<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1997
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 charger:
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 --- 352,353,939 shares outstanding
on March 31, 1997.*
*In addition, 34,958,743 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
BankAmerica Corporation's Annual Report on Form 10-K for the year ended December
31, 1996, including the consolidated financial statements and notes thereto.
<PAGE>
[BANK AMERICA LOGO APPEARS HERE]
1997
1ST Q U A R T E R
<PAGE>
CONTENTS
<TABLE>
======================================================================================
<S> <C>
PART I Item 1.
FINANCIAL Financial Statements:
INFORMATION Consolidated Statement of Operations.......................... 2
Consolidated Balance Sheet ................................... 3
Consolidated Statement of Cash Flows ......................... 4
Consolidated Statement of Changes in
Stockholders' Equity ......................................... 5
Notes to Consolidated Financial Statements ................... 6
Item 2
Management's Discussion and Analysis:
Highlights ................................................... 15
Business Sectors ............................................. 18
Operating Leverage and Capital Management .................... 21
Results of Operations:
Net Interest Income ........................................ 22
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 ............................. 46
Signatures ................................................... 47
======================================================================================
</TABLE>
1
<PAGE>
FINANCIAL STATEMENTS
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
==================================================================================================================
1997 1996
------- -------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $3,423 $3,388 $3,371 $3,307 $3,297
Interest-bearing deposits in banks 99 145 95 96 117
Federal funds sold 8 7 9 7 6
Securities purchased under resale agreements 155 144 178 176 155
Trading account assets 269 270 268 247 216
Available-for-sale and held-to-maturity securities 286 284 285 293 298
- ------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 4,240 4,238 4,206 4,126 4,089
INTEREST EXPENSE
Deposits 1,366 1,406 1,332 1,307 1,314
Federal funds purchased 13 20 17 20 22
Securities sold under repurchase agreements 149 155 201 176 163
Other short-term borrowings 275 254 243 208 178
Long-term debt 263 273 261 256 266
- ------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,066 2,108 2,054 1,967 1,943
- ------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,174 2,130 2,152 2,159 2,146
PROVISION FOR CREDIT LOSSES 220 220 235 250 180
- ------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,954 1,910 1,917 1,909 1,966
NONINTEREST INCOME
Deposit account fees 360 364 345 346 344
Credit card fees 87 94 92 90 79
Trust fees 57 57 53 56 63
Other fees and commissions 375 370 360 333 320
Trading income 188 134 153 178 165
Private equity investment activities 99 108 97 112 110
Net gain on sales of loans 59 20 25 17 26
Net gain on available-for-sale securities 20 20 7 4 30
Net gain on sales of subsidiaries and operations 13 5 41 83 51
Gain on issuance of subsidiary's stock - 147 - - -
Other income 127 180 146 101 86
- ------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 1,385 1,499 1,319 1,320 1,274
NONINTEREST EXPENSE
Salaries 839 834 822 814 821
Employee benefits 189 167 191 213 202
Occupancy 186 193 188 186 190
Equipment 182 184 180 175 163
Communications 93 92 89 90 92
Amortization of intangibles 91 92 93 93 95
Professional services 75 95 87 80 81
Regulatory fees and related expenses 10 2 95 13 13
Restructuring charges - 280 - - -
Other expense 368 311 336 333 356
- ------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 2,033 2,250 2,081 1,997 2,013
- ------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,306 1,159 1,155 1,232 1,227
PROVISION FOR INCOME TAXES 526 412 472 509 507
- ------------------------------------------------------------------------------------------------------------------
NET INCOME $ 780 $ 747 $ 683 $ 723 $ 720
- --------------------------------------------------------------------==============================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 2.05 $ 1.93 $ 1.75 $ 1.84 $ 1.79
EARNINGS PER COMMON SHARE -- ASSUMING FULL DILUTION 2.05 1.92 1.75 1.84 1.79
DIVIDENDS DECLARED PER COMMON SHARE 0.61 0.54 0.54 0.54 0.54
==================================================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
=========================================================================================================================
1997 1996
-------- --------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,561 $ 16,223 $ 13,619 $ 12,478 $ 12,870
Interest-bearing deposits in banks 6,390 5,708 5,829 5,194 5,585
Federal funds sold 153 134 306 276 143
Securities purchased under resale agreements 7,730 7,275 6,287 7,001 6,198
Trading account assets 12,931 12,205 14,000 12,633 11,215
Available-for-sale securities 11,532 12,113 11,717 10,964 11,287
Held-to-maturity securities 3,972 4,138 4,200 4,280 4,523
Loans 167,338 165,415 161,833 160,640 156,155
Less: Allowance for credit losses 3,538 3,523 3,511 3,495 3,496
- -------------------------------------------------------------------------------------------------------------------------
Net loans 163,800 161,892 158,322 157,145 152,659
Customers' acceptance liability 3,229 2,861 3,165 2,837 2,761
Accrued interest receivable 1,441 1,441 1,435 1,451 1,469
Goodwill, net 3,888 3,938 4,017 4,066 4,115
Identifiable intangibles, net 1,554 1,616 1,664 1,708 1,753
Unrealized gains on off-balance-sheet instruments 7,813 7,682 6,598 7,297 7,551
Premises and equipment, net 3,985 3,987 3,968 3,980 4,010
Other assets 7,925 9,540 7,826 7,531 8,104
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $249,904 $250,753 $242,953 $238,841 $234,243
- -----------------------------------------------------------------========================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Interest-bearing $ 84,071 $ 84,133 $ 83,779 $ 83,954 $ 84,314
Noninterest-bearing 39,561 39,694 37,589 34,737 34,570
Deposits in foreign offices:
Interest-bearing 43,854 42,732 42,035 41,444 40,127
Noninterest-bearing 1,513 1,456 1,498 1,710 1,506
- -------------------------------------------------------------------------------------------------------------------------
Total deposits 168,999 168,015 164,901 161,845 160,517
Federal funds purchased 730 2,176 1,093 2,740 2,125
Securities sold under repurchase agreements 7,124 7,644 8,489 8,861 7,640
Other short-term borrowings 18,883 17,566 16,263 14,530 11,523
Acceptances outstanding 3,229 2,861 3,165 2,837 2,761
Accrued interest payable 921 879 868 833 842
Unrealized losses on off-balance-sheet instruments 7,473 7,633 6,458 7,310 7,719
Other liabilities 5,850 6,004 5,750 4,824 5,875
Long-term debt 14,725 15,785 15,454 14,953 15,074
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 227,934 228,563 222,441 218,733 214,076
Corporation obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the
corporation (trust preferred securities) 1,873 1,477 - - -
STOCKHOLDERS' EQUITY
Preferred stock 1,596 2,242 2,242 2,242 2,423
Common stock 605 605 605 605 604
Additional paid-in capital 8,473 8,467 8,458 8,439 8,384
Retained earnings 12,029 11,500 10,989 10,544 10,067
Net unrealized gain (loss) on available-for-sale securities (90) 32 (27) (79) (56)
Common stock in treasury, at cost (2,516) (2,133) (1,755) (1,643) (1,255)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 20,097 20,713 20,512 20,108 20,167
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $249,904 $250,753 $242,953 $238,841 $234,243
- -----------------------------------------------------------------========================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
==========================================================================================================================
THREE MONTHS ENDED MARCH 31
---------------------------
(IN MILLIONS) 1997 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 780 $ 720
Adjustments to net income to arrive at net cash provided (used) by operating activities:
Provision for credit losses 220 180
Net gain on sales of loans and subsidiaries and operations (72) (77)
Net amortization of loan fees and discounts (31) (16)
Depreciation and amortization of premises and equipment 147 143
Amortization of intangibles 91 95
Provision for deferred income taxes 2 109
Change in assets and liabilities net of effects from acquisitions
and pending dispositions:
Increase in accrued interest receivable (11)
Increase (decrease) in accrued interest payable 42 (6)
Increase in trading account assets (726) (1,699)
Increase in current income taxes payable 509 254
Deferred fees received from lending activities 38 51
Net cash used by loans held for sale (80) (346)
Other, net 1,025 (1,423)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,945 (2,026)
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales proceeds 1,101 200
Maturities, prepayments, and calls 1,225 1,437
Purchases (1,955) (925)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 293 348
Purchases (130) (215)
Proceeds from loan sales and securitizations 2,138 255
Purchases of loans (108) (620)
Purchases of premises and equipment (153) (184)
Proceeds from sales of other real estate owned 128 105
Net cash provided (used) by:
Loan originations and principal collections (4,433) (588)
Interest-bearing deposits in banks (681) 176
Federal funds sold (19) 578
Securities purchased under resale agreements (455) (1,236)
Other, net 107 53
- --------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (2,942) (616)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 784 571
Principal payments and retirements of long-term debt (1,842) (823)
Net proceeds from issuance of trust preferred securities 396
Proceeds from issuance of common stock 44
Proceeds from issuance of treasury stock 62
Preferred stock redeemed (646) (211)
Treasury stock purchased (481) (289)
Common stock dividends (216) (198)
Preferred stock dividends (34) (53)
Net cash provided (used) by:
Deposits 984 23
Federal funds purchased (1,446) (3,035)
Securities sold under repurchase agreements (520) 1,257
Other short-term borrowings 1,317 3,896
Other, net (35) 17
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (1,677) 1,199
Effect of exchange rate changes on cash and due from banks 12 1
- --------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and due from banks (2,662) (1,442)
Cash and due from banks at beginning of period 16,223 14,312
- --------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $13,561 $12,870
- ----------------------------------------------------------------------------------------------============================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
====================================================================================================================
1997 1996
------- ----------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of quarter $ 2,242 $ 2,242 $ 2,242 $ 2,423 $ 2,623
Preferred stock redeemed (646) -- -- (181) (200)
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 1,596 2,242 2,242 2,242 2,423
COMMON STOCK
Balance, beginning of quarter 605 605 605 604 602
Common stock issued -- -- -- 1 2
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 605 605 605 605 604
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of quarter 8,467 8,458 8,439 8,384 8,328
Common stock issued -- 5 8 55 74
Preferred stock redeemed -- -- -- -- (18)
Treasury stock issued 6 4 11 -- --
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 8,473 8,467 8,458 8,439 8,384
RETAINED EARNINGS
Balance, beginning of quarter 11,500 10,989 10,544 10,067 9,606
Net income 780 747 683 723 720
Common stock dividends (216) (193) (194) (195) (198)
Preferred stock dividends (34) (44) (43) (45) (53)
Foreign currency translation adjustments,
net of related income taxes (1) 1 (1) (6) (8)
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 12,029 11,500 10,989 10,544 10,067
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES
Balance, beginning of quarter 32 (27) (79) (56) 1
Valuation adjustments, net of related income taxes (122) 59 52 (23) (57)
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter (90) 32 (27) (79) (56)
COMMON STOCK IN TREASURY, AT COST
Balance, beginning of quarter (2,133) (1,755) (1,643) (1,255) (938)
Treasury stock purchased (475) (450) (200) (385) (316)
Treasury stock issued 94 74 98 1 --
Other (2) (2) (10) (4) (1)
- --------------------------------------------------------------------------------------------------------------------
Balance, end of quarter (2,516) (2,133) (1,755) (1,643) (1,255)
- --------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $20,097 $20,713 $20,512 $20,108 $20,167
- -----------------------------------------------------------------===================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. The unaudited consolidated financial statements of
FINANCIAL BankAmerica Corporation and subsidiaries (BAC) are prepared
STATEMENT in conformity with generally accepted accounting principles
PRESENTATION 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, 1996.
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 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.
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). The FASB
subsequently amended SFAS No. 125 in December 1996. As amended,
SFAS No. 125 applies to securities lending, repurchase
agreements, dollar rolls, and other similar secured financing
transactions occurring after December 31, 1997 and to all other
transfers and servicing of financial assets occurring after
December 31, 1996. The adoption of SFAS No. 125 on January 1,
1997 did not have a material effect on BAC's financial position
or results of operations.
Certain amounts in prior periods have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
NOTE 2. During the three-month periods ended March 31, 1997 and 1996,
SUPPLEMENTAL BAC made interest payments on deposits and other
DISCLOSURE OF interest-bearing liabilities of $2,024 million and $1,949
CASH FLOW million, respectively, and made net income tax payments of $45
INFORMATION million and $144 million, respectively. In addition, during the
same periods there were foreclosures of loans with carrying
values of $62 million and $124 million, respectively.
During the three-month period ended March 31, 1997, BAC made
payments on accrued liabilities of $18 million related to
common stock repurchased during 1996. At March 31, 1997, BAC
accrued a $12 million liability related to common stock
repurchased during the first quarter of 1997.
- --------------------------------------------------------------------------------
NOTE 3. During the three-month period ended March 31, 1997, BAC sold
AVAILABLE-FOR- available-for-sale securities for aggregate proceeds of $1,101
SALE AND HELD- million, resulting in gross realized gains of $28 million and
TO-MATURITY gross realized losses of $8 million. During the three-month
SECURITIES AND period ended March 31, 1996, BAC sold available-for-sale
TRADING securities for aggregate proceeds of $200 million, resulting in
ACTIVITIES gross realized gains of $37 million and gross realized losses
of $7 million.
6
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
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>
MARCH 31, 1997 $11,532 $11,701 $3,666 $3,972
December 31, 1996 12,113 12,059 3,920 4,138
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
</TABLE>
The net unrealized loss on available-for-sale securities at
March 31, 1997 included a $16 million unrealized gain on excess
servicing associated with the adoption of SFAS No. 125.
During the three-month periods ended March 31, 1997 and 1996,
trading income included net unrealized holding gains on trading
securities of $6 million and $3 million, respectively. These
amounts exclude the net unrealized trading results of the
Parent's securities broker and dealer subsidiaries.
- --------------------------------------------------------------------------------
NOTE 4. The trust preferred securities are issued by trusts all of
TRUST whose outstanding common securities are owned by the Parent.
PREFERRED Such common securities represent an aggregate
SECURITIES liquidation amount equal to 3 percent of the total capital of
each trust. The sole assets of the trusts are junior
subordinated deferrable interest debentures of the Parent.
During the first quarter of 1997, BankAmerica Capital III, a
trust all of whose outstanding common securities ($12 million
liquidation amount) are owned by the Parent, issued trust
preferred securities (the Series 3 preferred securities) with
an aggregate liquidation amount of $400 million. The sole
assets of the trust are junior subordinated deferrable interest
debentures issued by the Parent having an aggregate principal
amount of $412 million (the Series 3 debentures). In addition,
the Parent has entered into an expense agreement with the trust
obligating the Parent to pay any costs, expenses or liabilities
of the trust, other than obligations of the trust to pay
amounts due pursuant to the terms of the Series 3 preferred
securities.
The distribution rate for the Series 3 preferred securities
corresponds to the interest rate on the Series 3 debentures,
which is a floating rate adjusted quarterly based on the three-
month London Interbank Offered Rate (LIBOR) for U.S. dollar
deposits plus 0.57%. The interest payment dates are January 15,
April 15, July 15, and October 15. The Parent has the right to
defer payment of interest on the Series 3 debentures at any
time or from time to time for an extension period not exceeding
20 quarters. During any such extension period, distributions on
the Series 3 preferred securities will also be deferred and the
Parent's ability to pay dividends on its common and preferred
stock will be restricted.
The Series 3 debentures have a stated maturity of January 15,
2027, although the Parent may redeem the Series 3 debentures
prior to stated maturity (i) on or after January 15, 2002 or
(ii) prior to January 15, 2002 upon the occurrence of certain
events relating to the tax treatment of the trust or the Series
3 debentures or relating to the capital treatment of the Series
3 preferred securities, in each case, at a redemption price of
100% of the principal amount plus accrued interest. The Series
3 preferred securities are subject to mandatory redemption upon
repayment of the Series 3 debentures at their stated maturity
date or their earlier redemption at a redemption price equal to
their liquidation amount plus accrued distributions to the date
fixed for redemption.
7
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
The Parent has issued a guarantee for the payment of
distributions and payments on liquidation or redemption of the
Series 3 preferred securities, but only to the extent of funds
held by the trust. The guarantee is a junior subordinated
obligation of the Parent.
In the first quarter of 1997, distributions and amortization of
deferred issuance costs on all of the trust preferred
securities totaling $35 million were included in noninterest
expense in the consolidated statement of operations.
For specific details on other trust preferred securities, refer
to Note 15 on page 64 of BAC's 1996 Annual Report to
Shareholders.
- --------------------------------------------------------------------------------
NOTE 5. During the first quarter of 1997, BAC's Board of Directors
STOCK authorized an amendment to its existing stock repurchase
REPURCHASE program. The amended program enables the Parent to buy back up
PROGRAM to an additional $3.0 Billion of its common stock by the end of
1998 and to buy back or redeem up to an additional $1.0 billion
of its preferred stock by the end of 1998.
During the three months ended March 31, 1997, the Parent
repurchased 4.3 million shares of its common stock under the
amended and prior stock repurchase programs at an average per-
share price of $110.48. These transactions reduced
stockholders' equity by $475 million.
On January 15, 1997, the Parent redeemed all 11,250,000
outstanding shares of its 9% Cumulative Preferred Stock, Series
H, reducing stockholders' equity by $281 million. The
redemption price was equal to the stated value of $25.00 per
share, plus accrued and unpaid dividends to the redemption date
of $0.28125 per share.
In addition, on February 15, 1997, the Parent redeemed all
14,600,000 outstanding shares of its 8 3/8% Cumulative
Preferred Stock, Series K, reducing stockholders' equity by
$365 million. The redemption price was equal to the stated
value of $25.00 per share, plus accrued and unpaid dividends to
the redemption date of $0.44201 per share.
The remaining buyback and redemption authorities for common
stock and preferred stock under the current amended program
totaled $3.3 billion and $1.2 billion, respectively, at March
31, 1997.
- --------------------------------------------------------------------------------
NOTE 6. The following is a summary of the components of income tax
INCOME expense:
TAXES
<TABLE>
<CAPTION>
1997 1996
------- -------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES
Federal $370 $265 $301 $361 $362
State and local 84 58 90 95 93
Foreign 72 89 81 53 52
- -------------------------------------------------------------------------------
$526 $412 $472 $509 $507
- -----------------------------------============================================
</TABLE>
BAC's estimated annual effective income tax rates for the
three-month periods ended March 31, 1997 and 1996 were 40.3
percent and 41.3 percent, respectively. These rates are higher
than the federal statutory tax rate of 35.0 percent due
principally to state income taxes.
8
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
NOTE 7. Earnings per common share have been computed based on the
EARNINGS following:
PER COMMON
SHARE
<TABLE>
<CAPTION>
1997 1996
-------- ----------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income applicable to
common stock $ 746 $ 703 $ 640 $ 678 $ 667
Average number of common
shares outstanding 354,292 357,805 359,017 361,858 366,067
Average number of common
and common equivalent
shares outstanding 363,400 365,511 365,672 368,543 372,385
Average number of common
shares outstanding --
assuming full dilution 363,400 366,208 365,885 368,591 373,548
</TABLE>
In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS No.
128), which is effective for periods ending after December 15,
1997. BAC expects to adopt SFAS No. 128 in the fourth quarter
of 1997. At that time, BAC will be required to change the
method currently used to compute earnings per share and to
restate all prior periods presented. SFAS No. 128 eliminates
primary earnings per share and earnings per common share,
assuming full dilution, and requires the presentation of basic
and diluted earnings per share. As a result, under the new
requirements, BAC's computation of earnings per common and
common equivalent share will be replaced by earnings per common
share which excludes any dilutive effects of outstanding stock
options and warrants. Also, BAC's computation of earnings per
common share, assuming full dilution, will be replaced with
diluted earnings per share and will be based on the average
market price of BAC's common stock for the period. Had SFAS No.
128 been in effect, it would have resulted in an increase in
earnings per common share of $0.05 for the first quarter of
1997, $0.04 for the fourth quarter of 1996, $0.03 for the third
quarter of 1996, $0.04 for the second quarter of 1996, and
$0.03 for the first quarter of 1996. The impact of SFAS No. 128
on converting earnings per common share, assuming full
dilution, to diluted earnings per share for the aforementioned
quarters is not material.
- --------------------------------------------------------------------------------
NOTE 8. In the ordinary course of business, BAC enters into various
OFF-BALANCE- types transactions that involve credit-related financial
SHEET instruments and foreign exchange and derivatives contracts that
TRANSACTIONS 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.
9
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
CREDIT-RELATED FINANCIAL INSTRUMENTS
A summary of the contractual amounts of each significant class
of credit-related financial instruments outstanding appears
below. The contractual amounts of these instruments are not
recorded as assets or liabilities on the balance sheet. These
amounts represent the amounts at risk should the contract be
fully drawn upon, the client default, and the value of any
existing collateral become worthless.
<TABLE>
<CAPTION>
1997 1996
-------- ----------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $ 37,917 $ 36,897 $37,271 $36,978 $35,982
Other commitments to extend credit/a/ 101,128 100,234 92,965 97,954 95,790
Standby letters of credit/b/ 18,954 17,092 16,486 17,121 16,344
Commercial letters of credit 3,677 4,064 3,833 4,596 4,236
- -----------------------------------------------------------------------------------------------
</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 $3,102 million at March
31, 1997, $2,999 million at December 31, 1996, $2,940
million at September 30, 1996, and $2,619 million at both
June 30, 1996 and March 31, 1996.
FOREIGN EXCHANGE AND DERIVATIVES CONTRACTS
The tables on page 11 summarize the notional and credit risk
amounts for each significant class of foreign exchange and
derivatives contracts outstanding in BAC's trading and asset
and liability management portfolios. These tables should be
read in conjunction with the descriptions of such products and
their risks included on pages 38 through 44, and 72 through 78
of BAC's 1996 Annual Report to Shareholders.
10
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
NOTIONAL AND CREDIT RISK AMOUNTS FOR DERIVATIVE FINANCIAL INSTRUMENTS HELD OR
ISSUED FOR TRADING PURPOSES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARCH 31, 1997 DECEMBER 31, 1996
------------------- -------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/a/ AMOUNT RISK/a/
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $432,161 $1,903/b/$442,160 $2,968/b/
Futures and forward rate contracts:
Commitments to purchase 145,206 115 138,381 34
Commitments to sell 172,300 101 182,065 280
Written options 30,378 -/c/ 32,679 -/c/
Purchased options 46,193 325 40,805 373
- --------------------------------------------------------------------------------
826,238 2,444 836,090 3,655
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 655,186 3,879 612,767 2,670
Written options 37,945 -/c/ 24,840 -/c/
Purchased options 41,508 490 23,272 319
Currency swaps 28,813 942 27,589 951
- --------------------------------------------------------------------------------
763,452 5,311 688,468 3,940
Stock index options and
commodity contracts 1,217 58 1,561 87
- --------------------------------------------------------------------------------
$1,590,907/d/ $7,813 $1,526,119/e/ $7,682
- -------------------------------------===========================================
</TABLE>
NOTIONAL AND CREDIT RISK AMOUNTS FOR DERIVATIVE FINANCIAL INSTRUMENTS HELD OR
ISSUED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARCH 31, 1997 DECEMBER 31, 1996
------------------- -------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/a/ AMOUNT RISK/a/
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $ 36,163 $117 $ 46,445 $128
Futures and forward rate contracts 70,084 - 58,467 -
Purchased options 10,250 54 10,957 81
- --------------------------------------------------------------------------------
116,497 171 115,869 209
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 11 - 1,746 -
Currency swaps 121 - 673 -
- --------------------------------------------------------------------------------
132 - 2,419 -
- --------------------------------------------------------------------------------
$116,629/d/ $171 $118,288/e/ $209
- ------------------------------------------======================================
</TABLE>
/a/ Credit risk represents current replacement cost after the effects of master
netting agreements.
/b/ Includes the effects of cross product netting of certain interest rate
derivatives and currency swaps.
/c/ Interest rate and foreign exchange options written have no credit risk.
/d/ Interest rate swaps and interest rate options in both the trading and asset
and liability management portfolios include $11.3 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 $2.4 billion of intercompany hedging-related contracts.
/e/ Interest rate swaps and interest rate options in both the trading and asset
and liability management portfolios include $13.9 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 $2.4 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 unrealized gains on foreign exchange and
derivatives contracts. It is the amount of loss that BAC would suffer if all
counterparties failed to perform according to the terms of the contract and the
value of any existing collateral became worthless, based on then-current
currency exchange and interest rates at each respective period after the effects
of master netting agreements.
11
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
The following tables summarize the average and period-end fair
values of each significant class of foreign exchange and
derivatives contracts outstanding in BAC's trading portfolio
and the period-end fair values for each significant class of
foreign exchange and derivatives contracts outstanding in BAC's
asset and liability management portfolio. Fair value amounts
consist of unrealized gains and losses, accrued interest
receivable and payable, and premiums paid or received, and take
into account master netting agreements. The fair value amounts
for the trading portfolio are disaggregated by gross unrealized
gains (assets) and gross unrealized losses (liabilities), while
the fair value amounts for the asset and liability management
portfolio are shown on a net basis. Fair value amounts were
generally calculated using discounted cash flow models based on
current market yields for similar instruments and the maturity
of each instrument.
FAIR VALUES OF DERIVATIVE INSTRUMENTS HELD OR ISSUED FOR TRADING
PURPOSES
<TABLE>
<CAPTION>
==============================================================================================
MARCH 31, 1997 DECEMBER 31, 1996
--------------------------- -------------------------
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 $ 2,579 $ 1,903 $ 2,956 $ 2,968
Liabilities (2,349) (1,725) (2,661) (2,820)
Futures and forward rate contracts:
Assets 218 216 335 314
Liabilities (229) (229) (331) (329)
Written options (284) (261) (221) (300)
Purchased options 344 325 307 373
- ----------------------------------------------------------------------------------------------
279 229 385 206
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts:
Assets 4,250 3,879 2,358 2,670
Liabilities (4,401) (3,863) (2,709) (2,842)
Written options (641) (603) (333) (369)
Purchased options 497 490 283 319
Currency swaps:
Assets 1,051 942 1,137 951
Liabilities (880) (771) (1,308) (937)
- ----------------------------------------------------------------------------------------------
(124) 74 (572) (208)
STOCK INDEX OPTIONS AND COMMODITY CONTRACTS
Assets 29 58 58 87
Liabilities (26) (21) (25) (36)
- ----------------------------------------------------------------------------------------------
3 37 33 51
- ----------------------------------------------------------------------------------------------
$ 158 $ 340 $ (154) $ 49
- --------------------------------------------------============================================
</TABLE>
/a/ Average fair value amounts are calculated based on monthly balances.
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR ASSET AND
LIABILITY MANAGEMENT PURPOSES
<TABLE>
<CAPTION>
===============================================================================================
(IN MILLIONS) MARCH 31, 1997 DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $(585) $(369)
Futures and forward rate contracts 10 (26)
Purchased options 7 (4)
- -----------------------------------------------------------------------------------------------
(568) (399)
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts -- --
Currency swaps (105) (63)
- -----------------------------------------------------------------------------------------------
(105) (63)
- -----------------------------------------------------------------------------------------------
$(673) $(462)
- ---------------------------------------------------------------------==========================
</TABLE>
12
<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.
TRADING-RELATED INCOME
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1997 1996
------- ----------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Trading Income
Interest rate $ 12 $ 19 $ 17 $ 8 $ 12
Foreign exchange 92 64 64 90 98
Debt instruments 84 51 72 80 55
------------------------------------------------------------------------------------------
$188 $134 $153 $178 $165
------------------------------------------================================================
Other trading-related Income/a/
Interest rate $ 10 $ 13 $ 5 $ 7 $ 6
Foreign exchange 4 3 4 7 6
Debt instruments 59 53 52 59 44
------------------------------------------------------------------------------------------
$ 73 $ 69 $ 61 $ 73 $ 56
------------------------------------------================================================
</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 the 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.
ASSET AND LIABILITY MANAGEMENT ACTIVITIES
BAC uses foreign exchange contracts and derivative instruments,
primarily interest rate contracts, to manage interest rate risk
related to specific assets and liabilities, including fixed rate
and adjustable rate residential mortgages, long-term debt, and
deposits. Foreign exchange contracts are used to hedge net capital
exposure and foreign currency exposures. For a detailed description
of BAC's asset and liability management objectives and strategies
used to achieve those objectives, refer to pages 76 through 78 of
BAC's 1996 Annual Report to Shareholders.
13
<PAGE>
================================================================================
The expected maturities and weighted average interest rates
associated with BAC's asset and liability management interest
rate swap portfolio at March 31, 1997 were not significantly
different from those at year-end 1996.
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>
1997 1996
-------- ------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Indemnified securities lent $ - $ - $ - $ 73 $134
Associated collateral - - - 75 135
-------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9. BAC recorded a pre-tax restructuring charge of $280 million in
RESTRUCTURING the fourth quarter of 1996 as a result of decisions to
CHARGES implement a number of restructurings of its business
activities. The charge covers severance payments, premises and
other costs connected with the wholesale banking, retail
banking, and staff support areas affected by the actions.
Approximately $196 million of the pre-tax charge is for
severance payments, reflecting an estimated reduction of
approximately 3,700 positions. Approximately $72 million is for
premises expense, primarily reflecting the planned closure of
120 branches. Equipment write-offs and other miscellaneous
costs total $12 million. Management expects that the majority
of these restructurings will be accomplished in 1997.
The following is a summary of changes in restructuring charges
for the first quarter of 1997:
<TABLE>
<CAPTION>
POSITION
(DOLLAR AMOUNTS IN MILLIONS) SEVERANCE PREMISES OTHER/A/ TOTAL REDUCTIONS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $196 $72 $12 $280 3,700
Payments 34 6 1 41 NA
Positions eliminated NA NA NA NA 522
--------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 $162 $66 $11 $239 3,178
---------------------------------------===============================================
</TABLE>
* Includes equipment write-offs and other miscellaneous costs.
NA - Not applicable.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
HIGHLIGHTS
================================================================================
The following is a summary of first-quarter 1997 financial
information for BankAmerica Corporation and subsidiaries (BAC).
. BAC reported first-quarter 1997 earnings per share of $2.05,
an increase of 15 percent from $1.79 for the same period a
year ago. Net income for the first quarter of 1997 was $780
million, up 8 percent from $720 million for the first
quarter of 1996.
. The return on average common equity was 16.50 percent for
the first quarter of 1997, an increase of 131 basis points
from the same period in 1996.
. BAC continued to strategically manage its capital through
the following activities in the first quarter of 1997:
-- Established a relationship with D.E. Shaw & Co., Inc., a
private investment banking company, which significantly
enhances BAC's ability to offer equity-related products
to its customers;
-- Announced the intention to sell its consumer finance
business, Security Pacific Financial Services;
-- Sold $3.3 billion of residential first mortgages;
-- Extended its stock repurchase program by authorizing the
repurchase of an additional $3 billion of common stock
and the redemption of an additional $1 billion of
preferred stock by the end of 1998; and
-- Redeemed all outstanding shares of its Series H and
Series K preferred stock.
. Net interest income was $2,174 million, up $28 million from
the first quarter of 1996. BAC's net interest margin was
4.16 percent, down 20 basis points from the comparable
period a year ago, but up 3 basis points from the fourth
quarter of 1996. Excluding the effects of the credit card
securitizations during the second half of 1996, net interest
income would have increased $63 million from the first
quarter of 1996 and the net interest margin would have been
4.20 percent.
. Noninterest income was $1,385 million, an increase of $111
million, or 9 percent, from the first quarter of 1996,
primarily resulting from increases in fee income. Excluding
the effect of a $50 million pre-tax gain associated with the
sale of certain components of BAC's Institutional Trust and
Securities Services (ITSS) business during the first quarter
of 1996, noninterest income would have increased $161
million, or 13 percent, from the first quarter of 1996.
. Noninterest expense increased $20 million, or 1 percent,
from the first quarter of 1996, primarily due to expenses
associated with trust preferred securities. Without these
ongoing expenses, noninterest expense would have been $1,998
million, a decrease of $15 million from the first quarter of
1996. BAC's expense to revenue ratio was 53.53 percent, a
decrease of 48 basis points and 230 basis points from the
prior quarter and the first quarter of 1996, respectively.
15
<PAGE>
================================================================================
. Nonaccrual assets decreased $88 million, or 8 percent, from
their year-end 1996 level. Net credit losses were $204
million for the first quarter of 1997, a decline of $35
million, or 15%, from the first quarter of 1996. The
provision for credit losses was $220 million, up $40 million
from the first quarter of 1996, but unchanged from the
previous quarter.
. In connection with BAC's ongoing efforts to effectively
manage capital, BAC repurchased 4.3 million shares of its
common stock during the first quarter of 1997 at an average
per-share price of $110.48, which reduced stockholders'
equity by $475 million.
. On January 15, 1997, BAC redeemed all outstanding shares of
its 9% Cumulative Preferred Stock, Series H, which reduced
stockholders' equity by $281 million. In addition, on
February 15, 1997, BAC redeemed all outstanding shares of
its 8 3/8% Cumulative Preferred Stock, Series K, which
reduced stockholders' equity by $365 million.
16
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1997 1996
------- ----------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS, FIRST FOURTH THIRD SECOND FIRST
EXCEPT PER SHARE DATA) QUARTER QUARTER/a/ QUARTER/b/ QUARTER QUARTER
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 4,240 $ 4,238 $ 4,206 $ 4,126 $ 4,089
Interest expense 2,066 2,108 2,054 1,967 1,943
- -------------------------------------------------------------------------------------------------------------
Net interest income 2,174 2,130 2,152 2,159 2,146
Provision for credit losses 220 220 235 250 180
Noninterest income 1,385 1,499 1,319 1,320 1,274
Noninterest expense 2,033 2,250 2,081 1,997 2,013
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 1,306 1,159 1,155 1,232 1,227
Provision for income taxes 526 412 472 509 507
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 780 $ 747 $ 683 $ 723 $ 720
- ------------------------------------------------=============================================================
PER SHARE DATA
Earnings per common and common
equivalent share $ 2.05 $ 1.93 $ 1.75 $ 1.84 $ 1.79
Earnings per common share --
assuming full dilution 2.05 1.92 1.75 1.84 1.79
Dividends declared per common share 0.61 0.54 0.54 0.54 0.54
- -------------------------------------------------------------------------------------------------------------
STOCK DATA
Book value per common share at period end $ 52.51 $ 51.99 $ 50.92 $ 49.64 $ 48.74
Common stock price range:
High 123 3/4 103 7/8 85 1/4 80 3/8 79 1/8
Low 95 3/8 82 1/8 72 69 3/4 58 3/4
Closing common stock price 100 7/8 99 3/4 82 1/8 75 3/4 77 1/2
Average number of common and common
equivalent shares outstanding (in
thousands) 363,400 365,511 365,672 368,543 372,385
Average number of common shares outstanding --
assuming full dilution (in thousands) 363,400 366,208 365,885 368,591 373,548
Number of common shares outstanding at
period end (in thousands) 352,354 355,267 358,826 359,893 364,082
- -------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Loans $167,338 $165,415 $161,833 $160,640 $156,155
Total assets 249,904 250,753 242,953 238,841 234,243
Deposits 168,999 168,015 164,901 161,845 160,517
Long-term debt 14,725 15,785 15,454 14,953 15,074
Common equity 18,501 18,471 18,270 17,866 17,744
Total equity 20,097 20,713 20,512 20,108 20,167
- -------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Expense to revenue/c/ 53.53% 54.01% 54.47% 55.14% 55.83%
Rate of return (based on net income) on:
Average common equity 16.50 15.24 14.16 15.42 15.19
Average total equity 15.70 14.42 13.44 14.56 14.28
Average total assets 1.25 1.21 1.12 1.21 1.22
- -------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Ratio of common equity to total assets 7.40% 7.37% 7.52% 7.48% 7.58%
Ratio of total equity to total assets 8.04 8.26 8.44 8.42 8.61
Ratio of average total equity to average
total assets 7.99 8.40 8.29 8.29 8.55
=============================================================================================================
</TABLE>
/a/ Includes the income statement effect of a $147 million nontaxable gain from
the initial public offering of BA Merchant Services, Inc. (BAMS) common
stock and a $280 million pre-tax restructuring charge.
/b/ Includes the income statement effect of a one-time Savings Association
Insurance Fund (SAIF) assessment that increased noninterest expense by $82
million.
/c/ Excludes net other real estate owned expense, amortization of intagnibles,
expenses associated with trust preferred securities, and the effects of a
one-time assessment for SAIF in the third quarter of 1996, a fourth-quarter
1996 restructing charge, and a fourth-quarter 1996 gain on the initial
public offering of BAMS common stock.
17
<PAGE>
BUSINESS SECTORS
================================================================================
SELECTED BUSINESS SECTOR DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
THRE MONTHS EDNED MARCH 31/a/
--------------------------------------------------------------------------------------------
U.S. CORPORATE AND
TOTAL INTERNATIONAL BANKING CONSUMER BANKING MIDDLE MARKET BANKING
-------------------- --------------------- ---------------- ---------------------
(DOLLAR AMOUNTS IN MILLIONS) 1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 2,174 $ 2,146 $ 385 $ 350 $ 1,370 $ 1,355 $ 224 $ 208
Noninterest income 1,385 1,274 555 551 671 521 57 56
Noninterest expense 2,033 2,013 502 487 1,245 1,207 138 135
- --------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE THE PROVISIONS FOR
CREDIT LOSSES AND INCOME TAXES 1,526 1,407 438 414 796 669 143 129
Provision for credit losses 220 180 (17) (12) 284 214 (5) 8
Provision for income taxes 526 507 163 163 221 195 61 51
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME 780 720 292 263 291 260 87 70
Preferred stock dividends 34 53 11 17 16 24 4 6
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
COMMON EQUITY $ 746 $ 667 $ 281 $ 246 $ 275 $ 236 $ 83 $ 64
- ------------------------------------============================================================================================
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
Loans $165,478 $154,929 $ 45,281 $ 41,506 $83,519 $79,504 $21,421 $19,253
Earning assets 210,560 197,712 75,926 69,741 84,642 80,441 21,151 19,062
Total assets 252,105 237,083 101,468 92,423 95,130 91,496 24,183 21,848
Deposits 166,491 159,543 47,664 43,608 97,202 94,871 8,201 7,294
Common equity 18,324 17,665 5,942 5,609 8,385 7,942 1,952 1,892
SELECTED FINANCIAL RATIOS
Return on average common
equity 16.50% 15.19% 19.15% 17.69% 13.32% 11.93% 17.25% 13.65%
Expense to revenue/b/ 53.53 55.83 50.80 52.57 56.76 60.17 45.97 48.41
================================================================================================================================
</TABLE>
For management reporting purposes, BAC segregates its
operations into five primary business or operating sectors. BAC
determines its business sector results based on an internal
management reporting system that allocates certain 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 interest-rate risk hedging activities
centrally, the effects of hedging are generally 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.
18
<PAGE>
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31/a/
------------------------------------------------------------------------
COMMERCIAL REAL ESTATE WEALTH MANAGEMENT ALL OTHER
----------------------- ----------------- -----------------------
(DOLLAR AMOUNTS IN MILLIONS) 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 113 $ 98 $ 48 $ 41 $ 34 $ 94
Noninterest income 11 7 99 96 (8) 43
Noninterest expense 36 32 107 109 5 43
- -----------------------------------------------------------------------------------------------------------
INCOME BEFORE THE PROVISIONS FOR
CREDIT LOSSES AND INCOME TAXES 88 73 40 28 21 94
Provision for credit losses (40) (32) - 1 (2) 1
Provision for income taxes 53 43 16 11 12 44
- -----------------------------------------------------------------------------------------------------------
NET INCOME 75 62 24 16 11 49
Preferred stock dividends 1 3 1 1 1 2
- -----------------------------------------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO
COMMON EQUITY $ 74 $ 59 $ 23 $ 15 $ 10 $ 47
- ------------------------------------=======================================================================
SELECTED AVERAGE
BALANCE SHEET COMPONENTS
Loans $ 9,733 $10,003 $4,764 $4,231 $ 760 $ 432
Earning assets 9,784 10,042 4,874 4,316 14,183 14,110
Total assets 10,119 10,403 5,552 4,995 15,653 15,918
Deposits 2,113 1,898 7,316 6,922 3,995 4,950
Common equity 872 990 576 577 597 655
SELECTED FINANCIAL RATIOS
Return on average common equity 34.19% 23.91% 16.17% 10.42% NM NM
Expense to revenue/b/ 27.21 29.46 69.63 77.04 NM NM
===========================================================================================================
</TABLE>
/a/ For comparability purposes, both 1997 and 1996 amounts reflect BAC's
business-sector allocation methodologies at March 31, 1997 .
/b/ Excludes net other real estate owned expense, amorization of intangibles,
and expenses associsted with trust preferred secutities.
NM - Not meaningful.
The information set forth in the tables on pages 18 through 19
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. Results
from prior periods are restated for changes in sector
composition and in allocation and assignment methodologies to
allow comparability. In addition, the expense to revenue ratios
have been adjusted to exclude net other real estate owned
expenses, amortization of intangibles, and expenses associated
with trust preferred securities. For a detailed discussion of
the composition of each business sector, refer to pages 19
through 22 of BAC's 1996 Annual Report to Shareholders.
U.S. Corporate and International Banking - U.S. Corporate and
International Banking's net income for the first three months
of 1997 increased $29 million, or 11 percent, from the amount
reported for the same period a year ago. This increase
reflected higher net interest income, which primarily resulted
from growth in lease financing and foreign commercial and
industrial loans. In addition, the reduction in the provision
for credit losses and the slight increase in noninterest income
partially offset the increase in noninterest expense. This
sector's expense to revenue ratio decreased to 50.80 percent, a
177 basis point improvement from the same period a year ago.
19
<PAGE>
================================================================================
Consumer Banking - Consumer Banking's net income for the first
three months of 1997 was up $31 million, or 12 percent, from
the amount for the same period last year. Net interest income
increased primarily due to higher volumes on consumer
installment and consumer lease financing loans. Noninterest
income increased due to higher revenues from service charges on
deposit accounts and ATM fees in California, larger gains on
the sales of residential first mortgages, and higher loan
servicing revenue. The increases in net interest income and
noninterest income, coupled with BAC's efforts to keep
noninterest expense at targeted levels, resulted in an expense
to revenue ratio of 56.76 percent, a 341 basis point
improvement from the same period a year ago. The provision for
credit losses increased $70 million primarily in the credit
card, consumer financing, and manufactured housing portfolios.
Average loan outstandings grew $4 billion, or 5 percent, from
the first three months of 1996, reflecting growth in
manufactured housing loans, consumer auto loans, and lease
financing.
Middle Market Banking - Middle Market Banking's net income for
the first three months of 1997 increased $17 million, or 24
percent, from the first quarter of 1996. An increase in net
interest income and a decrease in the provision for credit
losses contributed to this growth. Net interest income was up
due to higher loan volumes. The reduction in the provision for
credit losses was primarily a result of improved credit
quality.
Commercial Real Estate - Net income in the commercial real
estate sector increased $13 million, or 21 percent, from the
first three months of 1996. Net interest income increased as a
result of higher spreads on construction and commercial real
estate loans.
Wealth Management - Wealth Management's net income was $24
million for the first three months of 1997, an increase of $8
million, or 50 percent, from the same period a year ago. Net
interest income increased primarily due to higher loan
balances.
All Other - This sector includes the results from corporate
asset and liability management activities (investment
securities, federal funds bought and sold, institutional and
brokered deposits and intermediate debt), along with any
residual differences between actual centrally managed external
hedging results and the transfer of interest rate risk hedging
to the appropriate business sectors. Also included in this
sector are the residual income and expenses related to the ITSS
business, which the corporation had substantially divested by
the end of the first quarter of 1996.
This sector's net income for the first three months of 1997
decreased $38 million from the amount reported for the
comparable period a year ago. Net interest income decreased $60
million due to lower results from corporate liquidity
management activities. Noninterest income for the first three
months of 1996 included a $50 million pre-tax gain associated
with the divestiture of the ITSS business. The reduction in
noninterest expense was primarily related to the sale of the
ITSS business.
20
<PAGE>
OPERATING LEVERAGE AND CAPITAL MANAGEMENT
===============================================================================
BAC continued to demonstrate effective management of operating
leverage in the first quarter of 1997. Operating leverage is
achieved when the rate of revenue growth exceeds that of
expenses. As shown in the table below, in the first quarter of
1997, revenue increased 4 percent while noninterest expense
increased 1 percent from the first quarter of 1996.
Capital management objectives are achieved when the rates of
growth in common shares outstanding and preferred stock
dividends are below that of net income. As a result of BAC's
stock repurchase program, the average number of common shares
outstanding, assuming full dilution, decreased 3 percent in the
first quarter of 1997 from the comparable quarter last year.
Additionally, preferred stock dividends decreased 36 percent
from the first quarter of 1996. However, the decrease in
preferred stock dividends will be partially offset by the
after-tax effect of noninterest expense related to
distributions on trust preferred securities in future years.
By effectively managing expenses, BAC reported increases in net
income of 8 percent from the first quarter of 1996. In
addition, the rate of return on average common equity increased
131 basis points from the first quarter of 1996.
================================================================================
OPERATING LEVERAGE AND CAPITAL MANAGEMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 CHANGE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING LEVERAGE COMPONENTS
Net interest income $ 2,174 $ 2,146 1%
Noninterest income 1,385 1,274 9
Total revenue 3,559 3,420 4
Noninterest expense 2,033 2,013 1
Operating income/a/ 1,526 1,407 8
Provision for credit losses 220 180 22
Provision for income taxes 526 507 4
CAPITAL MANAGEMENT COMPONENTS
Net income 780 720 8
Preferred stock dividends 34 53 (36)
Net income applicable to common stock 746 667 12
Average number of common shares outstanding --
assuming full dilution (in thousands) 363,400 373,548 (3)
Earnings per common share --
assuming full dilution $ 2.05 $ 1.79 15
Average common equity 18,324 17,665 4
Rate of return on average common equity 16.50% 15.19% 131/bp/
- -----------------------------------------------------------------------------------------
</TABLE>
/a/ Represents net income before the provisions for credit losses and income
taxes.
/bp/ - Basis points.
21
<PAGE>
RESULTS OF OPERATIONS
================================================================================
NET INTEREST Taxable-equivalent net interest income for the first quarter of
INCOME 1997 was $2,180 million, up $29 million from the same period a
year ago. The increase primarily resulted from growth in
earning assets, partially offset by an increase in costs of
funds. Excluding the effects of credit card securitizations,
taxable-equivalent net interest income would have increased $64
million from the first quarter of 1996.
Average earning assets totaled $210.6 billion for the first
quarter of 1997, up $12.8 billion from the same period in 1996.
The increase was largely attributable to growth in most
segments of the loan portfolio as average loans increased $10.5
billion from the first quarter of 1996. In addition, average
trading account assets rose $2.4 billion from the first quarter
of 1996.
BAC's net interest margin for the first quarter of 1997 was
4.16 percent, down 20 basis points from the comparable period a
year ago. The yield on average earning assets decreased 17
basis points from the same period a year ago, primarily due to
lower prevailing market rates. The cost of funds increased 3
basis points primarily due to increased rates on domestic
interest-bearing deposits, the largest component of interest-
bearing liabilities. In addition, BAC has experienced growth in
wholesale funding sources, including foreign interest-bearing
deposits and domestic purchased funds, which are more costly
than traditional core deposits.
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 BAC's net interest income results by approximately $20
million in the first quarter of 1997, and increased it by
approximately $20 million in the same period a year ago. The
effect of the hedging amounts on the net interest margin in
each period was less than 5 basis points.
22
<PAGE>
================================================================================
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
FIRST QUARTER 1997 FIRST QUARTER 1996
-------------------------------- --------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ RATE/b/ BALANCE/a/ INTEREST/b/ RATE/b/
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 6,069 $ 99 6.63% $ 5,998 $ 117 7.83%
Federal funds sold 591 8 5.30 434 6 5.32
Securities purchased under resale agreements 9,361 155 6.73 9,312 155 6.71
Trading account assets 13,358 269 8.18 11,008 217 7.92
Available-for-sale securities/c,d/ 11,595 203 7.04 11,419 214 7.51
Held-to-maturity securities/d/ 4,108 86 8.40 4,612 86 7.51
Domestic loans:
Consumer-residential first mortgages 37,076 686 7.40 36,861 691 7.50
Consumer-residential junior mortgages 14,775 309 8.48 13,829 301 8.75
Consumer-credit card 8,399 305 14.54 8,943 334 14.92
Other consumer 19,788 480 9.86 16,424 404 9.89
Commercial and industrial 33,884 647 7.75 32,870 647 7.91
Commercial loans secured by real estate 12,429 275 8.86 10,990 244 8.89
Financial institutions 2,942 32 4.47 2,786 32 4.58
Lease financing 2,729 37 5.56 1,910 26 5.55
Construction and development loans
secured by real estate 2,266 66 11.78 3,162 81 10.31
Loans for purchasing or carrying securities 1,751 30 6.85 1,239 21 6.72
Agricultural 1,562 35 8.96 1,654 37 9.03
Other 1,288 20 6.01 1,208 17 6.00
-------- ------ -------- -------
Total domestic loans 138,889 2,922 8.48 131,876 2,835 8.63
Foreign loans 26,589 504 7.68 23,053 464 8.09
-------- ------ -------- -------
Total loans/c/ 165,478 3,426 8.35 154,929 3,299 8.55
-------- ------ -------- -------
Total earning assets 210,560 4,246 8.14 197,712 $ 4,094 8.31
Nonearning assets 45,093 ====== 42,917 =======
Less: Allowance for credit losses 3,548 3,546
-------- --------
TOTAL ASSETS $252,105 $237,083
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 7,131 $ 24 1.38% $ 13,230 $ 40 1.20%
Savings 12,158 61 2.02 13,031 67 2.06
Money market 34,608 255 2.99 27,714 217 3.15
Time 29,974 400 5.41 29,676 371 5.03
-------- ------ -------- -------
Total domestic interest-bearing deposits 83,871 740 3.58 83,651 695 3.34
Foreign interest-bearing deposits:
Banks located in foreign countries 13,089 180 5.59 13,972 216 6.21
Governments and official institutions 10,668 137 5.22 7,890 103 5.27
Time, savings, and other 20,945 309 5.99 18,638 300 6.48
-------- ------ -------- -------
Total foreign interest-bearing deposits 44,702 626 5.69 40,500 619 6.15
-------- ------ -------- -------
Total interest-bearing deposits 128,573 1,366 4.31 124,151 1,314 4.26
Federal funds purchased 1,054 13 5.10 1,661 22 5.25
Securities sold under repurchase agreements 9,925 149 6.07 10,819 163 6.06
Other short-term borrowings 17,999 275 6.20 11,766 178 6.09
Long-term debt 15,606 263 6.83 15,445 266 6.92
-------- ------ -------- -------
Total interest-bearing liabilities 173,157 $2,066 4.84 163,842 $ 1,943 4.77
====== =======
Domestic noninterest-bearing deposits 36,342 33,811
Foreign noninterest-bearing deposits 1,576 1,581
Other noninterest-bearing liabilities 19,106 17,568
-------- --------
Total liabilities 230,181 216,802
Trust preferred securities/e/ 1,784 -
Stockholders' equity 20,140 20,281
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $252,105 $237,083
======== ========
Interest income as a percentage of average
earning assets 8.14% 8.31
Interest expense as a percentage of average
earning assets (3.98) (3.95)
----- -----
NET INTEREST MARGIN 4.16% 4.36%
===== =====
=============================================================================================================================
</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/ 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.
/e/ Trust preferred securities represent corporation obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the corporation.
23
<PAGE>
================================================================================
NONINTEREST Noninterest income for the first quarter of 1997 was $1,385
INCOME million, an increase of $111 million, or 9 percent, from the
first quarter of 1996. Excluding the aforementioned $50 million
pre-tax gain in the first quarter of 1996 associated with the
sale of certain components of BAC's ITSS business, noninterest
income would have increased $161 million, or 13 percent, from
the comparable quarter last year. The increase reflected growth
in fees and commissions, trading income, and other noninterest
income.
Fees and commissions, the largest component of noninterest
income, was $879 million, up $73 million from the first quarter
of 1996, reflecting BAC's continued focus on expanding its fee-
generating activities. Revenues earned from retail deposit
account fees rose $20 million in the first quarter of 1997
compared with the same quarter last year, primarily due to
increased revenues from service fees and charges associated
with deposit accounts and also to an increase in the number of
fee-paying accounts. Other fees and commissions rose $55
million, primarily attributable to increased revenues from loan
fees and charges. Loan fees and charges are reported net of
amortization expense and valuation adjustments on mortgage
servicing rights and, commencing the first quarter of 1997,
other consumer servicing rights, which are recognized in
connection with the adoption of Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities" (SFAS No. 125). The increase in loan fees and
charges resulted primarily from the securitization of credit
card receivables, BAC's expanded mortgage banking activities,
the impact of the implementation of SFAS No. 125, and higher
revenues from late payment and overlimit charges on credit card
accounts. The growth in loan fees and charges also reflects an
increase in the amortization expense and valuation adjustments
on servicing rights of $20 million in the first quarter of
1997.
Trading income was $188 million in the first quarter of 1997,
an increase of $23 million from the corresponding quarter in
1996. The increase in the current quarter is largely
attributable to BAC's trading activities in domestic debt
securities. For more information on the functional components
of trading income, refer to Note 8 of the Notes to Consolidated
Financial Statements on pages 9 through 14.
Other noninterest income totaled $318 million in the first
quarter of 1997, an increase of $15 million from the first
quarter of 1996. Excluding the $50 million gain from the
divestiture of ITSS during the first quarter of 1996, other
noninterest income would have increased $65 million from the
same quarter last year. The increase included higher income
related to net gains on sales of loans, other net gains on
sales of subsidiaries and operations, and other income. Net
gain on sales of loans was $59 million, up $33 million from the
first quarter of 1996, largely due to growth in the sale of
residential first mortgages. Excluding the ITSS gain, net gains
on sales of subsidiaries and operations would have increased
$12 million from the comparable quarter in 1996, primarily a
result of net gains from the previously announced Texas branch
divestitures. Other income rose $53 million from the first
quarter of 1996 to $140 million in the first quarter of 1997.
The increase primarily reflected higher income from equity
investments in affiliates and joint ventures, which was $20
million in the first quarter of 1997, an increase of $23
million from the comparable quarter last year.
24
<PAGE>
================================================================================
NONINTEREST INCOME
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FIRST QUARTER
-------------
(IN MILLIONS) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
FEES AND COMMISSIONS
Deposit account fees:
Retail $ 271 $ 251
Commercial 89 93
Credit card fees:
Membership 6 10
Other 81 69
Trust fees:
Corporate and employee benefit 2 9
Personal and other 55 54
Other fees and commissions:
Loan fees and charges 133 79
Off-balance-sheet credit-related instrument fees 77 87
Financial services fees 37 42
Mutual fund and annuity commissions 26 25
Other 102 87
- --------------------------------------------------------------------------------
879 806
- --------------------------------------------------------------------------------
TRADING INCOME 188 165
- --------------------------------------------------------------------------------
OTHER NONINTEREST INCOME
Private equity investment activities 99 110
Net gain on sales of loans 59 26
Net gain on available-for-sale securities 20 30
Net gain on sales of subsidiaries and operations 13 51
Other income 127 86
- --------------------------------------------------------------------------------
318 303
- --------------------------------------------------------------------------------
$1,385 $1,274
- -----------------------------------------------------------------===============
</TABLE>
25
<PAGE>
================================================================================
NONINTEREST Noninterest expense for the first quarter of 1997 was $2,033
EXPENSE million, an increase of $20 million, or 1 percent, from the
first quarter of 1996. Noninterest expense in the first quarter
of 1997 included expenses associated with trust preferred
securities of $35 million. Excluding these expenses,
noninterest expense would have been $1,998 million, a decline
of $15 million, or 1 percent, from the comparable quarter in
1996. The decrease mainly reflected lower other noninterest
expense, partially offset by modest increases in personnel
expense and in occupancy and equipment expense.
Personnel expense, the largest component of noninterest
expense, was $1,028 million in the first quarter of 1997,
essentially unchanged from the same period in 1996. BAC's staff
level on a full-time-equivalent (FTE) basis was approximately
77,300 at March 31, 1997, down from approximately 78,700 at
March 31, 1996. FTE is a measurement equal to one full-time
employee working a standard day. BAC had approximately 91,900
employees, both full-time and part-time, at March 31, 1997,
down from approximately 94,100 at March 31, 1996.
Occupancy and equipment expense was $368 million, an increase
of $15 million, or 4 percent, from the corresponding quarter in
1996. The increase was reflected in higher equipment expense
caused by increased acquisitions of mechanical and other
equipment, computer software, and voice and data
telecommunication equipment.
Other noninterest expense was $637 million in the first quarter
of 1997, unchanged from the first quarter of 1996. Excluding
the aforementioned expenses associated with trust preferred
securities, other noninterest expense would have been $602
million in the first quarter of 1997, a decrease of $35
million, or 5 percent, from the comparable quarter last year.
The decrease mainly represented a decline in advertising
expenditures and lower miscellaneous expenses.
26
<PAGE>
================================================================================
NONINTEREST EXPENSE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FIRST QUARTER
-------------
(IN MILLIONS) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
PERSONNEL
Salaries $ 839 $ 821
Employee benefits 189 202
- --------------------------------------------------------------------------------
1,028 1,023
- --------------------------------------------------------------------------------
OCCUPANCY AND EQUIPMENT
Occupancy 186 190
Equipment 182 163
- --------------------------------------------------------------------------------
368 353
- --------------------------------------------------------------------------------
OTHER NONINTEREST EXPENSE
Communications 93 92
Amortization of intangibles 91 95
Professional services 75 81
Regulatory fees and related expenses 10 13
Other expense 368 356
- --------------------------------------------------------------------------------
637 637
- --------------------------------------------------------------------------------
$ 2,033 $ 2,013
- ----------------------------------------------------------------================
Full-time-equivalent staff at period end 77,300 78,700
Employees at period end 91,900 94,100
- --------------------------------------------------------------------------------
</TABLE>
INCOME The provision for income taxes was $526 million and $507
TAXES million for the quarters ended March 31, 1997 and 1996,
respectively, reflecting forecasted annual effective income tax
rates of 40.3 percent and 41.3 percent, respectively.
For further information concerning BAC's provision for federal,
state, and foreign income taxes for the most recent five
quarters, refer to Note 6 of the Notes to Consolidated
Financial Statements on page 8.
27
<PAGE>
BALANCE SHEET REVIEW
================================================================================
Interest-earning assets totaled $210.0 billion at March 31,
1997, up $3.1 billion, or 1 percent, from year-end 1996. Growth
in interest-earning assets, primarily loans, trading account
assets, and interest-bearing deposits in banks, was funded by
increases in other short-term borrowings and foreign interest-
bearing deposits.
Total deposits at March 31, 1997 increased $1.0 billion from
December 31, 1996. The growth was primarily attributable to a
$1.1 billion increase in foreign interest-bearing deposits that
resulted from BAC's continued participation in selected global
markets.
In June 1996, the Financial Accounting Standards Board (FASB)
issued SFAS No. 125. The FASB subsequently amended SFAS No. 125
in December 1996. As amended, SFAS No. 125 applies to
securities lending, repurchase agreements, dollar rolls, and
other similar secured financing transactions occurring after
December 31, 1997 and to all other transfers and servicing of
financial assets occurring after December 31, 1996. The
adoption of the amended portion of SFAS No. 125 is not expected
to have a material effect on BAC's financial position or
results of operations.
28
<PAGE>
================================================================================
CREDIT CARD BAC sold and securitized $1,471 million in credit card
SECURITIZATION receivables during 1996. The securitizations affect, 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.
The table below shows the impact of the securitization of
credit card receivables made during the second half of 1996 on
the first-quarter 1997 financial position and results of
operations. There were no credit card securitizations during
the first quarter of 1997. The table includes the effects of
the adoption of SFAS No. 125, which requires the recognition of
gains and amortized cost resulting from the securitization
transactions.
- --------------------------------------------------------------------------------
IMPACT OF CREDIT CARD SECURITIZATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1997/a/
--------------------------------------------
BEFORE
CREDIT CARD CREDIT CARD
(DOLLAR AMOUNTS IN MILLIONS) SECURITIZATION SECURITIZATION REPORTED
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 2,209 $ (35) $ 2,174
Credit card fees 93 (6) 87
Other noninterest income 1, 267 31/b/ 1,298
- ------------------------------------------------------------------------------------------------------------
Total revenue 3,569 (10) 3,559
Noninterest expense 2,033 2,033
- ------------------------------------------------------------------------------------------------------------
Income before provision for credit
losses and income taxes 1,536 (10) 1,526
Provision for credit losses 243 (23)/c/ 220
- ------------------------------------------------------------------------------------------------------------
Income before income taxes $ 1,293 $ 13 $ 1,306
- ----------------------------------------------------------------------======================================
NET INTEREST MARGIN 4.20% (0.04)% 4.16%
- ------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Credit card loans outstanding $ 9,836 $ (1,471) $ 8,365
Total assets 251,375 (1,471) 249,904
- ------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Credit card loans 9,870 (1,471) 8,399
Earning assets 212,031 (1,471) 210,560
Total assets 253,576 (1,471) 252,105
- ------------------------------------------------------------------------------------------------------------
NET CREDIT LOSSES - CREDIT CARD PORTFOLIO 138 (23) 115
- ------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Annualized ratio of net credit losses on credit card loans
to average credit card loans outstanding 5.69% (0.12)% 5.57%
Delinquent credit card loan ratio/d/ 2.60 (0.02) 2.58
============================================================================================================
</TABLE>
/a/ Includes the impact of credit card securitization transactions that took
place during 1996. There were no credit card securitizations during the
first quarter of 1997.
/b/ Includes $13 million associated with the adoption of SFAS No. 125.
/c/ Represents the investors' share of charge-offs.
/d/ 60 days or more past due.
29
<PAGE>
================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES - AVERAGE BALANCES,
INTEREST, AND AVERAGE RATES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
FIRST QUARTER 1997
----------------------------------------------------------
RATE
RATE BASED ON
BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other
government agency securities $ 1,337 $ 22 6.63% 6.54%
Mortgage-backed securities 6,537 110 6.73 6.75
Other domestic securities 936 13 5.73 6.52
Foreign securities 2,785/c/ 58 8.38/d/ 8.10/d/
- ----------------------------------------------------------------------------------------------
$11,595 $203 7.04% 7.05%
- ---------------------------------------=======================================================
<CAPTION>
FIRST QUARTER 1996
----------------------------------------------------------
RATE
RATE BASED ON
BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other
government agency securities $ 1,437 $ 24 6.57% 6.67%
Mortgage-backed securities 6,549 110 6.72 6.79
Other domestic securities 722 10 5.58 6.49
Foreign securities 2,711/c/ 70 10.43/d/ 9.76/d/
- ----------------------------------------------------------------------------------------------
$11,419 $214 7.51% 7.51%
- ---------------------------------------=======================================================
</TABLE>
<TABLE>
<CAPTION>
FIRST QUARTER 1997 FIRST QUARTER 1996
----------------------------------- ----------------------------------
(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 $ 13 $ - 6.04% $ 72 $ 1 4.61%
Mortgage-backed securities 2,128 40 7.46 2,439 47 7.64
State, county, and municipal
securities 392 7 7.44 433 8 7.56
Other domestic securities 57 1 6.82 146 2 7.38
Foreign securities 1,518 38 10.05 1,522 28 7.44
- ------------------------------------------------------------------------------------------------------------
$4,108 $86 8.40% $4,612 $86 7.51%
- ---------------------------------------=====================================================================
</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 lower levels of interest received on nonaccrual debt-
restructuring par bonds in the first quarter of 1997 compared to the first
quarter of 1996.
30
<PAGE>
CREDIT RISK MANAGEMENT
================================================================================
LOAN PORTFOLIO Total loans at march 31, 1997 were up $1.9 billion, or 1
MANAGEMENT percent, from year-end 1996. This growth was primarily in the
domestic commercial and foreign portfolios.
- --------------------------------------------------------------------------------
LOAN OUTSTANDINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1997 1996
-------- ----------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 35,881 $ 37,459 $ 37,445 $ 38,012 $ 37,701
Residential junior mortgages 14,857 14,743 14,525 14,386 13,889
Other installment 17,863 16,979 15,998 15,057 14,682
Credit card 8,365/a/ 8,707/a/ 9,021 9,342 8,919
Other individual lines of credit 1,939 1,948 1,845 1,824 1,845
Other 391 401 303 307 304
- ------------------------------------------------------------------------------------------------------
79,296 80,237 79,137 78,928 77,340
Commercial:
Commercial and industrial 34,554 33,404 33,076 33,097 32,193
Loans secured by real estate 12,445 12,488 12,062 11,410 11,052
Financial institutions 3,232 3,109 2,537 3,075 2,705
Lease financing 2,790 2,542 2,682 2,019 1,941
Construction and development loans
secured by real estate 2,261 2,252 2,530 2,896 3,107
Loans for purchasing or carrying securities 2,447 1,941 1,328 1,399 1,402
Agricultural 1,475 1,696 1,561 1,581 1,585
Other 1,450 1,270 1,253 1,146 1,211
- ------------------------------------------------------------------------------------------------------
60,654 58,702 57,029 56,623 55,196
- ------------------------------------------------------------------------------------------------------
139,950 138,939 136,166 135,551 132,536
FOREIGN
Commercial and industrial 17,540 16,394 16,257 15,958 15,183
Banks and other financial institutions 3,526 3,958 3,480 4,077 2,916
Governments and official institutions 1,008 970 943 1,015 1,334
Other 5,314 5,154 4,987 4,039 4,186
- ------------------------------------------------------------------------------------------------------
27,388 26,476 25,667 25,089 23,619
- ------------------------------------------------------------------------------------------------------
TOTAL LOANS 167,338 165,415 161,833 160,640 156,155
Less: Allowance for credit losses 3,538 3,523 3,511 3,495 3,496
- ------------------------------------------------------------------------------------------------------
$163,800 $161,892 $158,322 $157,145 $152,659
- --------------------------------------------------====================================================
</TABLE>
/a/ Excludes credit card receivables of $1,471 million that were securitized
during 1996. There were no credit card securitizations during the first
quarter of 1997.
31
<PAGE>
===============================================================================
Domestic Consumer Loans -- During the three months ended March
31, 1997, domestic consumer loans decreased by $0.9 billion, or
1 percent, primarily due to a decrease in residential first
mortgages. The continued growth in residential first mortgages
was more than offset by the sale of $3.3 billion of mortgages
from the portfolio, resulting in a net decrease of $1.6 billion
in this portfolio. In addition, other installment loans
increased $0.9 billion due to growth in manufactured housing in
the South and auto loans and leases in California, reflecting
strong customer demand in these loan categories.
==============================================================================
DOMESTIC CONSUMER LOANS BY GEOGRAPHIC AREA AND LOAN TYPE AS OF MARCH 31, 1997
- ------------------------------------------------------------------------------
<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 $25,858 $ 9,860 $3,609 $1,002 $2,772 $2,329 $45,430
Washington 1,420 1,946 1,226 349 1,526 575 7,042
Arizona 948 931 300 242 601 123 3,145
Texas 794 122 382 654 778 279 3,009
Oregon 978 532 239 152 285 79 2,265
Other/a/ 5,883 1,466 2,609 6,116 961 1,370 18,405
- ------------------------------------------------------------------------------------------------------------------
$35,881 $14,857 $8,365 $8,515 $6,923 $4,755 $79,296
- ------------------------------------===============================================================================
</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 $862 million at March 31, 1997, a decrease of
$12 million from the December 31, 1996 level. The decrease was
reflected in a lower level of delinquencies in most of the loan
categories. Partially offsetting this decrease was an increase
in delinquent credit card loans.
================================================================================
DOMESTIC CONSUMER LOAN DELINQUENCY INFORMATION/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1966
-------- ---------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DELINQUENT CONSUMER LOANS
Residential first mortgages $463 $477 $518 $535 $609
Residential junior mortgages 61 62 64 70 82
Credit card 216 206 207 204 199
Other 122 129 113 96 94
- ------------------------------------------------------------------------------------------------------------------
$862 $874 $902 $905 $984
- --------------------------------------------------------------------==============================================
<CAPTION>
<S> <C> <C> <C> <C> <C>
DELINQUENT CONSUMER LOAN RATIOS/b/
Residential first mortgages 1.29% 1.27% 1.38% 1.41% 1.61%
Residential junior mortgages 0.41 0.42 0.44 0.48 0.59
Credit card 2.58 2.36 2.29 2.19 2.23
Other 0.60 0.67 0.63 0.56 0.56
Total 1.09 1.09 1.14 1.15 1.27
- --------------------------------------------------------------------==============================================
</TABLE>
/a/ 60 days or more past due.
/b/ Ratios represent deliquency balances expressed as a percentage of total
loans for that loan category.
32
<PAGE>
===============================================================================
Domestic Commercial Loans -- Domestic commercial loans
increased $2.0 billion, or 3 percent, during the three months
ended March 31, 1997. In addition, most commercial loan
categories experienced some growth. Commercial and industrial
loans increased $1.2 billion, loans for purchasing or carrying
securities increased $0.5 billion, and lease financing
increased $0.2 billion. The growth in commercial and industrial
loans primarily reflected BAC's efforts to diversify its market
share as well as increased loan demand from large corporate and
middle market borrowers in various industries throughout the
United States.
===============================================================================
DOMESTIC COMMERCIAL LOANS SECURED BY REAL ESTATE BY GEOGRAPHIC AREA AND PROJECT
TYPE AT MARCH 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APARTMENT & LIGHT
(IN MILLIONS) OFFICE RETAIL CONDOMINIUM INDUSTRY HOTEL OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $1,457 $1,346 $1,081 $1,177 $175 $1,092 $ 6,328
Washington 523 350 415 522 152 538 2,500
Nevada 160 164 211 74 107 234 950
Oregon 128 126 172 82 25 58 591
Arizona 84 86 75 59 46 102 452
Illinois 56 29 70 93 - 24 272
Other/a/ 440 228 143 109 131 301 1,352
- ------------------------------------------------------------------------------------------------------------
$2,848 $2,329 $2,167 $2,116 $636 $2,349 $12,445
- -----------------------------------------===================================================================
</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 MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APARTMENT & LIGHT
(IN MILLIONS) SUBDIVISION RETAIL CONDOMINIUM OFFICE INDUSTRY HOTEL OTHER TOTAL
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $210 $234 $ 96 $ 65 $ 50 $15 $ 72 $ 742
Washington 225 42 66 70 15 18 69 505
Nevada 78 28 76 19 32 54 53 340
Texas 25 21 77 1 13 - 11 148
Arizona 41 18 39 - 7 - 25 130
Oregon 8 28 33 7 - 3 21 100
Illinois 7 12 23 10 3 - 2 57
New York - 7 5 - - - 42 54
Florida - 52 - - - - - 52
Other/a/ 16 59 39 3 10 1 5 133
- ------------------------------------------------------------------------------------------------------------
$610 $501 $454 $175 $130 $91 $300 $2,261
-----------------------------------========================================================================
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic
construction and development loans.
33
<PAGE>
================================================================================
Foreign Loans -- BAC has continued to expand its lending
activities in the Pacific Rim as well as in selected
countries in Latin America. As a result, total foreign loans
increased $0.9 billion, or 3 percent, between year-end 1996
and March 31, 1997, primarily due to an increase in
commercial and industrial loans of $1.1 billion.
- --------------------------------------------------------------------------------
EMERGING In connection with its effort to maintain a diversified
MARKET 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 March 31, 1997, BAC's emerging market exposure
totaled $13.3 billion, or 5 percent of total assets, compared
to $12.1 billion, or 5 percent, at year-end 1996. 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 may selectively expand its
investment in these regions.
================================================================================
EMERGING MARKET EXPOSURE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------------------------------
LOANS AVAILABLE-FOR-SALE SECURITIES/a/
------------------------- ---------------------------------
MEDIUM AND
(IN MILLIONS) TOTAL/c/ SHORT-TERM LONG-TERM COLLATERALIZED UNCOLLATERALIZED
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mexico $2,696 $376 $ 621/d/ $335 $19
Brazil 1,933 687 73 - 8
India 1,562 164 209 - -
Chile 1,259 209 449 - -
Argentina 1,135 234 72 - 1
Colombia 927 512 308 - 10
China 785 407 40 - -
Philippines 761 78 9 21 32
Indonesia 593 253 55 - -
Venezuela 357 13 - - -
Pakistan 318 2 6 - -
Russia 318 6 - - -
Other/e/ 653 140 172 82 -
- -------------------------------------------------------------------------------------------
$13,297 $3,081/f/ $2,014/f/ $438 $70
- --------------------=======================================================================
</TABLE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES/a/ OTHER/b/
------------------------------ ----------------------
MEDIUM-AND
COLLATERALIZED UNCOLLATERALIZED SHORT-TERM LONG-TERM
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mexico $ 753 $211 $ 367 $ 14
Brazil - 17 1,130 18
India - - 1,184 5
Chile - - 514 87
Argentina - 28 774 26
Colombia - 1 96 -
China - - 326 12
Philippines - - 603 18
Indonesia - - 285 -
Venezuela 288 22 15 19
Pakistan - - 310 -
Russia - - 312 -
Other/e/ - - 252 7
- -----------------------------------------------------------------------------
$1,041/g/ $279/g/ $6,168 $206
- --------------------------===================================================
</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: $72 million for Mexico, $30 million for Brazil, $352
million for India, $110 million for Chile, $10 million for Argentina, $55
million for the Philippines, $89 million for Indonesia, $6 million for
Venezuela, and $62 million for Pakistan.
/d/ Includes a $30 million loan that is collateralized by zero-coupon U.S.
Treasury securities.
/e/ No other country individually exceeded 2 percent of total emerging market
exposure.
/f/ Total loans include nonaccrual loans of $6 million.
/g/ Total fair value of held-to-maturity securities was approximately $1
billion.
34
<PAGE>
===============================================================================
ALLOWANCE FOR The allowance for credit losses at March 31, 1997 was $3,538
CREDIT LOSSES million, or 2.11 percent of loans outstanding, compared with
$3,523 million, or 2.13 percent, at December 31, 1996. The
ratio of the allowance for credit losses to total nonaccrual
assets was 343 percent at March 31, 1997, up from 315 percent
at December 31, 1996.
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.
================================================================================
COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- ---------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:
Historical loss experience component $ 334 $ 349 $ 393 $ 406 $ 471
Credit management allocated component 404 426 375 398 380
- ----------------------------------------------------------------------------------------------
Total special mention and classified 738 775 768 804 851
Other:
Domestic consumer 1,475 1,414 1,366 1,333 1,288
Domestic commercial 240 252 255 240 237
Foreign 309 300 288 283 283
- ----------------------------------------------------------------------------------------------
Total allocated $2,762 $2,741 $2,677 $2,660 $2,659
Unallocated 776 782 834 835 837
- ----------------------------------------------------------------------------------------------
$3,538 $3,523 $3,511 $3,495 $3,496
- ----------------------------------------------================================================
- ----------------------------------------------------------------------------------------------
</TABLE>
Net credit losses for the first quarter of 1997 were $204
million, down $35 million from the same period a year ago. The
decrease was largely in the domestic commercial portfolios,
which had net credit recoveries of $5 million for the first
quarter of 1997, compared with net credit losses of $60
million for the comparable period in 1996. This change was
primarily reflected in the construction and development, and
financial institutions portfolios, and was due to lower charge-
offs.
Domestic consumer net credit losses for the first quarter of
1997 increased $22 million from the same period a year ago.
This increase was primarily in the consumer installment and
credit card portfolios. Higher charge-offs of consumer
installment loans were driven by growth and default rates in
the manufactured housing portfolio. Higher levels of personal
bankruptcy filings contributed to increased charge-offs in the
credit card portfolio. The increases in net charge-offs of
consumer installment and credit card loans were partially
offset by the decreases in charge-offs of residential first
mortgages and residential junior mortgages.
Foreign net credit recoveries in the first quarter of 1997,
primarily related to previously charged off loans to borrowers
in Peru, decreased $8 million from the comparable period in
1996.
35
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
QUARTERLY CREDIT LOSS EXPERIENCE
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996
------- -------------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance, beginning of period $ 3,523 $ 3,511 $ 3,495 $ 3,496 $ 3,554
CREDIT LOSSES
Domestic consumer:
Residential first mortgages 7 7 12 12 11
Residential junior mortgages 13 17 17 16 20
Credit card 124 114 119 117 113
Other installment 104 108 90 81 76
Other individual lines of credit 21 20 20 20 19
Other 5 4 4 3 3
Domestic commercial:
Commercial and industrial 16 20 20 50 40
Loans secured by real estate 1 3 5 2 12
Financial institutions - - - 23 23
Lease financing - - 1 - -
Construction and development loans secured by real
estate 1 2 17 16 26
Loans for purchasing or carrying securities - - - - -
Agricultural - 2 - 1 -
Foreign 2 15 18 2 4
- --------------------------------------------------------------------------------------------------------------------------------
Total credit losses 294 312 323 343 347
CREDIT LOSS RECOVERIES
Domestic consumer:
Residential first mortgages - - 1 - -
Residential junior mortgages 4 5 4 4 4
Credit card 9 10 8 9 10
Other installment 45 44 48 38 34
Other individual lines of credit 2 3 2 2 3
Other 1 - 1 1 -
Domestic commercial:
Commercial and industrial 16 20 11 21 28
Loans secured by real estate 2 6 3 2 4
Financial institutions - - - - 2
Lease financing 1 - 1 1 1
Construction and development loans secured by real
estate 3 1 1 3 6
Loans for purchasing or carrying securities - - - 1 -
Agricultural 1 1 - 3 -
Foreign 6 15 17 12 16
- --------------------------------------------------------------------------------------------------------------------------------
Total credit loss recoveries 90 105 97 97 108
- --------------------------------------------------------------------------------------------------------------------------------
Total net credit losses 204 207 226 246 239
Provision for credit losses 220 220 235 250 180
Other net additions (deductions) (1) (1) 7 (5) 1
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ 3,538 $ 3,523 $ 3,511 $ 3,495 $ 3,496
- ---------------------------------------------------------=======================================================================
ANNUALIZED RATIO OF NET CREDIT LOSSES (RECOVERIES)
TO AVERAGE LOAN OUTSTANDINGS
Domestic consumer:
Residential first mortgages 0.08% 0.07% 0.12% 0.13% 0.11%
Residential junior mortgages 0.27 0.35 0.35 0.33 0.48
Credit card 5.57 4.95 4.95 4.76 4.62
Other installment 1.36 1.54 1.08 1.16 1.19
Other individual lines of credit 3.89 3.67 3.81 3.91 3.60
Other 3.91 3.58 3.28 3.46 3.90
Domestic commercial:
Commercial and industrial - - 0.11 0.34 0.15
Loans secured by real estate (0.05) (0.04) 0.07 - 0.29
Financial institutions - - - 2.93 3.08
Lease financing (0.09) - - (0.18) (0.16)
Construction and development loans secured by real
estate (0.38) 0.24 2.34 1.80 2.46
Loans for purchasing or carrying securities - - - (0.27) -
Agricultural (0.28) 0.03 - (0.19) -
Total domestic 0.61 0.60 0.66 0.77 0.76
Foreign (0.06) - 0.01 (0.17) (0.21)
TOTAL 0.50 0.51 0.56 0.63 0.62
RATIO OF ALLOWANCE TO LOANS AT QUARTER END 2.11 2.13 2.17 2.18 2.24
EARNINGS COVERAGE OF NET CREDIT LOSSES/a/ 7.49X 6.65X 6.15X 6.03X 5.89X
- ------------------------------------------------------------====================================================================
</TABLE>
/a/ 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 $88 million, or 8 percent,
ASSETS between year-end 1996 and March 31, 1997. This decrease
reflected improvements in most segments of the loan portfolio,
particularly in commercial loans secured by real estate and in
foreign commercial loans. These improvements resulted primarily
from full or partial payments on nonaccrual loans. Other
significant factors that contributed to the decrease were the
restoration of nonaccrual loans to accrual status and lower
charge-offs in most loan categories. The decrease in
nonaccruals also reflects low levels of loans being placed on
nonaccrual status.
BAC's nonperforming asset ratios reflected improvement in BAC's
credit quality during the first three months of 1997. At March
31, 1997, the ratio of nonaccrual loans to total loans was 0.62
percent, down from 0.66 percent at December 31, 1996. In
addition, the ratio of nonperforming assets (comprised of
nonaccrual assets and other real estate owned) to total assets
declined 7 basis points from year-end 1996 to 0.52 percent at
March 31, 1997.
For further information concerning nonaccrual assets, refer to
the tables below and on pages 38 and 39.
================================================================================
ANALYSIS OF CHANGE IN NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------- ----------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter $1,118 $1,119 $1,488 $1,697 $1,891
Additions:
Loans placed on nonaccrual status 108 119 66 129 191
Leases acquired - - 34 - -
Other/a/ - 144 - - -
Deductions:
Sales (3) (33) (4) (26) (67)
Restored to accrual status (75) (34) (229) (37) (60)
Foreclosures (8) (3) (5) (6) (11)
Charge-offs (10) (19) (51) (77) (90)
Other, primarily payments (100) (175) (180) (192) (157)
- -------------------------------------------------------------------------------------------
BALANCE, END OF QUARTER $1,030 $1,118 $1,119 $1,488 $1,697
- -----------------------------------------==================================================
</TABLE>
/a/ Reflects the effect of a change in the past due period on nonaccrual loans.
During the fourth quarter of 1996, BAC changed the past due period for
nonaccrual residential real estate loans and consumer loans that were
collateralized by junior mortgages on residential real estate. The maximum
period loans can be past due before being placed on nonaccrual status was
reduced from 180 days to 90 days.
37
<PAGE>
================================================================================
NONACCRUAL ASSETS, RESTRUCTURED LOANS, AND LOANS PAST DUE 90 DAYS OR MORE AND
STILL ACCRUING INTEREST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- -------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONACCRUAL ASSETS
Domestic consumer loans:
Residential first mortgages/a/ $ 347 $ 354 $ 233 $ 272 $ 301
Residential junior mortgages/a/ 60 59 55 66 69
Other consumer 2 2 3 4 3
Domestic commercial loans:
Commercial and industrial 251 241 323 381 457
Loans secured by real estate 147 206 229 245 251
Financial institutions - - 5 4 25
Lease financing 2 1 1 3 -
Construction and development loans secured by real estate 104 95 119 346 417
Agricultural 23 28 28 34 33
- ------------------------------------------------------------------------------------------------------------------------
936 986 996 1,355 1,556
Foreign loans, primarily commercial 89 109 122 130 138
Other interest-bearing assets 5 23 1 3 3
- ------------------------------------------------------------------------------------------------------------------------
$1,030 $1,118/b/ $1,119/b/ $1,488/b/ $1,697/b/
- ------------------------------------------------------------------======================================================
RESTRUCTURED LOANS
Domestic commercial:
Commercial and industrial $ 21 $ 25 $ 21 $ 29 $ 29
Loans secured by real estate 257 255 236 55 60
Construction and development loans secured by real estate 16 16 16 15 1
Agricultural 1 1 - - -
- ------------------------------------------------------------------======================================================
295 297 273 99 90
Foreign/c/ - 5 1 4 1
- ------------------------------------------------------------------------------------------------------------------------
$ 295 $ 302 $ 274 $ 103 $ 91
- ------------------------------------------------------------------======================================================
LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
Domestic consumer:
Residential first mortgages/a/ $ - $ - $ 145 $ 133 $ 163
Residential junior mortgages/a/ - - 8 5 8
Other consumer 189 186 179 173 165
Domestic commercial:
Commercial and industrial 13 29 11 31 10
Loans secured by real estate 12 5 9 5 8
Financial institutions - - - 21 1
Lease financing - - - - 1
Construction and development loans secured by real estate 1 12 4 21 -
Agricultural 1 1 4 - -
- ------------------------------------------------------------------------------------------------------------------------
216 233 360 389 356
Foreign 2 2 3 - 4
- ------------------------------------------------------------------------------------------------------------------------
$ 218 $ 235 $ 363 $ 389 $ 360
- ------------------------------------------------------------------======================================================
</TABLE>
/a/ Reflects the effect of a change in the past due period on nonaccrual loans.
During the fourth quarter of 1996, BAC changed the past due period for
nonaccrual residential real estate loans and consumer loans that were
collateralized by junior mortgages on residential real estate. The maximum
period loans can be past due before being placed on nonaccrual status was
reduced from 180 days to 90 days.
/b/ Excludes certain nonaccrual debt-restructuring par bonds and other
instruments that were included in available-for-sale and held-to-maturity
securities of $67 million at December 31, 1996, $62 million at September 30,
1996, $6 million at June 30, 1996, and $5 million at March 31, 1996. There
were no such amounts at March 31, 1997.
/c/ Excludes debt restructurings with countries that have experienced liquidity
problems of $1.5 billion at March 31, 1997 and $1.6 billion at each quarter
ended in 1996. The majority of these instruments were classified as either
available-for-sale or held-to-maturity securities.
38
<PAGE>
================================================================================
INTEREST INCOME FOREGONE ON NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN MILLIONS) MARCH 31, 1997
- --------------------------------------------------------------------------------------
<S> <C>
DOMESTIC
Interest income that would have been recognized had the assets
performed in accordance with their original terms $49
Less: Interest income included in the results of operations 16
- --------------------------------------------------------------------------------------
Domestic interest income foregone 33
FOREIGN
Interest income that would have been recognized had the assets
performed in accordance with their original terms 5
Less: Interest income included in the results of operations 1
- --------------------------------------------------------------------------------------
Foreign interest income foregone 4
- --------------------------------------------------------------------------------------
$37
- -----------------------------------------------------------------------------------===
</TABLE>
===============================================================================
CASH INTEREST PAYMENTS ON NONACCRUAL ASSETS BY LOAN TYPE/a/
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------------------------------------------
CUMULATIVE BOOK AS A
CONTRACTUAL INTEREST NONACCRUAL PERCENTAGE
PRINCIPAL CUMULATIVE APPLIED BOOK OF
(DOLLAR AMOUNTS IN MILLIONS) BALANCE CHARGE-OFFS TO PRINCIPAL BALANCE CONTRACTUAL
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 350 $ 2 $ 1 $ 347 99%
Residential junior mortgages 61 - 1 60 98
Other consumer 4 2 - 2 50
Commercial:
Commercial and industrial 615 277 87 251 41
Loans secured by real estate 257 90 20 147 57
Financial institutions 52 51 1 - -
Lease financing 2 - - 2 100
Construction and development
loans secured by real estate 164 49 11 104 63
Agricultural 39 9 7 23 59
- -------------------------------------------------------------------------------------------------------
1,544 480 128 936 61
FOREIGN, PRIMARILY COMMERCIAL 197 91 17 89 45
Other interest-bearing assets 6 - 1 5 83
- -------------------------------------------------------------------------------------------------------
$1,747 $571 $146 $1,030 59%
- -------------------------------------==================================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
--------------------------------------------------------
CASH INTEREST
AVERAGE PAYMENTS APPLIED
NONACCRUAL -----------------------------------------
BOOK AS INTEREST
(DOLLAR AMOUNTS IN MILLIONS) BALANCE INCOME OTHER/b/ TOTAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 352 $ 4 $ - $ 4
Residential junior mortgages 59 - - -
Other consumer 2 - - -
Commercial:
Commercial and industrial 246 3 2 5
Loans secured by real estate 182 6 2 8
Financial institutions - - - -
Lease financing 1 - - -
Construction and development
loans secured by real estate 94 2 1 3
Agricultural 25 1 1 2
- ------------------------------------------------------------------------------------------------------
961 16 6 22
FOREIGN, PRIMARILY COMMERCIAL 97 1 1 2
Other interest-bearing assets 17 - - -
- -------------------------------------------------------------------------------------------------------
$1,075 $17 $ 7 $24
- ---------------------------------------------------====================================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE 9.15%
- -------------------------------------------------------------------------------------------------------
</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.
In meeting the needs of its global customers, BAC uses its
expertise to execute transactions to aid these customers in
managing their risk exposures to interest rates, 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 expose BAC to various types of risk. These risks
include credit risk (the possibility of loss from the failure
of a borrower or counterparty to fully perform under the terms
of a credit-related contract), operational risk (the
possibility of unexpected losses attributable to human error,
systems failures, fraud, or inadequate internal controls and
procedures), market risk (the possibility of loss arising from
adverse changes in market rates and prices, such as interest
rates and foreign currency exchange rates), and liquidity risk
(the possibility that BAC's cash flows may not be adequate to
fund operations and meet commitments on a timely and cost-
effective basis). For a detailed discussion of these risks and
how they are managed, refer to pages 38 through 44 of BAC's
1996 Annual Report to Shareholders.
For additional information concerning foreign exchange and
derivatives contracts, including their respective notional,
credit risk, and fair value amounts, refer to Note 8 of the
Notes to Consolidated Financial Statements on pages 9
through 14.
40
<PAGE>
INTEREST RATE RISK MANAGEMENT
================================================================================
BAC's banking activities other than trading include lending,
accepting deposits, investing in securities, and issuing debt
as needed to fund assets. BAC's governing objective in interest
rate risk management for these activities is to minimize the
potential for significant loss as a result of changes in market
conditions. BAC measures interest rate risk in terms of
potential impact on both its economic value and reported
earnings. Economic value calculations measure the changes in
the present value of net future cash flows. BAC measures its
exposure to reported earnings variability by estimating the
potential effect of changes in interest rates on projected net
interest income over a three-year period.
There are three sources of interest rate risk. These are gap
mismatches, options mismatches, and index mismatches. To
minimize exposure to declines in economic value due to gap
mismatches, BAC's policy is to minimize the duration difference
between its assets and liabilities. This asset and liability
management policy protects against losses of economic value in
the event of major upward and downward yield curve shifts. 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 context.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Net Interest Rate Risk (plot point graph in non-Edgar version)
(in billions of dollars) 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 3/31/97
<S> <C> <C> <C> <C> <C> <C>
Net Interest Rate Risk $(6.9) $1.0 $(2.8) $0.0 $(1.9) $9.1
</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 instruments
(e.g., loan commitments). Expected interest rate sensitivity of
individual categories of assets and liabilities as of March 31,
1997 is shown in the table on page 42.
41
<PAGE>
================================================================================
INTEREST RATE SENSITIVITY BY REPRICING OR MATURITY DATES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
MARCH 31, 1997
--------------------------------------------------------------
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 $ 1.1 $ - $ - $ - $ 1.1
Trading account securities 1.4 - - - 1.4
Loans:
Prime indexed 17.0 - - - 17.0
Adjustable rate residential first mortgages 9.1 5.0 5.4 4.9 24.4
Other loans, net 45.5 7.6 19.1 12.2 84.4
Other assets 17.3 0.8 14.9 10.3 43.3
- -------------------------------------------------------------------------------------------------------------------
Domestic Assets 91.4 13.4 39.4 27.4 171.6
- -------------------------------------------------------------------------------------------------------------------
DOMESTIC LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic deposits (67.5) (9.0) (22.1) (19.5) (118.1)
Other short-term borrowings (12.3) (2.0) (0.2) - (14.5)
Long-term debt and subordinated capital notes (10.8) (0.1) (3.5) (5.9) (20.3)
Other liabilities and stockholders' equity (5.0) (0.5) (11.5) (15.3) (32.3)
- -------------------------------------------------------------------------------------------------------------------
Domestic Liabilities and Stockholders' Equity (95.6) (11.6) (37.3) (40.7) (185.2)
OFFSHORE FUNDING BOOKS, NET (2.4) 0.9 0.3 1.2 -
- -------------------------------------------------------------------------------------------------------------------
Core Gap Before Risk Management Positions (6.6) 2.7 2.4 (12.1) (13.6)
- -------------------------------------------------------------------------------------------------------------------
INTEREST RATE RISK MANAGEMENT POSITIONS
Investment securities/a/ 2.5 1.0 4.2 5.9 13.6
Off-balance-sheet financial instruments/b/ 4.2 (6.1) (5.5) 7.4 -
- -------------------------------------------------------------------------------------------------------------------
Total Interest Rate Risk Management Positions 6.7 (5.1) (1.3) 13.3 13.6
- -------------------------------------------------------------------------------------------------------------------
Net Gap 0.1 (2.4) 1.1 1.2 -
- -------------------------------------------------------------------------------------------------------------------
Cumulative Gap $ 0.1 $ (2.3) $ (1.2) $ - $ -
- ---------------------------------------------------------==========================================================
</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 March 31, 1997, BAC had a "core" imbalance before risk
management positions as liabilities and equity exceeded assets
by approximately $14 billion. BAC's risk management activities
eliminated this imbalance while containing the size of net gap
mismatches in individual repricing periods. Investment
securities and "receive 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 $52.3 billion at March 31, 1997, down $1.4 billion, or
3 percent, from year-end 1996. The decline in liquid assets was
primarily reflected in decreases in cash and due from banks and
available-for-sale securities, partially offset by increases in
trading account assets and interest-bearing deposits in banks.
The ongoing operations of BAC resulted in cash inflows from
deposits and short-term borrowings of $2.3 billion and $3.9
billion in the first quarters of 1997 and 1996, respectively.
During the same periods, BAC's liquidity was enhanced by
proceeds from sales of loans, totaling $2.1 billion and $0.3
billion, respectively. In addition, total sales, maturities,
prepayments, and calls of securities exceeded total purchases,
resulting in cash inflows of $0.5 billion and $0.8 billion,
respectively.
Total loan originations and purchases exceeded total principal
collections, resulting in cash outflows of $4.5 billion and
$1.2 billion in the first quarters of 1997 and 1996. In
addition, in the first quarters of 1997 and 1996, the parent
paid dividends of $250 million and $251 million, respectively,
to its preferred and common stockholders. During the same
periods, the parent repurchased common and preferred stock for
$1,127 million and $500 million, respectively.
- --------------------------------------------------------------------------------
CAPITAL At March 31, 1997, total stockholders' equity amounted to $20.1
MANAGEMENT billion, a decrease of $0.6 billion from year-end 1996. The
decrease was primarily due to redemptions of preferred stock.
The decrease in BAC's preferred stock of $0.6 billion resulted
from the redemptions of all 11,250,000 outstanding shares of
its 9% Cumulative Preferred Stock, Series H, on January 15,
1997 and all 14,600,000 shares of its 8 3/8% Cumulative
Preferred Stock Series K, (Preferred Stock, Series K) on
February 15, 1997. Remaining redemption authority for preferred
stock under the current amended repurchase program totaled $1.2
billion at March 31, 1997. For additional information regarding
preferred stock, refer to Note 5 of the Notes to Consolidated
Financial Statements on page 8.
Common equity at March 31, 1997 was essentially unchanged from
$18.5 billion at December 31, 1996. The earnings net of common
and preferred stock dividends of $0.5 billion were offset by a
reduction of $0.5 billion due to repurchases of common stock.
During the first three months of 1997, BAC repurchased 4.3
million shares of its common stock at an average price per
share of $110.48 reflecting the corporation's ongoing efforts
to effectively manage capital. The shares were repurchased on
the open market over 47 trading days and represented
approximately six percent of the total volume of BAC common
stock traded on those days. Remaining buyback authority for
common stock under the current amended repurchase program
totaled $3.3 billion at March 31, 1997. For additional
information regarding the stock repurchase program, refer to
Note 5 of the Notes to Consolidated Financial Statements on
page 8.
43
<PAGE>
================================================================================
The Federal Reserve has announced that certain cumulative
preferred securities having the characteristics of trust
preferred securities qualify as minority interest, which is
included in Tier 1 capital for bank holding companies. During
the first quarter of 1997, BAC issued trust preferred
securities totaling $396 million, net of $4 million of deferred
debt issuance costs. For additional information regarding trust
preferred securities, refer to Note 4 of the Notes to
Consolidated Financial Statements on pages 7 and 8.
BAC's risk-based capital ratios continued to exceed regulatory
guidelines for "well-capitalized" status. BAC's Tier 1 and
total risk-based capital ratios at March 31, 1997 increased 6
basis points and 8 basis points, respectively, from year-end
1996 primarily due to an increase in retained earnings. The
increase of $396 million of trust preferred securities was
substantially offset by the redemption of the Preferred Stock,
Series K, of $365 million. The increases in Tier 1 and total
risk-based capital ratios may be temporary. These ratios may
return to their targeted levels to the extent that preferred
stock is redeemed in future periods. BAC's Tier 1 leverage
ratio was 7.36 percent at March 31, 1997, 8 basis points lower
than 7.44 percent at December 31, 1996, primarily due to an
increase in BAC's quarterly average total assets.
44
<PAGE>
================================================================================
RISK-BASED CAPITAL, RISK-WEIGHTED ASSETS, AND RISK-BASED CAPITAL RATIOS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1997 1996
-------- -------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RISK-BASED CAPITAL
Common stockholders' equity $ 18,591 $ 18,439 $ 18,297 $ 17,945 $ 17,800
Qualified perpetual preferred stock 1,596 1,961 2,242 2,242 2,242
Minority interest/a/ 1,964 1,566 - - -
Less: Goodwill, nongrandfathered core deposit and
other identifiable intangibles, and other deductions/b/ (4,832) (4,922) (5,007) (5,068) (5,114)
- ----------------------------------------------------------------------------------------------------------------------
Tier 1 risk-based capital 17,319 17,044 15,532 15,119 14,928
Eligible portion of the allowance for credit losses 2,778 2,758 2,673 2,651 2,571
Hybrid capital instruments 142 142 142 142 214
Subordinated notes and debentures 6,248 6,169 6,001 6,072 5,934
Less: Other deductions (188) (184) (174) (164) (135)
- ----------------------------------------------------------------------------------------------------------------------
Tier 2 risk-based capital 8,980 8,885 8,642 8,701 8,584
- ----------------------------------------------------------------------------------------------------------------------
Total 26,299 25,929 24,174 23,820 23,512
Less: Investments in unconsolidated banking
and finance subsidiaries (48) (49) (49) (48) (47)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RISK-BASED CAPITAL $ 26,251 $ 25,880 $ 24,125 $ 23,772 $ 23,465
- --------------------------------------------------------------========================================================
RISK-WEIGHTED ASSETS
Balance sheet assets:
Trading account assets $ 6,653 $ 6,022 $ 5,257 $ 5,289 $ 3,771
Available-for-sale and held-to-maturity securities 4,953 5,121 4,812 4,769 5,029
Loans 141,317 139,412 137,360 135,403 132,256
Other assets 17,221 18,711 17,435 16,314 17,667
- ----------------------------------------------------------------------------------------------------------------------
Total balance sheet assets 170,144 169,266 164,864 161,775 158,723
- ----------------------------------------------------------------------------------------------------------------------
Off-balance-sheet items:
Unused commitments 28,455 28,368 26,721 26,485 24,991
Standby letters of credit 15,613 15,021 14,518 15,832 13,675
Foreign exchange and derivatives contracts 4,669 4,662 4,535 4,425 4,617
Other 2,190 2,166 1,990 2,390 2,474
- ----------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet items 50,927 50,217 47,764 49,132 45,757
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RISK-WEIGHTED ASSETS $221,071 $219,483 $212,628 $210,907 $204,480
- --------------------------------------------------------------========================================================
RISK-BASED CAPITAL RATIOS
TIER 1 CAPITAL RATIO 7.83% 7.77% 7.30% 7.17% 7.30%
TOTAL CAPITAL RATIO 11.87 11.79 11.35 11.27 11.48
TIER 1 LEVERAGE RATIO 7.36 7.44 6.90 6.75 6.77
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents trust preferred securities and BAMS minority interest of $1,873
million and $91 million, respectively, at March 31, 1997 and $1,477 million
and $89 million, respectively, at December 31, 1996.
/b/ Includes nongrandfathered core deposit and other identifiable intangibles
acquired after February 19, 1992 of $739 million and $65 million,
respectively, at March 31,1997, $772 million and $67 million, respectively,
at December 31, 1996, $795 million and $69 million, respectively, at
September 30, 1996, $814 million and $72 million, respectively, at June 30,
1996, and $830 million and $75 million, respectively, at March 31, 1996.
Also includes $8 million and $9 million at December 31, 1996 and March 31,
1996, respectively, of the excess of the net book value over 90 percent of
the fair value of mortgage servicing assets and credit card intangibles.
There were no such excess amounts at March 31, 1997, September 30, 1996, and
June 30, 1996.
45
<PAGE>
[BANK AMERICA LOGO APPEARS HERE]
BANKAMERICA
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
NL-9 5/97 Paper Logo Appears
Here
<PAGE>
GRAPHICS APPENDIX INDEX
<TABLE>
<CAPTION>
BankAmerica Corporation
First Quarter 1997 10-Q
page reference Description of omitted graphic
- ----------------------- ------------------------------------------------------
<S> <C>
41 Net Interest Rate Risk
(Plot point graph in non-EDGAR version)
</TABLE>
1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Reference Description
- --------- -----------
<S> <C>
3.b BankAmerica Corporation Bylaws, as amended. Article V, Section 7
was amended on March 3, 1997. Article II, Section 9, Article V,
Section 2, Article VI, Sections 1 and 8, and Article X, Section 4
were amended on April 28, 1997.
10.a General Release and Settlement agreement between T.E. Peterson
and the Parent and the Bank effective March 27, 1997.*
10.b BankAmerica Corporation Executive Compensation Program -Benefits/
Perquisites Summary, as amended.*
27 Financial Data Schedule
- -------------------------------------------------------------------------------
</TABLE>
*Management contract or compensatory plan, contract, or arrangement.
1
<PAGE>
Exhibit 3.b
BANKAMERICA CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. All annual meetings of the shareholders
shall be held in the City and County of San Francisco, State of California, at
such place as may be fixed from time to time by the Board of Directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Special meetings of shareholders may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. Annual meetings of shareholders for the
election of Directors and the transaction of such other business as may be
properly brought before the meeting shall be held in March, April or May of each
year on such business day and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. SHAREHOLDERS LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of shareholders, a complete list of the shareholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be
<PAGE>
inspected by any shareholder who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board or the
President and shall be called by the Chairman of the Board or the President or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of shareholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than fifty days before the date of the meeting, to each shareholder
entitled to vote at such meeting.
Section 7. BUSINESS. Business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
Section 8. QUORUM AND ADJOURNMENT. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute or by the Certificate of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting.
Section 9. ORGANIZATION. At every meeting of the shareholders the
Chairman of the Board shall preside. In the absence of such officer, any other
officer of the rank of President; Vice Chairman of the Board; President of the
Global Retail Bank or Global Wholesale Bank, or similar division; Vice Chairman;
Executive Vice President or Senior Vice President present shall call such
meeting to order and preside. The Secretary, or in his or her absence, the
appointee of the presiding officer of the meeting shall act as Secretary of the
meeting.
Section 10. VOTING OF SHAREHOLDERS. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation a different
vote is required in which case such express provision shall govern and control
the decision of such question.
Each shareholder shall at every meeting of the shareholders be entitled to
one vote in person or by proxy for each share of the capital stock having voting
power held by such shareholder, but no proxy shall be voted on
<PAGE>
after three years from its date, unless the proxy provides for a longer period.
Section 11. JUDGES OF ELECTION. The Board of Directors may at any time
appoint one or more persons to serve as judges of election at any meeting of
shareholders with respect to the votes of shareholders at such meeting. If any
judge appointed is absent or refuses to act, a majority of the judges, if
present, may act. If a majority of the judges is not present, the presiding
officer of the meeting may appoint one or more persons to serve as judges for
the meeting. The judges appointed to act at any meeting of the shareholders
shall perform their duties faithfully and impartially, and shall notify the
Secretary of the Corporation in writing of the votes cast at such meeting by the
shareholders.
Section 12. NOTICE OF SHAREHOLDER BUSINESS AT ANNUAL MEETING. At an
annual meeting of the shareholders only such business shall be conducted as
shall have been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any shareholder of the Corporation entitled to vote
at the meeting who complies with the notice procedures set forth in this
Section. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than thirty days nor more than sixty days prior to the
meeting; provided, however, that if less than forty days' notice of the date of
-------- -------
the meeting is given to shareholders, notice by the shareholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the Corporation's stock which
are owned by the shareholder and (d) any material interest of the shareholder in
such business. Notwithstanding anything in these By-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section. The Chairman of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that any business
proposed at the meeting was not properly brought before the meeting in
accordance with the provisions of this Section, and if he or she should so
determine, he or she shall so declare to the meeting and any such business shall
not be transacted.
Section 13. NOTICE OF SHAREHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section shall be
eligible for election as Directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of shareholders
(a) by or at the direction of the Board of Directors or (b) by any shareholder
of the Corporation entitled to vote for the election of Directors at the meeting
who has complied with the notice procedures set forth in this Section. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than thirty days nor more than sixty days prior to the meeting; provided,
--------
however, that if less than forty days' notice
- -------
<PAGE>
of the date of the meeting is given to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which the notice of the date of the meeting was
mailed. A shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a Director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including such person's
written consent to being named in the Corporation's proxy statement as a nominee
if nominated by the Board of Directors and to serving as a Director if elected);
and (b) as to the shareholder giving the notice (i) the name and address, as
they appear on the Corporation's books, of such shareholder and (ii) the class
and number of shares of the Corporation's stock which are owned by such
shareholder; provided, however, that compliance by a shareholder with the notice
-----------------
provisions and other requirements in this Section shall not create a duty of the
Corporation to include the shareholder's nominee in the Corporation's proxy
statement or proxy if the shareholder's nominee is not nominated by the Board of
Directors, and the Corporation shall retain any discretion it has to omit the
nominee from the Corporation's proxy statement and proxy. At the request of the
Board of Directors, any person nominated by the Board of Directors for election
as a Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a shareholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination made at the meeting was not made in
accordance with the provisions of this Section or with law or rules applicable
to the meeting, and if he or she should so determine, he or she shall so declare
to the meeting and the nomination shall be disregarded.
ARTICLE III
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of Directors which shall
constitute the whole Board shall be not less than three or more than thirty-
five. The first Board shall consist of three Directors. Thereafter, within the
limits above specified, the number of Directors shall be determined by
resolution of the Board of Directors or by the shareholders at the annual
meeting. The Directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 2 of this Article III, and each
Director elected shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Directors need
not be shareholders.
Section 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly
created directorships resulting from any increase in the authorized number of
Directors may be filled by a majority of the Directors then in office, though
less than a quorum, or by a sole remaining Director, and the Directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify or until their earlier resignations or removals.
If there are no Directors in office, then an election of Directors may be held
in the manner provided by statute.
<PAGE>
Section 3. RESIGNATIONS. Any Director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board or President or
to the Secretary of the Corporation. The resignation of any Director shall take
effect at the date of receipt of such notice or at any later date specified
therein; and unless otherwise specified therein the acceptance of such
resignation by the Board of Directors shall not be necessary to make it
effective.
Section 4. GENERAL POWERS. The business of the Corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the shareholders.
Section 5. COMPENSATION OF DIRECTORS. Fees and expenses payable to
Directors shall be in such amounts as shall be determined by the Board of
Directors, except that no Director of the Corporation who receives any salary as
an officer or employee thereof shall receive any per diem or other compensation
for attending any meeting of the Board of Directors or of the Executive
Committee or of any other committee.
Section 6. ADVISORY DIRECTORS. The Board of Directors may appoint such
number of Advisory Directors as shall be determined by the Board from time to
time. Such Advisory Directors shall serve at the pleasure of the Board of
Directors and shall have such rights and functions as the Board shall determine.
Advisory Directors shall receive such compensation for their services as may be
fixed by the Board. No Advisory Director who receives a salary as an officer or
employee of the Corporation or any of its subsidiaries shall receive
compensation for attending any meeting of the Board of Directors or of any
committee of the Board.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. PLACE OF MEETINGS. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 2. ORGANIZATIONAL MEETING. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, on the same day as each annual meeting of shareholders at such
place as may be designated by the presiding officer of such meeting, or as may
be otherwise provided by vote of the shareholders at such meeting. Notice of
such meeting shall not be necessary.
Section 3. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board.
Section 4. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman of the Board or a Vice Chairman of the Board or the President on
two days' notice to each Director, either personally or by mail or by telegram;
special meetings shall be called by the Chairman of the Board
<PAGE>
or a Vice Chairman of the Board or the President or the Secretary in like manner
and on like notice on the written request of any three Directors.
Section 5. QUORUM. At all meetings of the Board a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 6. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing. The written consents shall be filed
with the minutes of proceedings of the Board or committee.
Section 7. TELEPHONE PARTICIPATION IN MEETINGS. Members of the Board of
Directors or any committees thereof may participate in a meeting of the Board of
Directors or of such committees by means of conference telephone or other
communications equipment by means of which all persons participating can hear
each other, and such participation shall constitute presence in person at such
meeting.
ARTICLE V
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. During the intervals between meetings of
the Board, all powers and authority of the Board regarding the management of the
business and affairs of the Corporation shall be exercised by the Executive
Committee of the Board; except that the committee shall have no power:
(a) To amend the Certificate of Incorporation (except that the committee
may, to the extent authorized in a resolution adopted by the Board
providing for the issuance of shares of stock, fix the designations
and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the Corporation or fix
the number of shares of any series of stock or authorize the increase
or decrease of the shares of any series).
(b) To amend the By-laws of the Corporation.
(c) To recommend to the shareholders of the Corporation the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets.
<PAGE>
(d) To adopt an agreement of merger or consolidation.
(e) To recommend to the shareholders of the Corporation the dissolution of
the Corporation or a revocation of a dissolution.
(f) To declare a dividend.
(g) To authorize the issuance of stock, except that the committee shall
have the power to authorize the issuance of common stock of the
Corporation in one transaction or a series of related transactions
(including, without limitation, pursuant to a shelf registration),
provided that the number of shares of common stock so authorized shall
not exceed 5% of the number of shares of common stock issued and
outstanding immediately before such authorization.
(h) To appoint or remove the Chairman of the Board or the President of the
Corporation.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
The committee shall have the power and authority to adopt a certificate of
ownership and merger in connection with the merger of a parent and one or more
subsidiary corporations.
Section 2. OFFICE OF THE CHAIRMAN. During intervals between meetings of
the Executive Committee, the Office of the Chairman shall exercise the power and
authority of the Executive Committee to the extent permitted by law and subject
to the final sentence of this Section 2. The Office of the Chairman shall
consist of such Directors or officers as the Board may from time to time appoint
by resolution passed by a majority of the whole Board. The Office of the
Chairman shall be subject to the limitations on delegation of authority set
forth in Section 12 of this Article V and such limits as the Board may establish
from time to time by resolution.
Section 3. AUDITING AND EXAMINING COMMITTEE. The Auditing and Examining
Committee shall provide assistance to the Board in meeting its responsibilities
regarding the adequacy of internal controls, the quality and integrity of
regulatory and financial accounting and reporting and the effectiveness of the
internal and external auditing and examining functions of the Corporation and
its subsidiaries.
In carrying out its duties the committee shall:
>> monitor areas of significant risk, including credit risk, market risk,
liquidity risk, cross border risk, operational risk, and compliance;
>> monitor the adequacy of the Corporation's internal controls through
reviewing reports of regulatory examinations of the Corporation,
management letters, and other assessments of the adequacy of internal
controls from the independent accountants and internal auditors, together
with any proposed responses by management of the Corporation;
>> review the Corporation's annual report and other principal periodic
financial reports to the public and reports to regulatory agencies
(including the adequacy of any of the foregoing reports' supporting
<PAGE>
processes), in all cases to the extent deemed appropriate by the
committee;
>> review significant accounting policy and reporting issues;
>> recommend to the Board the firm to be employed by the Corporation as its
independent auditors, and review and make recommendations to the Board
regarding the terms and scope of such firm's engagement, and monitor its
performance and independence;
>> annually review and approve the scope of the auditing and credit
examination functions of the Corporation and monitor their performance;
>> review with the Chief Executive Officer any performance reports and
compensation recommendations to be made to the Executive Personnel and
Compensation Committee for the General Auditor and the Director of Credit
Examination Services;
>> review and take such other actions as may be appropriate with respect to
reports and other requirements under the Federal Deposit Insurance
Corporation Improvement Act of 1991;
>> inquire into such matters and review such reports and other documents
regarding subsidiaries as it deems appropriate;
>> take such action as the committee deems appropriate to encourage free and
open communication among the Board, the committee, the independent
auditors and the officers of the Corporation responsible for internal
audit, credit examination, regulatory/financial accounting and reporting,
and internal controls, including the scheduling of periodic executive
sessions with the independent auditors and members of management deemed
appropriate by the committee.
The committee shall also provide assistance to the Board with respect to
the fiduciary activities of subsidiaries. The committee shall:
>> review reports of examination of the fiduciary activities of any
subsidiary which has been directed to the committee by the Board or by
regulatory authorities;
>> monitor the internal fiduciary audit function and its findings for
subsidiaries;
>> review reports from the Corporation's independent auditors with respect to
fiduciary activities of subsidiaries;
>> have authority to make recommendations to the Board with respect to
fiduciary activities of subsidiaries as a result of audit and examination
reviews;
The committee shall also provide assistance to the Board in meeting its
fiduciary responsibilities with respect to the employee benefit plans of the
Corporation subject to the Employee Retirement Income Security Act of 1974, as
amended (ERISA). In carrying out its duties the committee shall:
>> review the performance of the Employee Benefits Administrative
<PAGE>
Committee and the Employee Benefits Investment Committee and any other
fiduciary appointed by the Board for the Corporation's employee benefit
plans subject to ERISA and review audit reports on such plans;
The committee may employ, at the Corporation's expense, independent
accountants, outside counsel and other experts as it deems necessary, and shall
have all additional powers necessary to carry out the foregoing functions and
such other functions as may be assigned by the Board from time to time.
The committee shall consist of such members as the Board may from time to
time appoint by resolution passed by a majority of the whole Board. At least
two members of the committee shall have significant executive, professional,
educational, or regulatory experience in financial, auditing, accounting, or
banking matters as shall be determined by the Board.
No member of the committee shall be, or shall have been within one year
prior to serving as a member of the committee, an officer or employee of the
Corporation or any of its subsidiaries or affiliates, and no member shall have
any relationship that, in the opinion of the Board, would interfere with the
member's exercise of independent judgment as a member of the committee,
including any significant direct or indirect credit or other relationships with
the Corporation or its subsidiaries, the termination of which likely would
materially and adversely affect the Corporation's financial condition or results
of operations.
Section 4. EXECUTIVE PERSONNEL AND COMPENSATION COMMITTEE. The Executive
Personnel and Compensation Committee shall have responsibility for, and shall
review and approve, the compensation, including salary and perquisites, of the
Corporation's executive officers, as designated for Federal securities law
purposes by the Board from time to time, and such other members of the senior
management of the Corporation as determined by the committee from time to time
by resolution. The committee shall also make recommendations to the
Corporation's subsidiaries as to the compensation of such members of senior
management of the subsidiaries as determined by the committee from time to time
by resolution.
The committee shall also have responsibility for the administration of the
Corporation's short-term and long-term incentive plans and deferred compensation
programs established for the Executive Officers and other senior management of
the Corporation and its subsidiaries (incentive plans). The Committee shall
approve or review the designation of participants in incentive plans, the
principles and procedures used in determining grants and awards under the plans,
and with respect to grants or awards of the Company's equity securities, the
specific grants and awards within such categories of recipients as designated by
the committee from time to time by resolution. The committee shall also
recommend to the full Board such amendments or revisions to incentive plans, and
shall take such other actions with respect to incentive plans, as deemed
appropriate by the committee.
The committee shall also advise management regarding executive succession
planning and the selection, development and performance of the Executive
Officers and other senior management of the Corporation and its subsidiaries as
determined by the committee from time to time.
The committee shall have all additional powers necessary to carry out
<PAGE>
its responsibilities and such other duties as may be assigned by the Board from
time to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
No member of the committee shall be an active officer of the Corporation
or any of its subsidiaries, and no member shall have any relationship that, in
the opinion of the Board, would interfere with the member's exercise of
independent judgment as a member of the committee.
Section 5. NOMINATING COMMITTEE. The Nominating Committee shall
recommend to the Board criteria for the selection of candidates to serve on the
Board; evaluate all proposed candidates; recommend to the Board nominees to fill
vacancies on the Board; and recommend to the Board prior to the annual meeting
of shareholders a slate of nominees for election to the Board by the
shareholders of the Corporation at the annual meeting.
The committee may also review and make recommendations to the Executive
Committee or the Board with respect to the Corporation's overall compensation
program for Directors, including salary, perquisites, deferred compensation
plans, stock or stock option plans or other incentive plans, and retirement
plans.
In carrying out its duties, the committee shall seek possible candidates
for the Board and otherwise aid in attracting qualified candidates to the Board.
The committee shall be available to the Chairman of the Board and the Chief
Executive Officer and other members of the Board for consultation concerning
candidates for the Board. The committee shall periodically review, assess and
make recommendations to the Board with regard to the size and composition of the
Board. The committee shall have all additional powers necessary to carry out
its responsibilities and such other duties as may be assigned by the Board from
time to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
No member of the committee shall be an active officer of the Corporation
or any of its subsidiaries and no member shall have any relationship that, in
the opinion of the Board, would interfere with the member's exercise of
independent judgment as a member of the committee.
Section 6. PUBLIC POLICY COMMITTEE. The Public Policy committee shall
advise and make recommendations to the Board and management of the Corporation
and its subsidiaries concerning matters of public and social policy. The
committee shall identify and monitor the social, political and environmental
trends and issues that could affect the corporation's or its subsidiaries'
performance and the related interests of employees, shareholders, customers, and
the general public; evaluate and advise the Board and management on long range
plans and programs for adjusting operations to those trends and issues; provide
Community Reinvestment Act (CRA) oversight to ensure that the CRA activities of
all banking subsidiaries of the Corporation reflect the Corporation's commitment
to outstanding performance; and recommend to the Board and management, as
appropriate, action on specific public policy issues, and advise the Board and
management as to the committee's evaluation of related policies, practices and
procedures.
<PAGE>
The committee shall have all additional powers necessary to carry out its
responsibilities and such other duties as may be assigned by the Board from time
to time.
The committee shall consist of such Directors as the Board may from time
to time appoint by resolution passed by a majority of the whole Board.
Section 7. OTHER COMMITTEES. The Board may designate one or more other
committees, each committee to consist of one or more members as the Board
determines. The Board may designate one or more persons as alternate members of
any such committee who may replace any absent or disqualified member at any
meeting of the committee. Any such committee shall have and may exercise such
powers as may be specified in the resolution creating such committee, including,
to the extent authorized in a resolution adopted by the Board providing for the
issuance of shares of stock, the power to fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series. Each committee shall have
such name as may be determined from time to time by the Board. The Board may
change the members of any committee, fill vacancies and discharge any committee,
with or without cause, at any time.
Section 8. MEETING REQUIREMENTS. The Board shall designate one member of
each committee to serve as chairman of the committee. Except as otherwise stated
in these By-laws or a resolution of the Board, a number equal to a majority of
the members of a committee shall be deemed to constitute a quorum for actions of
the committee. If a quorum is not present at any meeting of a committee, the
committee members present may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Except as otherwise stated in these By-laws or in a resolution of the Board, the
vote of a majority of the members of a committee present at a meeting at which a
quorum is present shall be necessary for action to be taken by the committee,
and each committee shall hold regular and special meetings at times and places
and upon notice as the committee may determine. In the absence of any other
notice requirements, meetings of a committee may be called by the chairman of
the committee or the Secretary, and must be called by the chairman of the
committee or the Secretary upon the request of any two members of the committee,
on at least 24 hours' notice to each committee member before the hour appointed
for holding such meeting. Notice shall be given personally, or by leaving the
notice at the member's place of business or residence, or by mailing the notice
in San Francisco or Los Angeles, with the postage thereon fully prepaid,
addressed to the member at his or her last known place of business or residence,
or by telegraphing or telecopying the notice to the member at his or her last
known place of business or residence. The method of notice of a special meeting
shall be entered in the minutes of the special meeting, and the approval of the
minutes at any subsequent meeting of the committee shall be conclusive upon the
question of service. Personal notice includes telephone notice to the
individual.
Section 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
these By-laws, any action required or permitted to be taken at any meeting of
any committee may be taken without a meeting, if all members of the committee
<PAGE>
consent to the action in writing. The written consents shall be filed in the
minute book of the committee.
Section 10. TELEPHONE PARTICIPATION IN MEETINGS. Members of a committee
may participate in a meeting of the committee by means of conference telephone
or other communications equipment by means of which all persons participating
can hear each other, and such participation shall constitute presence in person
at the meeting.
Section 11. SUBCOMMITTEES. The provisions of this Section 11 with
respect to subcommittees shall be effective only to the extent permitted by
Delaware law. Subject to the foregoing, and except as otherwise stated in these
By-laws or a resolution of the Board, each committee may appoint and discharge
subcommittees and may delegate to such subcommittees any of the power and
authority of the committee, subject to such restrictions as the committee may
determine. The committee may authorize such subcommittees to appoint their own
subcommittees and to delegate any of their power and authority. Each
subcommittee shall have such members as the committee shall appoint, provided
that at least one member of the committee shall be a member of the subcommittee.
The name of each subcommittee shall be determined by the committee or
subcommittee which appoints it. Each committee and subcommittee may designate
one or more Directors or officers as alternate members of any subcommittee, who
may replace any specified or unspecified member who is absent or disqualified at
any meeting of the subcommittee. Each subcommittee shall be subject to the same
procedural requirements as the committee or subcommittee which appointed it,
including but not limited to the requirements set forth in this Article V for
notices, quorums, action by written consent, and telephone participation in
meetings. Each subcommittee shall report its actions at the next practicable
meeting of the committee or subcommittee for its review and any action it deems
appropriate.
Section 12. DELEGATION OF AUTHORITY. The Board of Directors and each
committee and subcommittee may delegate authority to officers and employees of
the Corporation, to the fullest extent permitted by law and subject to any
restrictions and limitations the Board of Directors, the committee, or the
subcommittee, as the case may be, deems appropriate. This power shall include
delegation to committees or subcommittees whose members may include officers of
the Corporation, provided however, that discretion reserved under Delaware law
to the Board of Directors or a committee established by the Board of Directors
may be exercised only by the Board of Directors or a Board committee established
by a majority of the whole Board of Directors.
Section 13. REPORTS TO THE BOARD. Except as otherwise stated in these
By-laws or a resolution of the Board, each committee shall keep minutes of its
proceedings and shall report its actions and, at least on a quarterly basis, the
actions of its subcommittees at the next practicable Board meeting for its
review and any action it deems appropriate. Any action of the Board with
respect to the report shall be recorded in the minutes of the meeting of the
Board, as well as in the minute book of the committee.
<PAGE>
ARTICLE VI
OFFICERS
Section 1. NUMBER AND TITLES. The officers of the Corporation may be,
and to the extent required by law shall be: a Chairman of the Board, a
President, one or more Vice Chairmen of the Board, one or more Presidents of
divisions, one or more Vice Chairmen, one or more Executive Vice Presidents, one
or more Senior Vice Presidents, one or more Vice Presidents, one or more
Assistant Vice Presidents, a Secretary, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, and such other officers as the
Board may by resolution create, or as may be appointed in accordance with
Section 2 of this Article.
The Board of Directors shall designate one officer of the Corporation as
the Chief Executive Officer and may in its discretion confer additional
functional titles, including but not limited to Chief Operating Officer and
Chief Financial Officer.
Section 2. APPOINTMENT, TERM OF OFFICE. The officers shall be appointed
by the Board of Directors and shall serve at the pleasure of the Board, which
may demote, suspend, remove or dismiss any officer with or without cause or
notice at any time. However, any such action shall be without prejudice to any
rights of such officer under any written contract addressing employment issues
executed by an officer of the Corporation authorized to execute such a contract.
Each officer shall hold office until a successor is elected and qualified or
until the officer's earlier resignation or removal.
Section 3. COMPENSATION. The compensation of all officers and other
employees of the Corporation shall be fixed by the Board of Directors or by a
committee appointed or officers designated for that purpose or in accordance
with procedures established by the Corporation's human resources or personnel
function.
Section 4. AUTHORITY, DUTIES, FIDELITY BOND. One person may hold more
than one office, except that the offices of President and Secretary and of
Chairman of the Board and Secretary may not be held by the same person. When
the signature or approval of two officers is required, a person holding two
offices shall act only as one signer or approver. The duties and authority of
the officers of the Corporation, other than as set forth in these By-laws, may
be prescribed and established by the Board of Directors or by the Executive
Committee. Each officer shall perform the duties imposed upon the officer by
law, these By-laws, the Board of Directors or the Executive Committee. Except
as otherwise set forth in these By-laws or by the Board of Directors or the
Executive Committee, each officer shall have such authority and duties as
usually are incident to the title and office held. Authority to act on behalf
of the Corporation may be delegated to officers to the extent permitted by these
By-laws, including, without limitation, Sections 2, 11 and 12 of Article V
hereof, except to the extent such delegation is prohibited or limited by
Delaware law. The Board of Directors may provide for such bond and fidelity
insurance covering the officers of the Corporation and for the faithful and
honest discharge of their duties as they may determine.
Section 5. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the shareholders and the Board of Directors and shall
have such other duties and authority as are set forth in these By-
<PAGE>
laws or may be assigned by the Board of Directors.
Section 6. THE VICE CHAIRMEN OF THE BOARD. The Board of Directors may
appoint one or more Vice Chairmen of the Board. Each Vice Chairman of the Board
shall have such duties and authority as may be assigned by the Board of
Directors or by the officer to whom such Vice Chairman of the Board reports. If
more than one Vice Chairman of the Board is appointed, the Board may designate
one such Vice Chairman of the Board as Senior Vice Chairman of the Board.
Section 7. THE PRESIDENT. The President shall have such duties and
authority as are set forth in these By-laws or may be assigned by the Board of
Directors or by the Chairman of the Board.
Section 8. VICE CHAIRMEN AND DIVISION PRESIDENTS. The Board of Directors
may appoint one or more Vice Chairmen and one or more Presidents of divisions of
the Corporation. Each Vice Chairman and each division President shall have such
duties and authority as may be assigned by the Board of Directors or by the
officer to whom such Vice Chairman or division President reports.
Section 9. THE VICE PRESIDENTS. The Board of Directors may appoint one
or more Vice Presidents. The Board may create categories of Vice Presidents,
including but not limited to Executive Vice Presidents, Senior Vice Presidents
and Assistant Vice Presidents. The Board of Directors, the Chairman of the
Board or the President may designate seniority of ranking among categories of
Vice Presidents. Each Vice President shall have such duties and authority as
may be assigned by the Board of Directors or by the officer to whom such Vice
President reports.
Section 10. THE SECRETARY. The Secretary shall have charge and custody of
the corporate seal, records and Minute Books of the Corporation, shall keep
correct written minutes of all meetings of shareholders and Directors, and shall
give or cause to be given notice of all meetings of the shareholders and of the
Board of Directors in accordance with these By-laws and as required by law. The
duties of the Secretary may be performed by any Assistant Secretary.
Section 11. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall have general executive supervision of the business and affairs of the
Corporation.
Section 12. THE CHIEF OPERATING OFFICER. The Chief Operating Officer
shall have such duties and authority as may be assigned by the Chief Executive
Officer, to whom the Chief Operating Officer shall report.
Section 13. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the principal financial officer of the Corporation.
<PAGE>
ARTICLE VII
CAPITAL STOCK--CERTIFICATES OF STOCK
Section 1. CERTIFICATES. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the Chairman of the Board of Directors, or the President or a Vice Chairman of
the Board of Directors, or a Vice Chairman, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
representing the number of shares registered in certificate form. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 2. LOST, STOLEN, MUTILATED OR DESTROYED CERTIFICATES. The Board
of Directors, a committee of the Board or an officer of the Corporation may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen, mutilated or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen,
mutilated or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors, a committee of the Board or an officer of
the Corporation may, as a matter of discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, mutilated or
destroyed certificate or certificates, or such owner's legal representative, to
advertise the same in such manner as shall be required and give the Corporation
a bond in such sum as may be directed as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen, mutilated or destroyed.
Section 3. TRANSFERS OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. FIXING RECORD DATE. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to
<PAGE>
any other action. A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 5. REGISTERED SHAREHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
Section 6. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
ARTICLE VIII
INDEMNIFICATION
Section 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or another
person of whom such person is the legal representative, is or was a Director,
officer, or employee of the Corporation or is or was serving at the request of
the Corporation as a director, officer, or employee of, or in some other
representative capacity for, another corporation or a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a Director, officer, or employee or in any other capacity
while serving as a Director, officer, or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a Director,
officer, or employee and shall inure to the benefit of such person's heirs,
executors and administrators; provided, however, that except as provided in
-------- -------
Section 2 hereof with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Article shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
-------- -------
General Corporation Law so requires, the
<PAGE>
payment of such expenses incurred by a Director or officer in such person's
capacity as a Director or officer (and not in any other capacity in which
service was or is rendered by such person while a Director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such Director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
Director or officer is not entitled to be indemnified under this Article or
otherwise.
Section 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1
of this Article is not paid in full by the Corporation within ninety days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-law, agreement, vote of
stockholders or disinterested Directors or otherwise.
Section 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, officer, or employee of the
Corporation serving in any capacity on behalf of the Corporation or at its
request for any other entity to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, whether
or not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
ARTICLE IX
NOTICES
Section 1. FORM OF NOTICES. Whenever, under the provisions of the
<PAGE>
statutes or of the Certificate of Incorporation or of these By-laws, notice is
required to be given to any Director or shareholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such Director or shareholder, at his or her address as it appears
on the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to Directors may also be given by telegram.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be given
by law or by the Certificate of Incorporation or these By-laws, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE X
EMERGENCY
Section 1. APPLICATION. This Article shall operate during any emergency
resulting from any disaster or other emergency condition when a quorum of the
Board of Directors or a Board committee cannot readily be convened.
Section 2. MEETINGS OF BOARD OR COMMITTEE. A meeting of the Board of
Directors or Board committee may be called by any officer or Director by giving
notice to the Directors or committee members who can be reached by any means the
person calling the meeting deems feasible.
Section 3. CONDUCT OF BUSINESS. During any emergency, the quorum
requirements for all meetings of the Board of Directors and any Board committee
shall be one-fourth of the members.
(a) If no Board of Directors meeting can be held because a quorum cannot
be assembled, then those Directors who can assemble may, by majority vote,
reduce the Board of Directors to not less than five Directors and may elect
emergency Directors.
(b) If only one Director can be found, then that Director may appoint
emergency Directors.
(c) If no Director can be found, then the Chief Executive Officer or
Acting Chief Executive Officer may appoint emergency Directors.
Section 4. SUCCESSION. During any emergency when the Chief Executive
Officer becomes incapacitated, cannot be located, or otherwise is unable to
perform his or her duties, succession to the powers of the Chief Executive
Officer as Acting Chief Executive Officer shall occur in the following order:
Chairman of the Board,
President,
Vice Chairman of the Board,
President, Global Retail Bank*,
President, Global Wholesale Bank*,
<PAGE>
Vice Chairman*,
any Executive Vice President.
* Titles marked with asterisk shall be considered equal in rank for
purposes of this provisions.
Priority within rank shall be set by seniority in the ranking office. If
seniority in office dates from the same day, then seniority based on total
length of service shall be determinative.
Notwithstanding the foregoing, the Board of Directors during an emergency
may appoint or replace any Acting Chief Executive Officer, or may change the
priority of succession, as the Board determines.
Section 5. AUTHORITY. During any emergency the Chief Executive Officer
or Acting Chief Executive Officer shall have all authority that officer deems
necessary to protect the interests of the Corporation, may appoint emergency
officers, and may delegate authority to them.
Section 6. NO LIABILITY. No officer, Director or employee acting in
accordance with any emergency By-laws or resolutions shall be liable except for
willful misconduct.
Section 7. EFFECT ON BY-LAWS. To the extent not inconsistent with this
emergency By-law, the By-laws of the Corporation shall remain in effect during
any emergency. Upon termination of the emergency, this
By-law shall cease to be operative and authority to act as an officer or
Director shall be determined by the other By-laws, except that Directors and
officers elected or appointed pursuant to this By-law shall remain Directors or
officers to the extent that vacancies have been caused by death or incapacity of
regular Directors or officers until their successors are appointed or elected.
Section 8. TERMINATION OF EMERGENCY. Any emergency condition which
causes this By-law to become operative shall be deemed terminated whenever one
of the following conditions is met:
(a) The Directors and emergency Directors determine by majority vote at a
meeting that the emergency condition is over; or
(b) A majority of the Directors elected or appointed pursuant to the
regular By-laws holds a meeting and determines the emergency condition is
over.
ARTICLE XI
MISCELLANEOUS
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 2. SEAL. In the execution on behalf of the Corporation of any
instrument, writing, notice or paper, it shall not be necessary to affix the
corporate seal of the Corporation thereon, and any such instrument, document,
writing, notice or paper when executed without said seal affixed
<PAGE>
thereon shall be of the same force and effect and as binding on the Corporation
as if said corporate seal had been affixed thereon in the first instance.
Section 3. AMENDMENTS. These By-laws may be altered or repealed at any
regular meeting of the shareholders or of the Board of Directors or at any
special meeting of the shareholders or of the Board of Directors if notice of
such alteration or repeal be contained in the notice of such special meeting.
<PAGE>
Exhibit 10.a
GENERAL RELEASE AND SETTLEMENT AGREEMENT
----------------------------------------
("AGREEMENT")
-------------
For good and valuable consideration, receipt of which is hereby
acknowledged, and in order to resolve and settle finally, fully and completely
all matters or disputes that now or may exist between them, the parties agree as
follows:
1. PARTIES. The parties to this Agreement are Thomas E. Peterson, his
--------
heirs, representatives, successors and assigns (hereinafter referred to
collectively as "Mr. Peterson") and Bank of America National Trust and Savings
Association, BankAmerica Corporation, and/or any of its or their subsidiaries or
affiliates (hereinafter referred to collectively as "Bank").
2. TIME TO SIGN AGREEMENT. Mr. Peterson acknowledges and agrees he
-----------------------
received the Agreement on or before March 14, 1997. Mr. Peterson also
acknowledges and agrees he had at least twenty-one (21) calendar days from the
date he received the Agreement to decide whether to sign it. Mr. Peterson
understands that for seven (7) calendar days after he signs this Agreement he
has the right to revoke it, and this Agreement shall not become effective and
enforceable until after the expiration of this seven day period. The Agreement
may not be revoked after the seven day period. Mr. Peterson understands that he
will not be entitled to receive or retain any of the consideration provided by
this Agreement, except under Paragraphs 4 and 7, unless in addition to signing
------
and returning the fully executed Agreement, he signs and returns Attachment A
confirming that he does not revoke the Agreement, and provided that Attachment A
is signed no fewer than eight (8) calendar days after Mr. Peterson signs this
Agreement. Mr. Peterson also understands and agrees that as an additional
condition to receiving or retaining the consideration provided for by this
Agreement (except under Paragraphs 4 and 7), Mr. Peterson must execute and
return to Bank the Confirmation of General Release and Settlement Agreement,
attached as Attachment B, which may not be signed any earlier than one day after
the Resignation Date, as defined in Paragraph 3, below.
3. VOLUNTARY RESIGNATION. Mr. Peterson hereby voluntarily tenders and
----------------------
Bank hereby accepts the voluntary resignation of Mr. Peterson from all officer
positions and from his employment effective June 30, 1997, or such later date as
the Bank may designate, but no later than December 31, 1997 (the "Resignation
Date").
4. PAYMENTS TO BE MADE. In consideration of the promises of Mr.
--------------------
Peterson as set forth herein, and without any other obligation to do so, the
parties agree that, within 15 business days of the Resignation Date, provided
that the Bank has received this fully
1
<PAGE>
executed Agreement, Bank will pay Mr. Peterson the gross sum of Forty-Five
Thousand Dollars ($45,000.00), less legal deductions for applicable taxes and
other withholdings.
5. BONUS ELIGIBILITY. As further consideration, and without any
------------------
other obligation to do so, the parties agree that, subject to the provisions of
Paragraph 2, Mr. Peterson will be eligible to receive a bonus under the Senior
Management Incentive Program ("SMIP") for his 1997 performance in an amount to
be decided at the discretion of the Bank. This payment, if any, will be less
legal deductions for applicable taxes and other withholdings and will be
payable at the same time such payments are made by Bank to other senior officers
under the SMIP generally for 1997 performance. Except as specified in this
paragraph, Mr. Peterson agrees that, as of the date he executes this Agreement,
he: (a) withdraws his participation in any and all bonus or incentive plan(s) or
program(s) of the Bank; (b) will not be eligible to participate in any such
plan(s) or program(s) between the date he executes this Agreement and December
31, 1997, and (c) is not now or will he in the future be entitled to any
incentive or bonus payment(s) from Bank based on his employment through the
Resignation Date, or on any other basis.
6. TREATMENT OF STOCK-BASED BENEFITS. As further consideration, and
----------------------------------
without any other obligation to do so, the parties agree that, subject to and
contingent upon satisfaction of the provisions of Paragraph 2:
(a) Bank will recommend to the Executive Personnel and Compensation
Committee ("EPCC") that all of the stock options (including the DEC account
credits associated therewith) previously granted to Mr. Peterson and outstanding
as of the Resignation Date, shall become 100% vested and immediately exercisable
as of the day after the Resignation Date;
(b) Bank will recommend to the EPCC that Mr. Peterson shall have
three (3) years from the Resignation Date or the expiration of the original
option period specified in the applicable option agreement, whichever is less,
to exercise all stock options which are vested or become vested as of the day
after the Resignation Date, including PSOs, and which have not been exercised as
of the day after the Resignation Date;
(c) Mr. Peterson will continue to receive credits to his DEC
accounts in accordance with the 1987 Management Stock Plan through the
Resignation Date; and
(d) With respect to Mr. Peterson's outstanding stock options and DEC
accounts, except as specified in this Paragraph 6, such options and DEC accounts
shall be treated in accordance with the terms of the plan or plans or option
agreements under which they were issued. Additionally, except as set forth in
this Agreement, as of the date he executes this Agreement, Mr. Peterson agrees
that he is not now nor will he in the future be entitled to any grants of or
receipt of stock options, restricted stock, performance shares, impact shares
(including cash-based stock units), credits to DEC accounts, SARs, or other
2
<PAGE>
stock-based incentive award(s) based on his employment through the Resignation
Date, or on any other basis.
7. FINANCIAL PLANNING. As further consideration, and without any
-------------------
other obligation to do so, Bank agrees that, for 1997, Mr. Peterson shall
continue to be eligible for standard financial counselling services at Bank's
expense to be provided by the Ayco Company. The parties understand and agree
that these services include tax preparation assistance by the Ayco Company in
1998 with respect to Mr. Peterson's 1997 tax returns. Except as provided by
this Paragraph, Mr. Peterson shall not be eligible for any Bank-paid financial
counselling services by Ayco Company or any other company after the Resignation
Date.
8. RELEASE OF CLAIMS. In exchange for the promises contained in
------------------
this Agreement, Mr. Peterson hereby waives, releases and forever discharges, and
agrees to the extent permitted by law that he will not in any manner institute,
prosecute or pursue, any and all complaints, claims, charges, claims for relief,
demands, suits, actions or causes of action, whether in law or in equity, which
he asserts or could assert, at common law or under any statute, rule,
regulation, order or law, whether federal, state, or local, or on any grounds
whatsoever, including without limitation, any age discrimination claims under
the Age Discrimination in Employment Act, and any claims under the California
Fair Employment and Housing Act, the California Labor Code, Title VII of the
Civil Rights Act of 1964, the Equal Pay Act, the Americans with Disabilities
Act, the Family and Medical Leave Act, the California Family Rights Act, the
Rehabilitation Act of 1973, the Employee Retirement Income Security Act of 1974,
the Racketeer Influenced and Corrupt Organizations Act, the Financial Reform
Recovery and Enforcement Act of 1989, the Fair Labor Standards Act, and/or
Section 1981 of Title 42 of the United States Code, against Bank and/or any of
its or their current or former, owners, officials, directors, officers,
shareholders, affiliates, agents, employee benefit plans, representatives,
servants, employees, attorneys, subsidiaries, parents, divisions, branches,
units, successors, predecessors, and assigns (collectively referred to as
"Released Parties") with respect to any event, matter, claim, damage or injury
arising out of his employment relationship with Bank, and/or the termination of
such employment relationship, and/or with respect to any other claim, matter, or
event arising prior to execution of this Agreement by Mr. Peterson. This
Agreement includes, but is not limited to, (i) release of any claims arising
from any statements (written or oral) made or distributed or published by any
and all of the Released Parties, prior to signing of this Agreement by Mr.
Peterson, including any statements by Mr. Peterson himself, and (ii) except as
otherwise specifically provided in this Agreement, release of any claims for any
type of wages, commissions, bonus, stock, incentive award, separation or
severance benefits, or any other form of compensation including, without
limitation, Bank's Employee Transition Program and/or any successor severance
program and/or the Change in Control Agreement referenced in Paragraph 10,
below. This Agreement does not waive rights or claims that may arise after the
date the Agreement is executed by Mr. Peterson.
3
<PAGE>
9. CIVIL CODE (S)1542 WAIVER. As a further consideration and inducement
-------------------------
for this Agreement, to the extent permitted by law, Mr. Peterson hereby waives
and releases any and all rights under Section 1542 of the California Civil Code
or any analogous state, local, or federal law, statute, rule, order or
regulation, he has or may have with respect to the Released Parties. California
Civil Code Section 1542 reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
Mr. Peterson hereby expressly agrees that this Agreement shall extend and apply
to all unknown, unsuspected and unanticipated injuries and damages as well as
those that are now disclosed.
10. CANCELLATION OF CHANGE IN CONTROL AGREEMENT. Mr. Peterson agrees
-------------------------------------------
that, effective the date Mr. Peterson executes this Agreement, the Change in
Control Agreement between Mr. Peterson and BankAmerica Corporation shall be
cancelled, all its provisions shall be void, and Bank shall have no liability
thereunder.
11. NO VACATION. Mr. Peterson acknowledges and agrees that he has no
-----------
accrued and unused vacation days, in lieu or personal choice days as of the date
he executes this Agreement and shall not earn or accrue any vacation, in lieu or
personal choice days between the date he executes this Agreement and the
Resignation Date.
12. WITHDRAWAL FROM DIRECTORSHIPS. Mr. Peterson represents and agrees
-----------------------------
that as of the Resignation Date, he has or will have resigned from all
directorships or board memberships which he holds for entities or subsidiaries
or affiliates within Bank, and has or will have resigned from all directorships
or board memberships outside of Bank which he holds on behalf of or for the
benefit of Bank.
13. NO DISPARAGEMENT. Mr. Peterson agrees and represents that he will
----------------
not criticize, defame or disparage any of the Released Parties, their plans or
their actions, to any third party, either orally or in writing. It shall not be
a violation of this Paragraph if Mr. Peterson provides information, which he in
good faith believes to be truthful, in response to inquiries from a
representative of a government agency acting in an official capacity and engaged
in either a formal or informal investigation of any of the Released Parties.
14. DEFERRED COMPENSATION AMOUNTS. Mr. Peterson understands and agrees
-----------------------------
that any and all deferred amounts he has under any deferred compensation plan,
if any, will be paid to him pursuant to the terms of such plan(s) following the
Resignation Date and, to the extent there is a conflict between the terms of the
applicable deferred compensation plan and
4
<PAGE>
the terms of this Agreement, the parties agree that the terms of the deferred
compensation plan will govern. Mr. Peterson also understands and agrees that any
payment to him under the Supplemental Retirement Plan shall be paid in accord
with the terms of the Supplemental Retirement Plan and in accord with the terms
of any applicable and valid Benefit Payment Election Form signed by Mr.
Peterson, and will be paid following the Resignation Date. Bank and Mr. Peterson
agree that the Benefit Payment Election Form signed by Mr. Peterson provides
that he be paid in 5 annual installments commencing in the calendar year
following the year in which his employment ends, and Mr. Peterson shall be paid
accordingly. Mr. Peterson also understands and agrees that to the extent the
timing of any payments under any deferred compensation plan in which he
participates conflicts with the timing of payments to Mr. Peterson as specified
in this Agreement, the timing provided for in the deferred compensation plan
shall control.
15. CONFIDENTIAL INFORMATION. Mr. Peterson agrees and acknowledges that
------------------------
the positions held by him within Bank gave him significant access to
confidential information of substantial importance to the business of the Bank.
Therefore, Mr. Peterson agrees that any and all information obtained by or
disclosed to him at any time during his employment with Bank which is not
generally known to the public ("Confidential Information"), is strictly
confidential and/or proprietary to Bank, constitutes trade secrets of Bank and
shall not be disclosed, discussed, or revealed to any persons, entities, or
organizations, outside of Bank, without prior written approval by an authorized
representative of Bank. Confidential Information shall include, but not be
limited to, information concerning Bank's customers, strategies, tactics,
methods of operation, processes, practices, policies, programs, marketing
information, market research data, financial information, procedures, and/or
personnel information. Further, to the fullest extent permitted by applicable
law, Mr. Peterson agrees he will not (a) use any Confidential Information to
solicit present or potential business or customers of the Bank or use any
Confidential Information to otherwise compete with the Bank, or (b) use any
Confidential Information to assist any other individual, company or entity to do
so. A breach of this Paragraph is a material breach. The parties to this
Agreement agree that, should Mr. Peterson violate the provisions of this
Paragraph, Bank shall be relieved of any obligation it may have to provide any
consideration to Mr. Peterson which has not yet been provided under this
Agreement. In addition to any remedy for breach of this Paragraph which is
provided by this Paragraph, Bank retains all other legal and equitable rights or
remedies, including injunctive relief, which may be available under the law.
16. CONFIDENTIALITY OF AGREEMENT TERMS. Mr. Peterson also agrees that
----------------------------------
the terms and conditions of this Agreement and any and all actions by Bank in
accordance therewith, are to be treated by Mr. Peterson as strictly confidential
and, with the exception of Mr. Peterson's counsel, tax advisor, immediate
family, financial advisor, or as required by applicable law, have not been and
shall not be disclosed, discussed, or revealed to any other persons, entities,
or organizations, whether within or outside Bank, without prior written approval
by an authorized representative of Bank. Mr. Peterson further agrees to
5
<PAGE>
take all reasonable steps necessary to insure that confidentiality is maintained
by any of the individuals or entities referenced above to whom disclosure is
authorized and agrees to accept responsibility for any breach of confidentiality
by said individuals or entities referenced above.
17. RETURN OF BANK PROPERTY. Mr. Peterson further represents and/or
-----------------------
agrees that he has returned or, prior to the Resignation Date, will return to
Bank all equipment and/or other property belonging to it (including, without
limitation, business credit cards, building passes, building keys, parking
passes, fax equipment, computer equipment, and phone equipment) which has been
or is in his care, custody, possession or control. The parties also recognize
that it is not practical for Mr. Peterson to return to Bank the home security
equipment currently installed in Mr. Peterson's home; however, Mr. Peterson
understands and agrees that Bank's monitoring of this security equipment shall
be discontinued on December 31, 1997. Mr. Peterson agrees that, no later than
the Resignation Date, he will reimburse or reconcile to the Bank's satisfaction
all outstanding expenses or bills charged or chargeable to the Bank under Bank
expense reimbursement guidelines.
18. FUTURE COOPERATION AND INDEMNIFICATION. Mr. Peterson additionally
--------------------------------------
agrees to make himself available in connection with any and all claims,
disputes, negotiations, investigations, lawsuits or administrative proceedings
involving the Bank, to provide information or documents, provide declarations or
statements to the Bank, meet with attorneys or other representatives of the
Bank, prepare for and give depositions or testimony, and/or otherwise cooperate
in the investigation, defense or prosecution of such matters. The parties
recognize and agree that nothing in this Agreement shall waive, release or in
any way impair Mr. Peterson's rights to indemnification arising from his
employment with Bank, as such rights are specified in the applicable bylaws of
Bank and provided by applicable law.
19. NO RAIDING. As further consideration, to the fullest extent
----------
permitted by applicable law, Mr. Peterson agrees he will not solicit for
employment or solicit for hire, on behalf of himself or any other person,
company or entity, any employees of Bank, nor will he aid any other person,
entity or company to do so, unless Mr. Peterson receives prior written
authorization to do so from Kathleen Burke (or her successor or delegee), from
the time he signs this Agreement through December 31, 2000, nor has he done so
within the three months prior to the time he signs this Agreement. A general
advertisement through the mass media soliciting applicants for a position or
positions shall not constitute a violation of this Paragraph. A breach of this
Paragraph is a material breach. The parties to this Agreement agree that, should
Mr. Peterson violate the provisions of this Paragraph, Bank shall be relieved of
any obligation it may have to provide any consideration to Mr. Peterson which
has not yet been provided under this Agreement. In addition to any remedy for
breach of this Paragraph which is provided by this Paragraph, Bank retains all
other legal and equitable rights or remedies, including injunctive relief, which
may be available under the law.
6
<PAGE>
20. NO ADMISSION OF LIABILITY. By entering into this Agreement, Bank and
-------------------------
the other Released Parties do not admit any liability whatsoever to Mr. Peterson
or to any other person arising out of any claims heretofore or hereafter
asserted by Mr. Peterson and Bank and the other Released Parties expressly deny
any and all such liability.
21. ASSIGNMENTS. Mr. Peterson represents that he has not assigned or
-----------
transferred to any person or entity any of his rights or claims which are or
could be covered by this Agreement, including but not limited to any covenant
not to sue and the waivers and releases contained in this Agreement.
22. PAYMENTS NOT PART OF PENSION OR RETIREMENT PLANS. None of the
------------------------------------------------
expenses to be incurred by Bank and/or payments or reimbursements to be made by
Bank to Mr. Peterson pursuant to this Agreement shall count as earnings for
purposes of Mr. Peterson's pension, regular or supplemental retirement, or
savings plan benefits, including specifically the 401(k) Investment Plan and the
Pension Plan.
23. ATTORNEYS' FEES. As further mutual consideration of the promises set
---------------
forth herein, the Bank and Mr. Peterson agree that they each are responsible for
their own attorneys' fees and costs, and each agrees that they will not seek
from the other reimbursement for attorneys' fees and/or costs incurred in this
action or relating to any matters addressed in this Agreement.
24. JOINT PARTICIPATION IN PREPARATION OF AGREEMENT. The parties hereto
-----------------------------------------------
participated jointly in the negotiation and preparation of this Agreement, and
each party has had the opportunity to obtain the advice of legal counsel and to
review, comment upon, and redraft this Agreement. Accordingly, it is agreed that
no rule of construction shall apply against any party or in favor of any party.
This Agreement shall be construed as if the parties jointly prepared this
Agreement, and any uncertainty or ambiguity shall not be interpreted against any
one party and in favor of the other.
25. SEVERABILITY. Should any of the provisions of this Agreement be
------------
rendered invalid by a court or government agency of competent jurisdiction, it
is agreed that this shall not in any way or manner affect the enforceability of
the other provisions of this Agreement which shall remain in full force and
effect. The parties further agree that California law shall govern the validity
and interpretation of this Agreement and that jurisdiction and/or venue of any
action involving the validity, interpretation or enforcement of this Agreement
or any of its terms, provisions or obligations or claiming breach thereof, shall
exist exclusively in a court or government agency located within San Francisco,
California.
26. SCOPE OF AGREEMENT. Mr. Peterson hereby affirms and acknowledges
------------------
that he has read the foregoing Agreement, that he has had the opportunity to
review or discuss it with the counsel of his choice that he has in fact had it
reviewed and discussed it with counsel of his choice, and that he fully
understands and appreciates the meaning of each of
7
<PAGE>
its terms. The parties to this Agreement represent that this Agreement may be
used as evidence in any subsequent proceeding in which any of the parties
alleges a breach of this Agreement or seeks to enforce its terms, provisions or
obligations.
27. ENTIRE AGREEMENT. This Agreement constitutes the complete
----------------
understanding between Mr. Peterson and Bank and supersedes any and all prior
agreements, promises, representations, or inducements, no matter its or their
form, concerning its subject matter. Mr. Peterson understands and agrees that,
except as required by law or as specifically provided for in this Agreement, he
shall receive no further benefits or compensation of any type. Section headings
in this Agreement are included for convenience of reference only and shall not
be considered part of this Agreement for any other purpose. No promises or
agreements made subsequent to the execution of this Agreement by these parties
shall be binding unless reduced to writing and signed by authorized
representatives of these parties.
PLEASE TAKE THIS AGREEMENT HOME AND CAREFULLY CONSIDER ALL
OF ITS PROVISIONS BEFORE SIGNING IT. YOU SHOULD CONSULT AN
ATTORNEY OF YOUR CHOICE ABOUT THIS AGREEMENT BEFORE YOU SIGN
THE AGREEMENT. THIS AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS TO THE EXTENT PERMITTED BY LAW.
THOMAS E. PETERSON
DATED: 3-19-97 /s/ THOMAS E. PETERSON
----------------------- -------------------------------
"BANK"
DATED: 3-25-97 by /s/ Kathleen J. Burke
----------------------- -----------------------------
Kathleen J. Burke
Vice Chairman
8
<PAGE>
ATTACHMENT A
STATEMENT OF NON-REVOCATION
AS OF THE DATE SHOWN ON THIS FORM
By signing below, I hereby verify that I have chosen not to revoke my
agreement to and execution of the General Release and Settlement Agreement. My
signature confirms my renewed agreement to the terms of that Agreement,
including the release and waiver of any and all claims relating to my employment
with Bank and/or the termination of that employment.
- ------------------------------ -----------------------------
Name (Please Print) Social Security Number
- ------------------------------ -----------------------------
Signature* Date*
*DO NOT SIGN, DATE OR RETURN THIS DOCUMENT UNTIL EIGHT (8) DAYS AFTER YOU SIGN
THE GENERAL RELEASE AND SETTLEMENT AGREEMENT.
9
<PAGE>
ATTACHMENT B
CONFIRMATION OF GENERAL RELEASE AND SETTLEMENT AGREEMENT
By signing below, I hereby acknowledge and confirm my agreement to all the
terms of the General Release and Settlement Agreement ("Agreement"). I also
agree, that as of the date I sign this document, my release and waiver of any
and all claims I may have relating to my employment within BankAmerica
Corporation and/or the termination of that relationship and/or release of other
claims arising before execution of the Agreement as set forth in the Agreement,
shall apply with the same force and effect as if set forth fully herein to the
period of time between the time I signed the Agreement and the date I sign this
document.
____________________________________________ ______________________
Signature* Date*
*DO NOT SIGN, DATE OR RETURN THIS DOCUMENT UNTIL AT LEAST ONE DAY AFTER YOUR
RESIGNATION DATE
10
<PAGE>
Exhibit 10.b
EXECUTIVE COMPENSATION PROGRAM
BENEFITS/PERQUISITES SUMMARY
IMPACT LEVEL 1
<TABLE>
<CAPTION>
====================================================================================================================================
BENEFITS/PERQUISITES PROGRAM DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Auto Parking Company paid parking is provided at a facility near the executive's
office location.
- ------------------------------------------------------------------------------------------------------------------------------------
Chauffeur Service Pool drivers are available for business purposes only.
- ------------------------------------------------------------------------------------------------------------------------------------
Club Memberships Available to executives on a business need basis. Company pays all
initiation fees for luncheon and country clubs in addition to 100% of
the monthly luncheon club dues and 50% of the monthly country
club dues.
Note: The Company will not maintain a membership in any club that
discriminates in its membership or guest policies on the basis of
race, religion, sex, age, national origin, sexual orientation, handicap,
or veteran status.
- ------------------------------------------------------------------------------------------------------------------------------------
Executive Financial Counseling OPTION A: Utilizing a financial planner of their choice, executives
are eligible for a one-time comprehensive initial financial plan of
$6,000 and an annual allowance of $2,500 for follow-up services for
personal income tax preparation, investment and estate planning, as
well as other related financial planning services as appropriate.
OPTION B: Each executive is assigned their own financial planner
from The Ayco CorporationAproviding an all-encompassing financial
counseling program to include income tax planning and preparation,
investment planning, estate planning, etc. A one-time $3,000
allowance will also be provided for estate planning documentation,
e.g., preparation of a will. Company paid cost of the program is
$15,000 per participant for the first year and approximately $9,000
each year thereafter.
With both options, all reimbursed costs will be considered imputed
income for purposes of W-2 earnings and will be grossed up to help
compensate for associated income taxes.
- ------------------------------------------------------------------------------------------------------------------------------------
Vacation Executives do not have accrued annual vacation entitlement. They
may schedule paid time off as appropriate.
- ------------------------------------------------------------------------------------------------------------------------------------
Business Travel All employees are allowed to fly Business Class on any non-North
American international flight of more than three hours, but are
encouraged to fly Coach Class. On flights of more than eight hours,
Group Executive Vice Presidents and above may fly First Class.
====================================================================================================================================
</TABLE>
<PAGE>
EXECUTIVE COMPENSATION PROGRAM
BENEFITS/PERQUISITES SUMMARY
IMPACT LEVEL 1
<TABLE>
<CAPTION>
====================================================================================================================================
BENEFITS/PERQUISITES PROGRAM DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Senior Management Incentive Plan (SMIP) Annual discretionary bonus program. Total cash compensation
targets are pre-established and awards are drawn from an incentive
award pool based upon the Corporation's overall performance.
Bonus is based upon 50% corporate performance and 50%
business/individual results.
- ------------------------------------------------------------------------------------------------------------------------------------
1992 Management Stock Plan Provides for discretionary grants of stock options and restricted
stockAto recognize current contribution and future potential
contribution to the Bank.
- ------------------------------------------------------------------------------------------------------------------------------------
Health/Life/Long-Term Disability The Company contributes toward the cost of medical, dental,
employee life insurance, accidental death and dismemberment
insurance, and long-term disability coverage.
- ------------------------------------------------------------------------------------------------------------------------------------
RETIREMENT PROGRAM
- ------------------------------------------------------------------------------------------------------------------------------------
BankAmeraccount Defined benefit (cash balance) pension plan.
_______________
- ------------------------------------------------------------------------------------------------------------------------------------
BankAmerishare 401(k) plan with matching employer contributions.
______________
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Plan Provides for Company match and pension accruals on qualified
_________________ earnings in excess of IRS limits ($150,000).
- ------------------------------------------------------------------------------------------------------------------------------------
BAC Deferred Compensation Plan Option to defer from 5% - 75% of base salary and 0% - 100% of
______________________________ bonus. Deferred amounts are not subject to income tax withholding,
but are subject to applicable employment taxes (FICA, Medicare,
(Not available to International Assignees) SDI, etc.)
====================================================================================================================================
</TABLE>
This chart is a brief summary of the perquisites and benefits currently made
available to executives. The Company reserves the right to change or end any
perquisite or benefit at any time. Please contact your Human Resource Officer
for additional information on the above perquisites described above. Also, see
Your Employee Handbook and any appendices for further information about health,
- ----------------------
life insurance, Long-Term Disability and the Retirement Program.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31,
1997 CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES, INTEREST,
AND AVERAGE RATES, NONPERFORMING ASSETS, QUARTERLY CREDIT LOSS EXPERIENCE, AND
COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q FILING.
Any item provided in the schedule, in accordance with the rules governing the
schedule, will not be subject to liability under the federal securities laws,
except to the extent that the financial statements and other information from
which the data were extracted violate the federal securities laws. Also,
pursuant to item 601(c)(1)(iv) of Regulation S-K promulgated by the Securities
and Exchange Commission (SEC), the schedule shall not be deemed filed for
purposes of Section 11 of the Securities Act of 1933, Section 18 of the Exchange
Act of 1934 and Section 323 of the Trust Indenture Act, or otherwise be subject
to the liabilities of such sections, nor shall it be deemed a part of any
registration statement to which it relates.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,561
<INT-BEARING-DEPOSITS> 6,390
<FED-FUNDS-SOLD> 7,883
<TRADING-ASSETS> 12,931
<INVESTMENTS-HELD-FOR-SALE> 11,532
<INVESTMENTS-CARRYING> 3,972
<INVESTMENTS-MARKET> 3,666
<LOANS> 167,338
<ALLOWANCE> 3,538
<TOTAL-ASSETS> 249,904
<DEPOSITS> 168,999
<SHORT-TERM> 26,737
<LIABILITIES-OTHER> 19,346<F1>
<LONG-TERM> 14,725<F2>
0
1,596
<COMMON> 605
<OTHER-SE> 17,896
<TOTAL-LIABILITIES-AND-EQUITY> 249,904
<INTEREST-LOAN> 3,423
<INTEREST-INVEST> 286
<INTEREST-OTHER> 531<F3>
<INTEREST-TOTAL> 4,240
<INTEREST-DEPOSIT> 1,366
<INTEREST-EXPENSE> 2,066
<INTEREST-INCOME-NET> 2,174
<LOAN-LOSSES> 220
<SECURITIES-GAINS> 20
<EXPENSE-OTHER> 2,033
<INCOME-PRETAX> 1,306
<INCOME-PRE-EXTRAORDINARY> 1,306
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
<YIELD-ACTUAL> 4.16
<LOANS-NON> 1,030
<LOANS-PAST> 218
<LOANS-TROUBLED> 295
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,523
<CHARGE-OFFS> 294
<RECOVERIES> 90
<ALLOWANCE-CLOSE> 3,538
<ALLOWANCE-DOMESTIC> 0<F4>
<ALLOWANCE-FOREIGN> 0<F4>
<ALLOWANCE-UNALLOCATED> 776
<FN>
<F1>INCLUDES TRUST PREFERRED SECURITIES OF $1,873 MILLION.
<F2>INCLUDES SUBORDINATED CAPITAL NOTES OF $354 MILLION.
<F3>INCLUDES INTEREST INCOME ON TRADING ACCOUNT ASSETS OF $269 MILLION.
<F4>THESE AMOUNTS ARE NOT REPORTED IN OUR INTERIM FILING.
</FN>
</TABLE>
