicable Award Agreement, an SAR
shall confer on the holder thereof a right to receive payment (the "SAR Value"),
upon exercise thereof, equal to the excess of (i) the Fair Market Value of one
share of Common Stock on the date of exercise over (ii) the grant price of the
SAR as specified by the Committee, which shall be not less than the Fair Market
Value of one share of Common Stock on the date of grant of the SAR.
3.2 Form and Timing of Payment. (a) Exercise of Tandem SARs for Cash or
Common Stock. Tandem SARs exercised during the Window Period described below
shall be payable only in cash, and Tandem SARs exercised outside the Window
Period shall be payable only in shares of Common Stock. A "Window Period" is a
period (i) beginning on the third business day following the date of public
release of BankAmerica's quarterly or annual summary statements of revenues and
earnings and (ii) ending on the twelfth business day following such date.
(b) Amount of Cash Payable on Exercise of Tandem SARs. When Tandem
SARs are exercised during the Window Period, the Optionee shall receive a cash
amount equal to (i) the number of Tandem SARs exercised multiplied by (ii) the
difference between (A) the highest Fair Market Value of one share of Common
Stock as of any day during the Window Period, and (B) the Option Price specified
for the related Option.
(c) Number of Shares Issuable or Deliverable on Exercise of Tandem
SARs. When Tandem SARs are exercised outside the Window Period, the Optionee
shall receive the number of whole shares of Common Stock equal to (i) the
aggregate SAR Value (as defined in Section 3.1) of the Tandem SARs exercised
divided by (ii) the Fair Market Value (as defined in Section 1.3) on the date of
exercise. The Company shall deliver cash in lieu of fractional shares.
3.3 Cancellation of Related Options. Each Award Agreement shall specify
whether the exercise of an SAR shall cancel any NQSO to which it relates, to the
extent of the exercise. Any exercise of an SAR with respect to an ISO must be
made in accordance with Section 3.1.
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ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
4.1 Introduction. BankAmerica has outstanding shares of restricted stock
granted under the 1987 Plan, the BankAmerica Corporation Restricted Stock Bonus
Plan (the "Bonus Plan") and the BankAmerica Corporation Management Incentive
Stock Plan ("MISP"). Restricted stock already granted under the 1987 Plan, the
Bonus Plan and the MISP will continue to be held under the terms of those plans,
except as provided in Section 1.7 of this Plan. Only grants of Restricted Stock
and Restricted Stock Units made on or after the effective date of this new Plan
shall be governed by the terms of this Article IV.
4.2 Award of Restricted Stock and Restricted Stock Units. The Committee
may, from time to time and subject to the provisions of the Plan and such other
terms and conditions as the Committee may prescribe, award shares of Common
Stock or Restricted Stock Units to be held under the restrictions set forth in
this Article to any eligible employee (the "Restricted Stockholder"). If an
eligible employee has been employed less than six months, any award of
Restricted Stock shall only be made from Common Stock which is held as treasury
stock by BankAmerica.
4.3 Minimum Restrictions on Disposition. A Restricted Stockholder may
not, under any circumstances, voluntarily dispose of any of the Restricted Stock
or Restricted Stock Units prior to the first to occur of the following events:
(a) the date on which the Restricted Stockholder completes the period
of continuous service, which shall not be less than one year, with the
Company following the award date specified by the Committee for such award;
(b) delivery of the Restricted Stock to the Restricted Stockholder
following a Committee determination pursuant to Section 6.6 hereof in
connection with a Change in Control;
(c) the Restricted Stockholder's retirement or death; or
(d) delivery of the Restricted Stock to the Restricted Stockholder
following his or her termination of employment prior to retirement or death
pursuant to a determination by the Committee under Section 4.6.
The limitations in this Section 4.3 will hereinafter be referred to as the
"minimum restrictions."
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4.4 Optional Restrictions. In addition to the minimum restrictions, the
Committee may impose additional restrictions ("optional restrictions") upon the
Restricted Stockholder's voluntary disposition of the Restricted Stock or
Restricted Stock Units, either at the time the Committee makes an award of such
Restricted Stock or Restricted Stock Units or at any subsequent time before the
minimum restrictions expire. The Committee may impose optional restrictions
(such as, without limitation, permitting such disposition and release only in
installments over a period of years) as it may deem in the best interests of the
Restricted Stockholder, or in the case of the Restricted Stockholder's death, of
the heirs or legatees who become entitled to such Restricted Stock or Restricted
Stock Units by the applicable laws of inheritance or under the terms of the
Restricted Stockholder's will.
4.5 Termination of Employment of Restricted Stockholder for Gross
Misconduct. If a Restricted Stockholder's services are terminated for cause for
gross misconduct, all shares of Restricted Stock and Restricted Stock Units
awarded to any Restricted Stockholder under this Plan shall be forfeited, and
the Committee shall direct such shares of Restricted Stock and Restricted Stock
Units to be transferred and delivered to BankAmerica. Gross misconduct
includes, but is not limited to, acts of dishonesty, such as theft,
embezzlement, and falsification of the Company's records with intent to deceive;
breach of trust; knowing violation of rules established by the Company; and any
crime determined by the Company to result in termination of employment.
4.6 Termination of Employment of Restricted Stockholder not Involving
Gross Misconduct.
(a) Should a Restricted Stockholder who was employed by the Company at
the date of grant terminate his or her employment with the Company prior to (i)
the date on which he or she completes the period of continuous service for the
Company following the award date specified by the Committee for such award, or
(ii) his or her death or retirement, or
(b) should the Company terminate his or her employment for any reason
other than for a cause set forth in Section 4.5 above,
BankAmerica shall reacquire all the Restricted Stock and Restricted Stock Units
without the payment of consideration in any form to such Restricted Stockholder
and the Restricted Stockholder shall unconditionally forfeit any right, title or
interest to such Restricted Stock and Restricted Stock Units, unless the
Committee, up to 90 days after such termination, determines in its sole
discretion to permit the Restricted Stockholder to (i) retain all or any part of
the Restricted Stock, and/or (ii) to waive in whole or in part any or all
remaining restrictions on Restricted Stock
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Units, and to deliver shares of Common Stock to the Restricted Stockholder in
respect of such Restricted Stock Units. Upon direction of the Committee, all
forfeited Restricted Stock and Restricted Stock Units shall be transferred and
delivered to BankAmerica. Termination of a Restricted Stockholder's employment
with the Company shall be deemed to include a change in ownership of the
Restricted Stockholder's employer such that the Restricted Stockholder's
employer ceases to be BankAmerica or one of its Subsidiaries.
4.7 Registration and Escrow. Any Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event that any stock certificate is issued
in respect of shares of Restricted Stock granted under the Plan, such
certificate shall be registered in the name of the Restricted Stockholder and
shall either bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, or, at the direction of the
Committee, be held by Bank of America National Trust and Savings Association
(the "Bank") (or another escrow agent appointed by the Committee) in escrow
subject to delivery to the Restricted Stockholder or to BankAmerica at such
times and in such amounts as the Committee shall direct under the terms of the
Plan. When an employee accepts an award of Restricted Stock pursuant to the
Plan, he or she thereby grants an irrevocable power of attorney to the Bank or
any other escrow agent appointed by the Committee to cause the transfer and
delivery to BankAmerica of any such Restricted Stock which the Committee shall
direct to be so transferred and delivered pursuant hereto.
4.8 Payment in Respect of Restricted Stock Units.
(a) Each Restricted Stock Unit shall represent one share of Common
Stock, and shall, at the time and to the extent it becomes vested, be payable by
the delivery of one share of Common Stock. The Committee is authorized to grant
Restricted Stock Units under which the Restricted Stockholder shall be entitled
to receive payments equivalent to dividends with respect to a number of shares
of Common Stock determined by the Committee, and the Committee may determine
that such amounts (if any) shall be paid to the Restricted Stockholder in cash
from time to time, or be deemed to have been reinvested in additional shares of
Common Stock or additional Restricted Stock Units, or otherwise reinvested.
Restricted Stock Units shall have no voting rights.
(b) The Committee may, in its discretion, provide that payment to the
Restricted Stockholder in respect of Restricted Stock Units shall be deferred
until such date or dates, not later than the Restricted Stockholder's death,
retirement or other termination of employment with the Company, as the
Restricted Stockholder may elect. Any such election shall be filed in writing
14
4015376.05
<PAGE>
with the Committee in accordance with such rules and regulations, including any
time periods within which such election shall be made, as the Committee may
specify.
4.9 Dividends on Restricted Stock. Even while the Restricted Stock is
held in escrow, the Committee may determine that all dividends BankAmerica pays
on the Restricted Stock shall be delivered directly to the Restricted
Stockholder, not the escrow account.
4.10 Voting Rights. Even while the Restricted Stock is held in escrow,
the Committee may determine that the Restricted Stockholder shall have the same
voting rights with respect to the Restricted Stock as those provided to other
shareholders of Common Stock.
ARTICLE V
OTHER STOCK-BASED AWARDS
5.1 Other Stock-Based Awards. The Committee is hereby authorized to grant
to Participants such awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, shares of
Common Stock (including, without limitation, securities convertible into shares
of Common Stock) as are deemed by the Committee to be consistent with the
purposes of the Plan; provided, however, that such grants must comply with Rule
-------- -------
16b-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and applicable law, except that Options may be
transferable to the extent permitted by, and in accordance with the provisions
of, Section 6.8 of the Plan. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the terms and
conditions of such awards. Shares of Common Stock or other securities delivered
pursuant to a purchase right granted under this Section 5.1 shall be purchased
for such consideration, which may be paid by such method or methods and in such
form or forms, including, without limitation, cash, shares of Common Stock,
other securities, other awards, or other property, or any combination thereof,
as the Committee shall determine, the value of which consideration, as
established by the Committee, shall not be less than the Fair Market Value of
such shares of Common Stock or other securities as of the date such purchase
right is granted.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by
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<PAGE>
registered or certified mail, postage prepaid, or otherwise delivered by hand or
messenger, addressed
(a) if to the Company, at
BankAmerica Corporation
1 South Van Ness Avenue, 7th Floor
San Francisco, CA 94103
Attn: c/o Bank of America NT&SA
Executive Resources #3005
(b) if to the Participant, at the last address shown on the Company's
personnel records, or
(c) to such address as either the Company or the Participant shall
later designate by notice to the other.
6.2 Amendments of Plan. BankAmerica may, at any time and from time to
time, modify, amend, suspend or terminate the Plan in any respect by action of
the Board or by written amendment executed by a duly authorized officer of
BankAmerica. Notwithstanding the above, however, any modification, amendment,
suspension or termination of the Plan shall not affect a Participant's rights to
a grant or award previously made, except as provided in Section 1.8(a), or
except with his or her consent.
6.3 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence from the Company taken by the recipient of any
grant or award under the Plan. Without limiting the generality of the
foregoing, the Committee shall be entitled to determine (a) whether or not any
such leave of absence shall be treated as a termination of employment with the
Company within the meaning of the Plan and (b) the impact, if any, of any such
leave of absence on grants and awards under the Plan.
6.4 Dilution and Other Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
shares of Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of shares of Common Stock or
other securities of BankAmerica, issuance of warrants or other rights to
purchase shares of Common Stock or other securities of BankAmerica, or other
similar corporate transaction or event, affects the Common Stock, such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
shall deem
16
4015376.05
<PAGE>
equitable, adjust any or all of (i) the number and type of shares of Common
Stock which thereafter may be made the subject of Awards, (ii) the number and
type of shares of Common Stock (or other securities or property) subject to
outstanding Awards, and (iii) the grant, purchase or exercise price with respect
to any Award, or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding Award; provided, however, in each case, that with
-------- -------
respect to Awards of ISOs no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422A of the Internal
Revenue Code or any successor provision thereto; and provided further that the
-------- -------
number of shares of Common Stock subject to any Award denominated in shares of
Common Stock shall always be a whole number.
6.5 General Restriction. Each grant and award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (a) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (b) the consent or approval of any government regulatory body,
or (c) an agreement by the recipient of a grant or award with respect to the
disposition of shares of Common Stock, is necessary or desirable as a condition
of, or in connection with, the making of a grant or award or the issue, delivery
or purchase of shares of Common Stock thereunder, then such grant or award shall
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
6.6 Change in Control. If BankAmerica undergoes a Change in Control (as
defined in Section 1.3(e)), the following shall apply:
(a) Except as provided in subsection (b) below, (i) all outstanding
Options and SARs shall be immediately exercisable in full and (ii) all
Restricted Stock, Restricted Stock Units, and Other Stock-Based Awards
shall be immediately released free from all restrictions and shall be
delivered or paid, as the case may be, to the Participant as soon as
practicable following the Change in Control.
(b)(i) The Performance Share Units awarded on November 7, 1994 (and
any subsequent awards of Performance Share Units) under the BankAmerica
Corporation 1992 MSP Performance Share Program shall vest in the time or
times specified in Section 4.1 of the Performance Share Program whether or
not the Participant continues in employment with the Company. However,
following a Change in Control, the Committee shall no longer have
discretion to not vest Performance Share Units after the end of the term of
the Award if BAC ranks 1 or 2 in total shareholder return relative to its
peer banks for the term of the Award.
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4015376.05
<PAGE>
(b)(ii) In the event (i) any Award has been made to a person who, at
the time of a Change in Control is an officer or director of BankAmerica,
as such terms are defined in Section 16 of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder,
and (ii) such Award has not satisfied the applicable minimum vesting
provisions of the Plan, this Section 6.6 shall apply to such Award
immediately after the satisfaction of any such applicable minimum vesting
period, whether or not the person remains an employee of the Company at
that time.
(c) Except as provided in the following sentence (and, if applicable,
the expiration of the minimum vesting period in (b)), in the event a
Participant terminates employment with the Company following a Change in
Control, his or her Options and SARs shall remain exercisable for a period
of three years following termination of employment, not to exceed the
original term of the Option or SAR. The preceding sentence shall not apply
to an incentive stock option unless the option agreement gives the
Committee discretion to permit the incentive stock option to remain
exercisable following termination of the optionholder's employment, in
which case the incentive stock option shall be exercisable for three months
following termination of employment without further Committee action.
(d) Section 6.7 of the Plan regarding payment of withholding taxes
shall remain applicable.
6.7 Withholding Taxes. The Company shall have the right to deduct from
any settlement of an Award made under the Plan, including the delivery or
vesting of shares, an amount sufficient to cover withholding required by law for
any federal, state or local taxes or to take such other action as may be
necessary to satisfy any such withholding obligations. The Committee may permit
shares to be used to satisfy required tax withholding and such shares shall be
valued at the Fair Market Value as of the settlement date of the applicable
award.
6.8 Non-Assignability. Except as provided below, no Participant shall
have the right to alienate, assign, encumber, hypothecate or pledge his or her
interest in any Award under the Plan, voluntarily or involuntarily, and any
attempt to so dispose of any such interest prior to payment thereof shall be
void.
Any Participant who is an Executive Officer (as defined below) shall have
the right, subject to the conditions specified in the following paragraph, to
irrevocably transfer to Immediate Family Members (as defined below) Options
granted at any time under the Plan to any such Participant ("Executive Officer
Participant"). As used in the Plan and the related Award Agreements, the
following
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<PAGE>
terms, when written with initial capital letters, shall have the meanings stated
below:
(a) The term Executive Officer means an Executive Officer designated
by the Board for federal securities law purposes, provided such officer is
also a member of the Managing Committee of Bank of America NT&SA.
(b) The term Immediate Family Members means (i) the children,
grandchildren or spouse of an Executive Officer Participant or (ii) a trust
for the benefit of such family members.
As conditions to such transferability of any Options, (i) the Executive
Officer Participant may not receive any consideration for the transfer; (ii) the
Award Agreements pursuant to which such Options are granted, or amendments to
the Award Agreements with respect to previously granted Options, in each case
approved by the Committee, must specify the actual extent to which such Options
may be transferred, all in accordance with the terms of the Plan; and (iii) the
Options so transferred must continue to be subject to the same terms and
conditions that were applicable to such Options prior to their transfer.
The transferee of any Options transferred in accordance with the terms and
conditions of the Plan shall have the right to exercise such Options and to have
the shares of Common Stock covered by such Options registered in the name of
such transferee, as though such transferee were the Optionee for purposes of
Section 2.7 of the Plan.
Notwithstanding anything contained in this Section 6.8, the Company shall
have the right to offset from any unpaid or deferred Award any amounts due and
owing from the Participant to the extent permitted by law; provided, however,
-------- -------
that with respect to any Options that are transferred in accordance with the
terms and conditions of the Plan, such right shall cease upon the transfer.
6.9 No Right to Employment. Nothing in the Plan nor in any agreement
entered into pursuant to the Plan shall confer upon any Participant the right to
continue in the employment of the Company, nor affect any right which the
Company may have to terminate the employment of such person.
6.10 Rights as Shareholder. No Participant shall have rights as a
shareholder with respect to shares of Common Stock awarded to him or her unless
and until the certificates for such shares are delivered to him or her. The
Committee may determine that
19
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<PAGE>
Restricted Stockholders have full voting rights with respect to Restricted
Stock, as provided in Section 4.9 hereof.
6.11 Entire Plan. This document is a complete statement of the Plan. As
of its effective date this document supersedes all prior plans, representations
and proposals, written or oral, relating to its subject matter, except as
otherwise provided in Section 1.7 hereof. The Company shall not be bound by or
liable to any person for any representation, promise or inducement made by any
employee or agent of it which is not embodied in this document.
6.12 Governing Law. The Plan shall be construed and enforced in accordance
with California law.
6.13 Delegation. The Committee may delegate to one or more officers of the
Company or any of its Subsidiaries, or to a committee of such officers, the
authority, subject to such terms and limitations as the Committee shall
determine, to make grants and awards to, or to cancel, modify, waive rights with
respect to, alter, discontinue, suspend, or terminate grants or awards held by,
officers or employees of the Company, who are not officers or directors of the
Company for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended.
6.14 Foreign Employees. In order to facilitate the making of any grant or
award under the Plan, the Committee may provide for such special terms for
grants and awards to participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Committee may consider necessary or appropriate to accommodate differences in
local law, policy or custom. Moreover, the Committee may approve such
supplements to or amendments, restatements, or alternative versions of the Plan
including supplements, amendments or alternative versions providing for Other
Stock-Based Awards as it may consider necessary or appropriate for such
purposes, without thereby affecting the terms of the Plan as in effect for any
other purpose. No such special terms, supplements, amendments or restatements,
however, shall include any provisions that are inconsistent with the terms of
the Plan as then in effect unless the Plan could have been amended to eliminate
such inconsistency without further approval by the shareholders of BankAmerica.
The resolution amending Sections 1.3(e) and 6.6 provided that no
modification, suspension, amendment or termination of the Plan may be made which
would adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option, stock appreciation right, restricted
stock unit or other
20
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<PAGE>
stock based award granted under the Plan prior to the date of such modification,
suspension, amendment or termination.
21
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1996 CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES, INTEREST,
AND AVERAGE RATES, NONPERFORMANCE 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,619
<INT-BEARING-DEPOSITS> 5,829
<FED-FUNDS-SOLD> 6,593
<TRADING-ASSETS> 14,000
<INVESTMENTS-HELD-FOR-SALE> 11,717
<INVESTMENTS-CARRYING> 4,200
<INVESTMENTS-MARKET> 3,892
<LOANS> 161,833
<ALLOWANCE> 3,511
<TOTAL-ASSETS> 242,953
<DEPOSITS> 164,901
<SHORT-TERM> 25,845
<LIABILITIES-OTHER> 16,241
<LONG-TERM> 15,454<F1>
0
2,242
<COMMON> 605
<OTHER-SE> 17,665
<TOTAL-LIABILITIES-AND-EQUITY> 242,953
<INTEREST-LOAN> 9,975
<INTEREST-INVEST> 876
<INTEREST-OTHER> 1,570<F2>
<INTEREST-TOTAL> 12,421
<INTEREST-DEPOSIT> 3,953
<INTEREST-EXPENSE> 5,964
<INTEREST-INCOME-NET> 6,457
<LOAN-LOSSES> 665
<SECURITIES-GAINS> 41
<EXPENSE-OTHER> 6,091
<INCOME-PRETAX> 3,614
<INCOME-PRE-EXTRAORDINARY> 3,614
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,126
<EPS-PRIMARY> 5.38
<EPS-DILUTED> 5.38
<YIELD-ACTUAL> 4.26
<LOANS-NON> 1,119
<LOANS-PAST> 363
<LOANS-TROUBLED> 274
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,554
<CHARGE-OFFS> 1,013
<RECOVERIES> 302
<ALLOWANCE-CLOSE> 3,511
<ALLOWANCE-DOMESTIC> 0<F3>
<ALLOWANCE-FOREIGN> 0<F3>
<ALLOWANCE-UNALLOCATED> 834
<FN>
<F1>Includes subordinated capital notes of $355 million
<F2>Includes interest income on trading account assets of $731 million.
<F3>These amounts are not reported in our interim filing.
</FN>
</TABLE>
