<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 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 CHARTER:
BANKAMERICA CORPORATION
STATE OF INCORPORATION OR ORGANIZATION:
Delaware.
ADDRESS AND TELEPHONE OF PRINCIPAL EXECUTIVE OFFICES:
Bank of America Center
San Francisco, California 94104
415-622-3530.
I.R.S. EMPLOYER I.D. NO.:
94-1681731.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
New York, Chicago, and Pacific Stock Exchanges: Common Stock, Par Value $1.5625
and Preferred Share Purchase Rights New York Stock Exchange:
Cumulative Adjustable Preferred Stock, Series A
Cumulative Adjustable Preferred Stock, Series B
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price on the consolidated
transaction reporting system on January 31, 1998, was in excess of $48.6
billion.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of January 31, 1998.
Common Stock, $1.5625 par value ------ 685,258,124 shares
outstanding on January 31, 1998.*
*In addition, 89,439,396 shares were held in treasury.
DOCUMENTS INCORPORATED BY REFERENCE AND PARTS OF FORM 10-K INTO WHICH
INCORPORATED:
Portions of the Annual Report to Shareholders for
the Year Ended December 31, 1997 Parts I, II, & IV
Portions of the Proxy Statement for the May 21, 1998
Annual Meeting of Shareholders Part III
<PAGE>
FORM 10-K
<TABLE>
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<S> <C> <C>
PART I Items 1 and 2. Business and Properties
General............................................................ 2
Operations......................................................... 3
Properties......................................................... 3
Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential......................... 4
Available-for-Sale and Held-to-Maturity Securities................. 7
Loan Portfolio..................................................... 9
Summary of Credit Loss Experience.................................. 12
Deposits........................................................... 12
Return on Equity and Assets........................................ 13
Short-Term Borrowings.............................................. 13
Competition........................................................ 13
Supervision and Regulation......................................... 14
Employees.......................................................... 17
Item 3. Legal Proceedings.................................................. 17
Item 4. Submission of Matters to a Vote of Security Holders................ 17
- -----------------------------------------------------------------------------------------------
PART II Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.............................................. 18
Item 6. Selected Financial Data............................................ 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 18
Forward-Looking Statements......................................... 18
Item 7a. Qualitative and Quantitative Disclosures About Market Risk......... 19
Item 8. Financial Statements and Supplementary Data........................ 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................... 19
- -----------------------------------------------------------------------------------------------
PART III Item 10. Directors and Executive Officers of the Registrant................. 20
Item 11. Executive Compensation............................................. 22
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 22
Item 13. Certain Relationships and Related Transactions..................... 22
- -----------------------------------------------------------------------------------------------
PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 23
- -----------------------------------------------------------------------------------------------
SIGNATURES ............................................................................. 27
</TABLE>
<PAGE>
PART I
================================================================================
Items 1 and 2. Business and Properties
- --------------------------------------------------------------------------------
General BankAmerica Corporation (the Parent) is a bank holding
company that was incorporated on October 7, 1968 under the
laws of the state of Delaware and is registered under the
Bank Holding Company Act of 1956, as amended. BankAmerica
Corporation and its subsidiaries (BAC) is the second largest
bank holding company in the United States based upon total
market capitalization of $50.2 billion at December 31, 1997.
During 1997, BAC combined several interstate affiliate banks
into Bank of America NT&SA (the Bank), a subsidiary of BAC.
In 1997, Bank of America (BofA) Alaska, N.A., BofA Arizona,
BofA Nevada, BofA New Mexico, N.A., BofA NW, National
Association (formerly Seattle-First National Bank), BofA
Illinois, and BofA Trust Company of Florida, N.A. were
merged into the Bank. Additional information related to the
merger of the interstate banks into the Bank is incorporated
by reference from page 23 of the 1997 Annual Report to
Shareholders.
During 1997, BAC completed the acquisition of Robertson,
Stephens & Company Group, L.L.C., an investment banking and
investment management firm, and established a relationship
with D.E. Shaw & Co., Inc., a private investment banking
company. Also during 1997, BAC completed the sale of its
consumer finance subsidiary, Security Pacific Financial
Services Inc., and the sales of certain rural Texas branches
and its branch system in Hawaii. Furthermore, BAC announced
decisions to exit Midwest retail facilities and to sell its
manufactured housing business.
The Parent's largest subsidiary, based on total assets at
year-end 1997, was the Bank. The Bank was founded by A. P.
Giannini in San Francisco, California, and began business as
Bank of Italy on October 17, 1904, offering banking services
to individuals and small businesses in the community. It
adopted its present name on November 1, 1930 and became a
subsidiary of the Parent on April 1, 1969.
At December 31, 1997, the Parent's other bank subsidiaries
included BofA Community Development Bank, which has a state
charter, BofA Texas, N.A., a national bank, and BofA FSB
(FSB), a federal savings bank. In addition, BofA National
Association, which holds a national charter, offers credit
card services, primarily to individuals, throughout the
United States.
2
<PAGE>
================================================================================
OPERATIONS
------------------------------------------------------------
The Parent, through its network of subsidiaries, provides
banking and other financial services throughout the United
States and in selected international markets to consumers
and business customers, including corporations, governments,
and other institutions.
In providing financial products to consumers, BAC offers
retail deposit, credit card, home mortgage, manufactured
housing and auto loan financing, and various other consumer
finance products. It provides a range of deposit and loan
products to individuals and small businesses through about
1,800 full-service branches, close to 7,700 ATMs, and
telephone and other delivery channels. In California, BAC's
largest market, the Bank operated approximately 970 branches
at December 31, 1997.
As a global financial intermediary, BAC provides capital-
raising services, trade finance, cash management, investment
banking, capital markets and credit products, and financial
advisory services to large public- and private-sector
institutions that are part of the global economy.
The range of financial products and services available to
consumers and large institutions is also provided to middle
market customers (companies with annual revenues between $5
million and $500 million) primarily in the West and the
Midwest.
BAC also provides credit and other financial services to a
variety of real estate market segments, including
developers, investors, pension fund advisors, real estate
investment trusts, and property managers.
Furthermore, BAC provides a range of services to individuals
and institutions with sophisticated financial planning and
management needs. The range of capabilities include
institutional investment management supporting BAC's
corporate and commercial banking relationships, private
banking, investment management, brokerage, and trust
services for high-net-worth clients world-wide.
Additional information about BAC and its operations is
incorporated by reference from pages 29 through 31, Note 2
on page 65, and Note 31 on page 91 of the 1997 Annual Report
to Shareholders.
PROPERTIES
------------------------------------------------------------
BAC's principal offices are located at 555 California Street
in San Francisco, California.
At December 31, 1997, BAC owned approximately one half of
its properties. The remaining facilities were leased.
3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ RATE/b/
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 6,197 $ 415 6.70%
Federal funds sold 746 41 5.54
Securities purchased under resale agreements 10,032 776 7.73
Trading account assets 15,538 1,236 7.96
Available-for-sale securities/c/,/d/ 11,934 839 7.03
Held-to-maturity securities/d/ 3,850 294 7.63
Domestic loans:
Consumer--residential first mortgages 35,260 2,601 7.38
Consumer--residential junior mortgages 14,898 1,261 8.46
Consumer--credit card 7,787 1,133 14.56
Other consumer 20,416 1,958 9.59
Commercial and industrial 34,280 2,725 7.95
Commercial loans secured by real estate 12,653 1,130 8.93
Financial institutions 3,175 168 5.30
Lease financing 2,747 157 5.70
Loans for purchasing or carrying securities 1,945 147 7.55
Construction and development loans secured by real estate 2,269 292 12.88/e/
Agricultural 1,656 144 8.70
Other 1,511 93 6.17
-------- -------
Total domestic loans 138,597 11,809 8.52
Foreign loans 27,429 2,073 7.56
-------- -------
Total loans/c/ 166,026 13,882 8.36
-------- -------
Total earning assets 214,323 $17,483 8.16
Nonearning assets 45,010 =======
Less: Allowance for credit losses 3,532
--------
TOTAL ASSETS/f/ $255,801
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 5,657 $ 89 1.57%
Savings 11,757 242 2.06
Money market 39,918 1,111 2.78
Time 30,419 1,674 5.50
-------- -------
Total domestic interest-bearing deposits 87,751 3,116 3.55
Foreign interest-bearing deposits:
Banks located in foreign countries 13,156 794 6.04
Governments and official institutions 10,802 590 5.47
Time, savings, and other 21,260 1,293 6.08
-------- -------
Total foreign interest-bearing deposits 45,218 2,677 5.92
-------- -------
Total interest-bearing deposits 132,969 5,793 4.36
Federal funds purchased 1,176 64 5.43
Securities sold under repurchase agreements 11,583 810 6.99
Other short-term borrowings 17,911 1,099 6.13
Long-term debt 14,665 1,022 6.97
-------- -------
Total interest-bearing liabilities 178,304 $ 8,788 4.93
Domestic noninterest-bearing deposits 34,655 =======
Foreign noninterest-bearing deposits 1,643
Other noninterest-bearing liabilities 19,344
--------
Total liabilities/f/ 233,946
Trust preferred securities/g/ 1,857
Stockholders' equity 19,998
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $255,801
========
Interest income as a percentage of average earning assets 8.16%
Interest expense as a percentage of average earning assets (4.10)
-----
NET INTEREST MARGIN 4.06%
=====
==============================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------
BALANCE/a/ INTEREST/b/ Rate/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,717 $ 453 7.93%
Federal funds sold 533 29 5.41
Securities purchased under resale agreements 10,334 653 6.32
Trading account assets 12,541 1,004 8.01
Available-for-sale securities/c/,/d/ 11,383 848 7.45
Held-to-maturity securities/d/ 4,347 322 7.42
Domestic loans:
Consumer--residential first mortgages 37,572 2,806 7.47
Consumer--residential junior mortgages 14,264 1,225 8.59
Consumer--credit card 8,837 1,284 14.53
Other consumer 17,465 1,720 9.85
Commercial and industrial 32,944 2,581 7.83
Commercial loans secured by real estate 11,508 1,018 8.84
Financial institutions 2,815 124 4.40
Lease financing 2,127 147 6.92
Loans for purchasing or carrying securities 1,270 86 6.78
Construction and development loans secured by real estate 2,816 301 10.69
Agricultural 1,570 137 8.70
Other 1,176 75 6.39
-------- -------
Total domestic loans 134,364 11,504 8.56
Foreign loans 24,087 1,863 7.73
-------- -------
TOTAL LOANS/c/ 158,451 13,367 8.44
-------- -------
Total earning assets 203,306 $16,676 8.20
Nonearning assets 42,060 =======
Less: Allowance for credit losses 3,524
--------
TOTAL ASSETS/f/ $241,842
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 12,205 $ 149 1.22%
Savings 12,872 263 2.05
Money market 28,772 905 3.14
Time 30,132 1,545 5.13
-------- -------
Total domestic interest-bearing deposits 83,981 2,862 3.41
Foreign interest-bearing deposits:
Banks located in foreign countries 12,957 763 5.89
Governments and official institutions 9,579 502 5.23
Time, savings, and other 19,058 1,232 6.47
-------- -------
Total foreign interest-bearing deposits 41,594 2,497 6.00
-------- -------
Total interest-bearing deposits 125,575 5,359 4.27
Federal funds purchased 1,492 79 5.29
Securities sold under repurchase agreements 11,702 695 5.94
Other short-term borrowings 14,448 883 6.11
Long-term debt 15,396 1,056 6.86
-------- -------
Total interest-bearing liabilities 168,613 $ 8,072 4.79
Domestic noninterest-bearing deposits 34,415 =======
Foreign noninterest-bearing deposits 1,557
Other noninterest-bearing liabilities 16,898
--------
Total liabilities/f/ 221,483
Trust preferred securities/g/ 90
Stockholders' equity 20,269
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $241,842
========
Interest income as a percentage of average earning assets 8.20%
Interest expense as a percentage of average earning assets (3.97)
-----
NET INTEREST MARGIN 4.23%
=====
====================================================================================================================================
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average rates are presented on a taxable-equivalent
basis. The taxable-equivalent basis adjustments are based on a marginal tax
rate of 40 percent.
/c/ Average balances include nonaccrual assets.
/d/ Refer to the table on page 7 for more detail on average balances, interest,
and average rates on available-for-sale and held-to-maturity securities.
/e/ Rates reflect a higher level of interest recoveries on nonaccrual loans
during 1997 as compared to the same period in 1996.
4
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ RATE/b/
- -----------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,853 $ 466 7.95%
Federal funds sold 548 32 5.89
Securities purchased under resale agreements 8,823 618 7.00
Trading account assets 9,106 745 8.18
Available-for-sale securities/c/,/d/ 9,768 764 7.83
Held-to-maturity securities/d/ 7,192 524 7.29
Domestic loans:
Consumer--residential first mortgages 35,407 2,500 7.06
Consumer--residential junior mortgages 13,832 1,252 9.05
Consumer--credit card 8,230 1,230 14.95
Other consumer 14,149 1,399 9.89
Commercial and industrial 30,927 2,619 8.47
Commercial loans secured by real estate 10,586 957 9.04
Financial institutions 2,511 143 5.69
Lease financing 1,835 111 6.06
Loans for purchasing or carrying securities 1,303 91 7.02
Construction and development loans secured by real estate 3,367 373 11.07
Agricultural 1,619 157 9.67
Other 1,394 91 6.56
-------- -------
Total domestic loans 125,160 10,923 8.73
Foreign loans 21,754 1,792 8.24
-------- -------
Total loans/c/ 146,914 12,715 8.65
-------- -------
Total earning assets 188,204 $15,864 8.43
Nonearning assets 42,641 =======
Less: Allowance for credit losses 3,672
--------
TOTAL ASSETS/f/ $227,173
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 13,241 $ 159 1.20%
Savings 13,550 282 2.08
Money market 29,070 870 2.99
Time 30,002 1,471 4.90
-------- -------
Total domestic interest-bearing deposits 85,863 2,782 3.24
Foreign interest-bearing deposits:
Banks located in foreign countries 10,245 679 6.63
Governments and official institutions 6,845 397 5.80
Time, savings, and other 16,131 1,065 6.60
-------- -------
Total foreign interest-bearing deposits 33,221 2,141 6.44
-------- -------
Total interest-bearing deposits 119,084 4,923 4.13
Federal funds purchased 2,222 131 5.89
Securities sold under repurchase agreements 9,110 581 6.38
Other short-term borrowings 9,301 630 6.77
Long-term debt 15,761 1,113 7.06
-------- -------
Total interest-bearing liabilities 155,478 $ 7,378 4.75
Domestic noninterest-bearing deposits 33,272 =======
Foreign noninterest-bearing deposits 1,630
Other noninterest-bearing liabilities 17,238
--------
Total liabilities/f/ 207,618
Trust preferred securities/g/ -
Stockholders' equity 19,555
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $227,173
========
Interest income as a percentage of average earning assets 8.43%
Interest expense as a percentage of average earning assets (3.92)
-----
NET INTEREST MARGIN 4.51%
=====
===========================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FOURTH QUARTER 1997
------------------------------------------------
BALANCE/a/ INTEREST/b/ RATE/b/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,808 $ 104 7.09%
Federal funds sold 726 10 5.49
Securities purchased under resale agreements 11,108 233 8.32
Trading account assets 16,205 341 8.35
Available-for-sale securities/c/,/d/ 12,878 227 7.03
Held-to-maturity securities/d/ 3,621 66 7.26
Domestic loans:
Consumer--residential first mortgages 33,156 606 7.31
Consumer--residential junior mortgages 14,876 314 8.39
Consumer--credit card 6,892 247 14.30
Other consumer 20,692 487 9.35
Commercial and industrial 35,230 718 8.08
Commercial loans secured by real estate 12,888 284 8.80
Financial institutions 3,388 53 6.28
Lease financing 2,767 42 5.92
Loans for purchasing or carrying securities 2,062 15 2.78/h/
Construction and development loans secured by real estate 2,287 66 11.49
Agricultural 1,715 37 8.59
Other 1,747 26 5.99
-------- ------
Total domestic loans 137,691 2,895 8.37
Foreign loans 28,078 536 7.58
-------- ------
TOTAL LOANS/c/ 165,769 3,431 8.23
-------- ------
Total earning assets 216,115 $4,412 8.12
Nonearning assets 45,968 ======
Less: Allowance for credit losses 3,495
--------
TOTAL ASSETS/f/ $258,588
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 5,238 $ 22 1.68%
Savings 11,201 58 2.07
Money market 47,974 295 2.43
Time 31,307 439 5.56
-------- ------
Total domestic interest-bearing deposits 95,720 814 3.37
Foreign interest-bearing deposits:
Banks located in foreign countries 12,920 211 6.48
Governments and official institutions 9,755 139 5.71
Time, savings, and other 21,693 337 6.15
-------- ------
Total foreign interest-bearing deposits 44,368 687 6.15
-------- ------
Total interest-bearing deposits 140,088 1,501 4.25
Federal funds purchased 1,494 21 5.54
Securities sold under repurchase agreements 13,195 256 7.69
Other short-term borrowings 16,431 269 6.50
Long-term debt 15,790 273 688
-------- ------
Total interest-bearing liabilities 185,360 $2,300 4.92
Domestic noninterest-bearing deposits 29,750 ======
Foreign noninterest-bearing deposits 1,465
Other noninterest-bearing liabilities 20,366
--------
Total liabilities/f/ 236,941
Trust preferred securities/g/ 1,873
Stockholders' equity 19,774
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $258,588
========
Interest income as a percentage of average earning assets 8.12%
Interest expense as a percentage of average earning assets (4.22)
-----
NET INTEREST MARGIN 3.90%
=====
===========================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FOURTH QUARTER 1996
-------------------------------------------------
BALANCE/a/ INTEREST/b/ RATE/b/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 5,878 $ 145 9.86%
Federal funds sold 499 7 5.49
Securities purchased under resale agreements 9,077 144 6.30
Trading account assets 13,393 271 8.05
Available-for-sale securities/c/,/d/ 11,763 210 7.12
Held-to-maturity securities/d/ 4,160 76 7.34
Domestic loans:
Consumer--residential first mortgages 37,291 695 7.46
Consumer--residential junior mortgages 14,625 312 8.48
Consumer--credit card 8,338 296 14.24
Other consumer 18,731 457 9.68
Commercial and industrial 33,454 669 7.95
Commercial loans secured by real estate 12,185 269 8.82
Financial institutions 2,695 29 4.29
Lease financing 2,508 51 8.15
Loans for purchasing or carrying securities 1,565 28 7.08
Construction and development loans secured by real estate 2,402 61 10.13
Agricultural 1,486 32 8.51
Other 1,241 17 5.33
-------- ------
Total domestic loans 136,521 2,916 8.52
Foreign loans 25,024 475 7.55
-------- ------
TOTAL LOANS/c/ 161,545 3,391 8.37
-------- ------
Total earning assets 206,315 $4,244 8.20
Nonearning assets 42,682 ======
Less: Allowance for credit losses 3,520
--------
TOTAL ASSETS/f/ $245,477
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 9,287 $ 30 1.32%
Savings 12,479 64 2.04
Money market 31,699 243 3.04
Time 30,357 415 5.44
-------- ------
Total domestic interest-bearing deposits 83,822 752 3.57
Foreign interest-bearing deposits:
Banks located in foreign countries 12,318 182 5.87
Governments and official institutions 9,996 130 5.17
Time, savings, and other 19,657 342 6.92
-------- ------
Total foreign interest-bearing deposits 41,971 654 6.20
-------- ------
Total interest-bearing deposits 125,793 1,406 4.45
Federal funds purchased 1,553 20 5.22
Securities sold under repurchase agreements 10,457 155 5.90
Other short-term borrowings 16,453 254 6.14
Long-term debt 15,790 273 6.88
-------- ------
Total interest-bearing liabilities 170,046 $2,108 4.93
Domestic noninterest-bearing deposits 35,585 ======
Foreign noninterest-bearing deposits 1,435
Other noninterest-bearing liabilities 17,429
--------
Total liabilities/f/ 224,495
Trust preferred securities/g/ 366
Stockholders' equity 20,616
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $245,477
========
Interest income as a percentage of average earning assets 8.20%
Interest expense as a percentage of average earning assets (4.07)
-----
NET INTEREST MARGIN 4.13%
=====
===========================================================================================================================
</TABLE>
/f/ The percentage of average total assets attributable to foreign operations
for the years ended December 31, 1997, 1996, and 1995 was 21 percent, 20
percent, and 18 percent, respectively. The percentage of average total
liabilities attributable to foreign operations for the same periods was 21
percent, 20 percent, and 19 percent, respectively.
/g/ Trust preferred securities represent corporation obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the corporation. Related
expenses are included in noninterest expense.
/h/ Rates reflect a decrease in fees during the fourth quarter of 1997 as
compared to the same period in 1996.
5
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================
NET INTEREST INCOME ANALYSIS
- ------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 OVER 1996
--------------------------------------------------
INCREASE (DECREASE)/a/
--------------------------------------------------
(IN MILLIONS) VOLUME RATE NET
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME/b/
Interest-bearing deposits in banks $ 36 $ (74) $ (38)
Federal funds sold 11 1 12
Securities purchased under resale agreements (20) 143 123
Trading account assets 238 (6) 232
Available-for-sale securities:
U.S. Treasury and other government agency securities (1) (3) (4)
Mortgage-backed securities 48 1 49
Other domestic securities 7 (1) 6
Foreign securities (23) (37) (60)
-----
Total available-for-sale securities (9)
Held-to-maturity securities:
U.S. Treasury and other government agency securities (1) - (1)
Mortgage-backed securities (21) (3) (24)
State, county, and municipal securities (28) - (28)
Other domestic securities 104 - 104
Foreign securities (90) 10 (80)
-----
Total held-to-maturity securities (29)
Domestic loans:
Consumer-residential first mortgages (171) (34) (205)
Consumer-residential junior mortgages 55 (19) 36
Consumer-credit card (154) 3 (151)
Other consumer 284 (46) 238
Commercial and industrial 105 39 144
Commercial loans secured by real estate 102 10 112
Financial institutions 17 27 44
Lease financing 39 (29) 10
Loans for purchasing or carrying securities 50 11 61
Construction and development loans secured by real estate (64) 55 (9)
Agricultural 7 - 7
Other 21 (3) 18
-----
Total domestic loans 305
Foreign loans 252 (42) 210
-----
Total loans 515
-----
NET INCREASE $ 806
=====
INTEREST EXPENSE
Domestic interest-bearing deposits:
Transaction $ (95) $ 35 $ (60)
Savings (22) 1 (21)
Money market 319 (113) 206
Time 15 114 129
-----
Total domestic interest-bearing deposits 254
Foreign interest-bearing deposits:
Banks located in foreign countries 12 19 31
Governments and official institutions 65 23 88
Time, savings, and other 138 (77) 61
-----
Total foreign interest-bearing deposits 180
-----
Total interest-bearing deposits 434
Federal funds purchased (17) 2 (15)
Securities sold under repurchase agreements (7) 122 115
Other short-term borrowings 213 3 216
Long-term debt (51) 17 (34)
-----
NET INCREASE $ 716
=====
===================================================================================================================
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1996 OVER 1995
---------------------------------------------------
INCREASE (DECREASE)/a/
---------------------------------------------------
(IN MILLIONS) VOLUME RATE NET
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME/b/
Interest-bearing deposits in banks $ (12) $ (1) $ (13)
Federal funds sold (1) (2) (3)
Securities purchased under resale agreements 99 (64) 35
Trading account assets 275 (16) 259
Available-for-sale securities:
U.S. Treasury and other government agency securities (15) 4 (11)
Mortgage-backed securities 92 (6) 86
Other domestic securities 7 3 10
Foreign securities 38 (39) (1)
-----
Total available-for-sale securities 84
Held-to-maturity securities:
U.S. Treasury and other government agency securities (19) (5) (24)
Mortgage-backed securities (165) 19 (146)
State, county, and municipal securities (2) (2) (4)
Other domestic securities (5) (1) (6)
Foreign securities (14) (8) (22)
-----
Total held-to-maturity securities (202)
Domestic loans:
Consumer-residential first mortgages 157 149 306
Consumer-residential junior mortgages 38 (65) (27)
Consumer-credit card 89 (35) 54
Other consumer 327 (6) 321
Commercial and industrial 166 (204) (38)
Commercial loans secured by real estate 82 (21) 61
Financial institutions 16 (35) (19)
Lease financing 19 17 36
Loans for purchasing or carrying securities (2) (3) (5)
Construction and development loans secured by real estate (60) (12) (72)
Agricultural (5) (15) (20)
Other (14) (2) (16)
-----
Total domestic loans 581
Foreign loans 186 (115) 71
-----
Total loans 652
-----
NET INCREASE $ 812
=====
INTEREST EXPENSE
Domestic interest-bearing deposits:
Transaction $ (13) $ 3 $ (10)
Savings (15) (4) (19)
Money market (9) 44 35
Time 6 68 74
-----
Total domestic interest-bearing deposits 80
Foreign interest-bearing deposits:
Banks located in foreign countries 166 (82) 84
Governments and official institutions 147 (42) 105
Time, savings, and other 188 (21) 167
-----
Total foreign interest-bearing deposits 356
-----
Total interest-bearing deposits 436
Federal funds purchased (40) (12) (52)
Securities sold under repurchase agreements 156 (42) 114
Other short-term borrowings 319 (66) 253
Long-term debt (27) (30) (57)
-----
NET INCREASE $ 694
=====
===================================================================================================================
</TABLE>
/a/ Changes that are the result of a joint volume and rate fluctuation are
allocated in proportion to the volume and rate changes
/b/ Interest income is presented on a taxable-equivalent basis. The taxable-
equivalent basis adjustments are based on a marginal tax rate of 40
percent.
6
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES-AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------ -----------------------------------
RATE
RATE BASED ON
BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/ BALANCE/a/ INTEREST/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other
government agency
securities $ 1,418 $ 92 6.51% 6.48% $ 1,440 $ 97
Mortgage-backed securities 7,000 479 6.85 6.88 6,305 431
Other domestic securities 911 51 5.56 6.21 786 44
Foreign securities 2,605/c/ 217 8.31/d/ 8.05/d/ 2,852/c/ 276
- -----------------------------------------------------------------------------------------------------------------------
$11,934 $839 7.03% 7.05% $11,383 $848
- -----------------------------------====================================================================================
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1995
-------------------------------- -------------------------------------------------------
RATE RATE
RATE BASED ON RATE BASED ON
BASED ON AMORTIZED BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) FAIR VALUE/b/ COST/b/ BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other
government agency
securities 6.72% 6.70% $1,659 $108 6.49% 6.45%
Mortgage-backed securities 6.83 6.82 4,962 344 6.94 6.89
Other domestic securities 5.64 6.61 660 34 5.22 5.84
Foreign securities 9.69/d/ 9.19/d/ 2,487/c/ 278 11.17/d/ 10.10/d/
- -----------------------------------------------------------------------------------------------------------------------------
7.45% 7.42% $9,768 $764 7.83% 7.64%
- -----------------------------------==========================================================================================
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 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 $ 11 $ 1 5.18% $ 33 $ 2 4.95%
Mortgage-backed securities 2,022 151 7.47 2,308 175 7.60
State, county, and municipal
securities 353 27 7.66 416 31 7.57
Other domestic securities 54 4 6.86 99 7 7.28
Foreign securities 1,410 111 7.89 1,491 107 7.15
- ------------------------------------------------------------------------------------------------------------------
$3,850 $294 7.63% $4,347 $322 7.42%
- ----------------------------------------==========================================================================
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ RATE/b/
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HELD-TO-MATURITY SECURITIES
U.S. Treasury and other government
agency securities $ 388 $ 26 6.72%
Mortgage-backed securities 4,490 321 7.15
State, county, and municipal
securities 445 35 7.89
Other domestic securities 178 13 7.62
Foreign securities 1,691 129 7.62
- ------------------------------------------------------------------------------------------
$7,192 $524 7.29%
- -------------------------------------------------------===================================
<CAPTION>
FOURTH 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 $ 1,420 $ 22 6.24% 6.34%
Mortgage-backed securities 7,685 132 6.86 6.97
Other domestic securities 973 13 5.27 5.92
Foreign securities 2,800/c/ 60 8.51 8.39
- ---------------------------------------------------------------------------------------
$12,878 $227 7.03% 7.81%
- -----------------------------------====================================================
<CAPTION>
FOURTH 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 $ 1,346 $ 23 6.74% 6.72%
Mortgage-backed securities 6,566 113 6.87 6.90
Other domestic securities 926 12 5.44 6.43
Foreign securities 2,925/c/ 62 8.38 8.06
- ---------------------------------------------------------------------------------------
$11,763 $210 7.12% 7.15%
- -----------------------------------====================================================
<CAPTION>
FOURTH QUARTER 1997 FOURTH 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 $ 8 $ - 3.13% $ 19 $ - 5.51%
Mortgage-backed securities 1,911 36 7.48 2,190 42 7.60
State, county, and municipal securities 310 6 7.79 401 7 7.55
Other domestic securities 54 1 6.87 58 1 7.12
Foreign securities 1,338 23 6.85 1,492 26 6.93
- ---------------------------------------------------------------------------------------------------------------------------------
$3,621 $66 7.26% $4,160 $76 7.34%
- -------------------------------------------------------==========================================================================
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average rates are presented on a taxable-equivalent
basis. The taxable-equivalent adjustments are based on a marginal tax rate
of 40 percent.
/c/ Average balances include nonaccrual assets.
/d/ Rates reflect interest received on nonaccrual debt-restructuring par
bonds.
7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES
CARRYING VALUE AND YIELD BY CONTRACTUAL MATURITY DATE
====================================================================================================================================
AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY SECURITIES
----------------------------- ---------------------------
DECEMBER 31, 1997/a/ DECEMBER 31, 1997
----------------------------- ---------------------------
(DOLLAR AMOUNTS IN MILLIONS) AMOUNT YIELD/b/ AMOUNT YIELD/b/
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DUE IN ONE YEAR OR LESS
U.S. Treasury and other government agency securities $ 83 3.56% $ 15 4.98%
Mortgage-backed securities - - - -
State, county, and municipal securities - - 32 5.35
Other securities 1,206 7.83 248 7.20
------- ------
1,289 7.55 295 6.89
DUE AFTER ONE YEAR THROUGH FIVE YEARS
U.S. Treasury and other government agency securities 292 6.29 - -
Mortgage-backed securities 6 8.00 63 7.90
State, county, and municipal securities - - 94 5.49
Other securities 415 6.71 128 8.01
------- ------
713 6.55 285 7.16
DUE AFTER FIVE YEARS THROUGH TEN YEARS
U.S. Treasury and other government agency securities 945 6.07 - -
Mortgage-backed securities 986 6.94 696 7.63
State, county, and municipal securities 2 5.51 88 5.61
Other securities 124 7.04 46 9.37
------- ------
2,057 6.54 830 7.51
DUE AFTER TEN YEARS
U.S. Treasury and other government agency securities 146 8.83 1 4.47
Mortgage-backed securities 6,515 7.13 1,118 7.47
State, county, and municipal securities 1 5.05 117 5.34
Other securities 1,631 5.94 1,021 4.00
------- ------
8,293 6.92 2,257 5.79
------- ------
$12,352 $3,667
======= ======
==================================================================================================================================
</TABLE>
/a/ These amounts exclude equity securities, which have no contractual
maturities.
/b/ Yields on tax-exempt securities have not been computed on a taxable-
equivalent basis.
<TABLE>
<CAPTION>
CARRYING VALUE BY INVESTMENT CATEGORY
==================================================================================================================================
DECEMBER 31,
------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government agency securities $ 1,466 $ 1,494 $ 1,810
Mortgage-backed securities 7,507 6,622 6,749
State, county, and municipal securities 3 2 7
Other securities 3,376 3,698 3,180
------- ------- --------
$12,352 $11,816 $ 11,746
======= ======= ========
HELD-TO-MATURITY SECURITIES
U.S. Treasury and other government agency securities $ 16 $ 19 $ 66
Mortgage-backed securities 1,877 2,163 2,481
State, county, and municipal securities 331 423 467
Other securities 1,443 1,533 1,642
------- ------- --------
$ 3,667 $ 4,138 $ 4,656
======= ======= ========
</TABLE>
Additional information on the securities portfolios is incorporated by reference
from page 60 of Note 1 and pages 66 and 67 of Note 7 of the 1997 Annual Report
to Shareholders.
8
<PAGE>
================================================================================
LOAN PORTFOLIO LOAN OUTSTANDINGS BY TYPE
========================================================
Information on loan outstandings by type is incorporated
by reference from page 34 of the 1997 Annual Report to
Shareholders.
<TABLE>
<CAPTION>
MATURITY DISTRIBUTION AND INTEREST RATE CHARACTERISTICS OF CERTAIN TYPES OF LOANS
======================================================================================================
REMAINING MATURITIES AS OF DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------
DUE AFTER ONE
DUE IN ONE YEAR THROUGH DUE AFTER
(IN MILLIONS) YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MATURITY DISTRIBUTION OF LOANS
Domestic commercial loans:
Secured by real estate $ 692 $ 3,359 $ 8,846 $12,897
Construction and development secured by
real estate 1,219 787 200 2,206
Commercial and industrial, financial institutions,
and agricultural 31,022 8,955 1,934 41,911
Foreign loans 19,005 4,837 4,690 28,532
-------------------------------------------------------------------------------------------------------
$51,938 $17,938 $15,670 $85,546
---------------------------------------------------------==============================================
LOANS DUE AFTER ONE YEAR
Predetermined interest rates $ 4,272 $ 5,435 $ 9,707
Floating or adjustable interest rates 13,666 10,235 23,901
-------------------------------------------------------------------------------------------------------
$17,938 $15,670 $33,608
------------------------------------------------------------------------===============================
</TABLE>
Principal repayments of loans are reported in the table
above in the maturity category in which remaining
payments are due under the contractual terms of the
loan. Certain loan agreements provide rollover options
that may extend the contractual maturity of these loans.
However, these extensions are not reflected in the table
above until such time as the option is exercised.
Information concerning recent international
developments, cross-border outstandings exceeding one
percent of total assets, and regional foreign exposure,
along with a discussion of the risks, including credit
risk, inherent in BAC's foreign operations are
incorporated by reference from pages 35 through 37,
pages 44 through 45, and Note 8 on page 67 of the 1997
Annual Report to Shareholders.
9
<PAGE>
================================================================================
OFF-BALANCE-SHEET CREDIT-RELATED FINANCIAL INSTRUMENTS
===============================================================
Information on off-balance-sheet credit-related financial
instruments is incorporated by reference from page 43 and pages
80 and 81 of Note 25 of the 1997 Annual Report to Shareholders.
NONPERFORMING ASSETS
===============================================================
Information on nonperforming assets is incorporated by
reference from pages 41 and 42 of the 1997 Annual Report to
Shareholders.
<TABLE>
<CAPTION>
INTEREST INCOME FOREGONE ON NONACCRUAL ASSETS
=============================================================================================
YEAR ENDED
(IN MILLIONS) DECEMBER 31,1997
---------------------------------------------------------------------------------------------
<S> <C>
DOMESTIC
Interest income that would have been recognized had the assets performed in
accordance with their original terms $178
Less: Interest income included in the results of operations 66
---------------------------------------------------------------------------------------------
Domestic interest income foregone 112
FOREIGN
Interest income that would have been recognized had the assets performed in
accordance with their original terms 21
Less: Interest income included in the results of operations 4
---------------------------------------------------------------------------------------------
Foreign interest income foregone 17
---------------------------------------------------------------------------------------------
$129
-----------------------------------------------------------------------------------------====
</TABLE>
Information on nonaccrual loan accounting policies and interest
income foregone on restructured loans is incorporated by
reference from pages 60 and 61 of Note 1, and Notes 8 and 9 on
pages 67 and 68 of the 1997 Annual Report to Shareholders.
10
<PAGE>
================================================================================
<TABLE>
<CAPTION>
RESTRUCTURED LOANS
=====================================================================================================
YEAR ENDED DECEMBER 31
-------------------------------------------------
(IN MILLIONS) 1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Commercial and industrial $ 5 $ 25 $ 78 $71 $ 66
Commercial loans secured
by real estate 265 255 18 15 21
Lease financing - - - - 1
Construction and development
loans secured by real estate 3 16 15 2 10
Agricultural 1 1 1 7 -
-----------------------------------------------------------------------------------------------------
$274 $297 $112 $95 $ 98
FOREIGN/a/ - 5 1 2 36
-----------------------------------------------------------------------------------------------------
$274 $302 $113 $97 $134
-----------------------------------------------------------------------------------------------------
/a/ Excludes debt restructurings with countries that have experienced liquidity problems of $1.4
billion, $1.6 billion, $1.6 billion, $1.8 billion, and $2.4 billion at December 31, 1997, 1996, 1995,
1994, and 1993, respectively. Beginning in the first quarter of 1994, the majority of these
instruments were classified as either available-for-sale or held-to-maturity securities. Prior
to January 1, 1994, these instruments were classified as loans. For further information on
these restructurings, refer to Note 8 of the Notes to Consolidated Financial Statements on
page 67 of the 1997 Annual Report to Shareholders.
Information on other debt restructurings is incorporated by reference from Note 8 on page 67 of the
1997 Annual Report to Shareholders.
OTHER INTEREST-BEARING ASSETS ON NONACCRUAL STATUS
=====================================================================================================
Other interest-bearing assets on nonaccrual status primarily include other assets and accounts
receivable. Information on other interest-bearing assets on nonaccrual status is incorporated by
reference from pages 41 and 42 of the 1997 Annual Report to Shareholders.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
SUMMARY OF ANNUAL CREDIT LOSS EXPERIENCE
CREDIT LOSS =========================================================================================================
EXPERIENCE Information on annual credit loss experience is
incorporated by reference from pages 38 through
40 of the 1997 Annual Report to Shareholders.
ALLOWANCE FOR FOREIGN CREDIT LOSSES/a/
=========================================================================================================
Year Ended December 31
--------------------------------------------------
(IN MILLIONS) 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $ 425 $428 $391 $ 392 $ 559
Credit losses 66 39 15 42 36
Credit loss recoveries 27 60 99 124 66
-----------------------------------------------------------------------------------------------
Net credit (losses) recoveries (39) 21 84 82 30
Provision for credit losses 624/b/ (26) (54) - -
Losses on the sale or swap of loans
to restructuring countries - - - - (3)
Other net additions (deductions) (5) 2 7 (13) (264)/a,c/
-----------------------------------------------------------------------------------------------
BALANCE, END OF YEAR $1,005 $425 $428 $ 391 $ 322
==================================================================================================
/a/ The allocations of the allowance for credit losses and the provision for credit losses are used to
measure divisional profitability and are based on management's judgment of potential losses in the
respective portfolios. This allocation process resulted in reductions in the allowance for foreign
credit losses of $166 million in 1993. These reductions primarily related to Latin America. While
management has allocated reserves to various portfolio segments for purposes of this table, the
allowance is general in nature and is available for the portfolio in its entirety.
/b/ The increase in the provision for credit losses was primarily related to the volatile conditions in
emerging markets towards the end of 1997.
/c/ Includes a $36 million addition related to the consolidation of subsidiaries and operations that were
held for disposition at December 31, 1992 and a deduction of $128 million related to the transfer of
certain assets net of their related allowance to other assets. This deduction included $88 million of
regulatory-related allocated transfer risk reserve.
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
====================================================================================================
Information on the allocation of the allowance for credit losses by loan type is incorporated by
reference on page 39 of the 1997 Annual Report to Shareholders .
-----------------------------------------------------------------------------------------------------
DEPOSITS AVERAGE DEPOSIT BALANCES AND AVERAGE RATES
=====================================================================================================
Average deposit balances, average rates, and average foreign deposit liabilities are shown on pages 4
and 5 of this report.
MATURITY DISTIBUTION OF DOMESTIC TIME DEPOSITS OF $100,000 OR MORE
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Decemeber 31, 1997
------------------------------------------------------------
TIME CERTIFICATES OTHER TIME
OF DEPOSIT DEPOSITS
(IN MILLIONS) OF $100,000 OR MORE OF $100,000 OR MORE
---------------------------------------------------------------------------------------------------
TIME REMAINING UNTIL MATURITY
<S> <C> <C>
Three months or less $ 6,747 $ 61
After three months through six months 2,164 -
After six months through twelve months 1,719 -
After twelve months 1,551 40
----------------------------------------------------------------------------------------------------
$ 12,181 $101
-------------------------------------------------------------=======================================
</TABLE>
12
<PAGE>
================================================================================
RETURN ON EQUITY The ratio of average total equity to average total assets,
AND ASSETS the rates of return on average total assets and average
common and total equity, and the common dividend payout
ratios for the years ended December 31, 1997, 1996, and 1995
are incorporated by reference from page 21 of the 1997
Annual Report to Shareholders.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
===========================================================================================================
SHORT-TERM DECEMBER 31 AVERAGE DURING YEAR
BORROWINGS ----------------------------- ---------------------------
MAXIMUM WEIGHTED
OUTSTANDINGS AVERAGE AVERAGE
(DOLLAR AMOUNTS IN MILLIONS) DURING YEAR OUTSTANDINGS INTEREST RATE OUTSTANDINGS INTEREST RATE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Federal funds purchased/a/ $ 3,751 $ 3,751 5.58% $ 1,176 5.43%
Securities sold under repurchase
agreements/a/ 15,106 11,159 7.95 11,583 6.99
Other short-term borrowings 20,163 15,702 6.52 17,911 6.13
-----------------------------------------------------------------------------------------------------------
1996
Federal funds purchased/a/ $ 2,740 $ 2,176 5.21% $ 1,492 5.29%
Securities sold under repurchase
agreements/a/ 15,102 7,644 5.98 11,702 5.94
Other short-term borrowings 17,566 17,566 6.08 14,448 6.11
-----------------------------------------------------------------------------------------------------------
1995
Federal funds purchased/a/ $ 5,160 $ 5,160 5.62% $ 2,222 5.89%
Securities sold under repurchase
agreements/a/ 10,730 6,383 6.69 9,110 6.38
Other short-term borrowings 10,800 7,627 6.88 9,301 6.77
===========================================================================================================
</TABLE>
/a/ Federal funds purchased and securities sold under
repurchase agreements mature either overnight or
weekly.
- --------------------------------------------------------------------------------
COMPETITION BAC, both domestically and internationally, operates in
intensely competitive environments. Domestically, BAC's
competitors include other banks, financial institutions, and
nonbanking institutions, such as finance companies, leasing
companies, insurance companies, brokerage firms, and
investment banking firms. Internationally, BAC primarily
competes with major foreign banks, domestic banks with
international operations, other financial institutions, and
nonfinancial companies.
In recent years, increased competition has also developed
from predominantly specialized finance and nonfinance
companies that offer wholesale finance, credit card, and
other consumer finance services, including on-line banking
services and personal finance software. Competition for
deposit and loan products remains strong, from both banking
and nonbanking firms, and affects the rates of those
products as well as the terms on which they are offered to
customers. Mergers between financial institutions have
placed additional pressure on banks within the industry to
streamline their operations, reduce expenses, and increase
revenues to remain competitive. In addition, competition
has intensified due to changes in federal and state
interstate banking laws, which permit banking organizations
to expand geographically. Such laws allow banks to merge
with other banks across state lines, thereby enabling BAC's
competitors to establish or expand banking operations in
BAC's most significant markets.
Technological innovation continues to contribute to greater
competition in domestic and international financial services
markets. Technological innovation has, for example, made it
possible for nondepository institutions to offer customers
automated transfer payment services that previously have
been traditional banking products. In addition, customers
13
<PAGE>
================================================================================
now expect a choice of several delivery systems and
channels, including telephone, mail, home computer, ATMs,
self-service branches, and in-store branches. In addition
to other banks, the sources of competition for such products
include savings associations, credit unions, brokerage
firms, money market and other mutual funds, asset management
groups, finance and insurance companies, and mortgage
banking firms.
The competitive environment within the United States is
significantly impacted by federal and state legislation.
Banking laws have had a substantial impact on the structure
and competitive dynamics of financial services markets in
the United States since, among other things, they limit the
types of financial services that both domestic and foreign
banks can offer and the geographic boundaries within which
they can operate. (See "Supervision and Regulation" below.)
Economic factors, along with legislative and technological
changes, will have an ongoing impact on the competitive
environment within the financial services industry. As a
major and active participant in financial markets, BAC
strives to anticipate and adapt to these changing
competitive conditions, but there can be no assurance as to
their impact on BAC's future business or results of
operations.
- --------------------------------------------------------------------------------
SUPERVISION AND The banking and financial services businesses in which BAC
REGULATION engages are highly regulated. Such regulation is intended,
among other things, to protect depositors covered by the
Federal Deposit Insurance Corporation (FDIC) and the banking
system as a whole. The laws, regulations, and policies
affecting such businesses are continually under review by
Congress, state legislatures, and federal and state
regulatory agencies. Changes in the laws, regulations, or
policies that affect BAC cannot necessarily be predicted,
but they may have a material effect on the business and
earnings of BAC.
Following is a summary of significant statutes, regulations,
and policies that apply to the operation of banking
institutions. This summary is qualified in its entirety by
reference to the full text of such statutes, regulations, or
policies.
A. GENERAL
As a bank holding company, the Parent is subject to
regulation under the Bank Holding Company Act (BHCA) of
1956, as amended, and is registered as such with, and
subject to examination by, the Board of Governors of the
Federal Reserve System (FRB). Pursuant to the BHCA, the
Parent is prohibited, with certain exceptions, from
acquiring direct or indirect ownership or control of more
than 5 percent of any class of voting shares of any
nonbanking corporation, and may not acquire more than 5
percent of the voting shares of any domestic bank without
the prior approval of the FRB. In addition, the Parent may
not engage in any business directly or through a nonbanking
subsidiary other than managing and controlling banks or
furnishing services that the FRB deems to be so closely
related to banking as "to be a proper incident thereto."
The Parent's subsidiaries are also subject to extensive
regulation, supervision, and examination by applicable
federal and state regulatory agencies. The Bank and other
national bank subsidiaries are primarily regulated by the
Office of the Comptroller of the Currency (OCC). The state-
chartered bank subsidiary of the Parent is primarily
regulated by the FDIC and state banking regulator. FSB is
subject to the regulatory authority of the Office of Thrift
Supervision (OTS) and the FRB. Further, all domestic
depository institution subsidiaries of BAC that are insured
institutions are subject to the authority of the FDIC. The
activities of
14
<PAGE>
================================================================================
the Parent's broker/dealers, which include BancAmerica
Robertson Stephens and BA Futures, Inc., are subject to
rules and regulations promulgated by the Securities and
Exchange Commission (SEC), the Commodity Futures Trading
Commission, securities industry self regulatory
organizations (the New York Stock Exchange, the National
Association of Securities Dealers, Inc., and the Municipal
Securities Rulemaking Board), the FRB, and various state
securities commissions. Other nonbank subsidiaries of the
Parent are regulated under applicable federal and/or state
mortgage lending, insurance, consumer, and other laws.
B. DIVIDEND RESTRICTIONS
The availability of dividends from the Parent's subsidiaries
is limited by various statutes and regulations. The
National Bank Act and other federal laws prohibit the
payment of dividends by a national bank under certain
circumstances, and limit the amount a national bank can pay
without the prior approval of the OCC. In addition, the
state-chartered banking subsidiary is subject to dividend
limitations imposed by applicable state and federal laws.
FSB is subject to OTS regulatory restrictions on its payment
of dividends. Specific information related to restrictions
on funds available to the Parent and its subsidiaries is
incorporated by reference from Note 30 on pages 88 through
90 of the 1997 Annual Report to Shareholders.
C. REGULATORY CAPITAL STANDARDS AND RELATED MATTERS
As a result of the enactment of the Financial Institution
Reform, Recovery, and Enforcement Act of 1989 (FIRREA), any
insured depository institution owned by the Parent (i.e.,
any bank or savings association subsidiary) can be assessed
for losses incurred by the FDIC in connection with
assistance provided to, or the failure of, any other
depository institution owned by the Parent. FIRREA also
established, in part, new regulations that raised capital
requirements and standards. The primary emphasis of the
capital standards required by FIRREA is to ensure that
financial institutions have sufficient capital to support
the risk levels of their assets and off-balance-sheet
commitments. The risk-based capital ratios and the leverage
ratio, as required by FIRREA, provide a means to measure
financial institutions' compliance with capital standards.
During 1991, Congress passed the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA), which focused
primarily on tightening the supervision of banks and thrifts
and recapitalizing the Bank Insurance Fund (BIF). Among
other things, FDICIA requires federal bank regulatory
authorities to take "prompt corrective action" with respect
to inadequately capitalized banks. FDICIA established five
tiers of capital measurement ranging from "well capitalized"
to "critically undercapitalized." If a bank does not meet
any of the minimum capital requirements set by its
regulators, FDICIA requires certain responses, such as that
the bank submit a plan, guaranteed by its holding company,
to restore its capital to adequate levels. It is BAC's
policy to maintain risk-based capital ratios for both the
parent and its domestic banking subsidiaries above the "well
capitalized" levels, and as of December 31, 1997, BAC and
all of its banking subsidiaries met the requirements of a
"well capitalized" institution.
BAC is also subject to the risk-based capital and leverage
guidelines of the FRB, which require that BAC's capital-to-
asset ratios meet certain minimum standards. For a detailed
discussion of the FRB guidelines and BAC's risk-based
capital and leverage ratios, refer to pages 50 through 53
and Note 20 on pages 73 and 74 of the 1997 Annual Report to
Shareholders.
15
<PAGE>
================================================================================
As deposits of BAC's subsidiary banks are insured by the BIF
administered by the FDIC, such subsidiaries are subject to
FDIC insurance assessments. For purposes of determining
insurance premium assessments, the FDIC places each insured
bank in one of nine risk categories based on its level of
capital and other relevant information (such as supervisory
evaluations). Assessment rates for deposit insurance
premiums currently range from zero percent to 0.27 percent,
depending on the assessment category into which the insured
institution is placed.
Deposits of BAC's subsidiary savings association and
portions of the deposits of BAC subsidiary banks are insured
by the Savings Association Insurance Fund (SAIF)
administered by the FDIC. The portion of the average
assessment base that is attributable to the adjusted amount
of deposits acquired from savings associations is treated as
SAIF deposits and is assessed at the rate applicable to SAIF
members in the same risk category. Those rates effectively
range from zero percent to 0.27 percent.
Under legislation enacted in 1996, beginning January 1,
1997, BIF member institutions will begin sharing the cost of
funding Financing Corporation interest payments. The cost
of funding these interest payments will be in the form of an
assessment on both BIF and SAIF insured deposits. BIF
insured deposit assessment rates will be lower than the SAIF
rates. Actual rates will fluctuate over time depending on
the amount of deposits insured by the BIF and SAIF at the
time the assessment is made.
D. KEY LEGISLATIVE AND REGULATORY DEVELOPMENTS
1. Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency
Act, which was enacted in 1994, authorizes bank holding
companies to acquire banks in other states, subject to
certain deposit concentration limitations. Beginning June 1,
1997 and subject to certain deposit concentration and other
limitations, banks were authorized to merge with other banks
in states that do not "opt out" of the interstate
legislation prior to June 1, 1997. Interstate mergers were
permitted to be conducted prior to June 1, 1997 in states
that specifically permit such mergers. The ability to merge
with other banks across state lines has enabled BAC to
consolidate a number of its affiliate banking operations.
However, Texas has "opted out".
2. Pending Legislation and Regulation
During 1997, Congress considered reform of the Glass-
Steagall Act and the BHCA, which restrict banks' and bank
holding companies' ability to engage in certain activities,
including the underwriting of and dealing in various
securities. If such statutory reform is enacted in the
future, it could cause a significant change in the makeup of
the financial services industry and affect the ability of
BAC to offer a broader range of financial products.
As noted above, it is impossible to predict whether or when
any such legislation and regulation might be enacted, and
there can be no assurance as to the impact of any such
legislation on BAC's future business or results of
operations.
16
<PAGE>
================================================================================
3. Environmental Regulation
Since BAC is not a manufacturer using or a transporter
conveying chemicals or toxins that might have an adverse
effect on the environment, its primary exposure to
environmental law and regulation is through its lending and
trust activities. BAC's lending and trust procedures
include controls designed to identify and monitor this
exposure in an effort to avoid any significant loss or
liability related to environmental regulations.
E. MONETARY AND ECONOMIC POLICIES
The operations of bank holding companies and their
subsidiaries are affected by the credit and monetary
policies of the FRB. An important function of the FRB is to
regulate the national supply of bank credit. Among the
instruments of monetary policy used by the FRB to implement
its objectives are open market operations in U.S. Government
securities, changes in the discount rate on bank borrowings,
and changes in reserve requirements on bank deposits. These
instruments of monetary policy are used in varying
combinations to influence the overall level of bank loans,
investments and deposits, the interest rates charged on
loans and paid for deposits, the price of the dollar in
foreign exchange markets, and the level of inflation. The
credit and monetary policies of the FRB have had a
significant effect on the operating results of BAC in the
past and are expected to continue to do so in the future.
- --------------------------------------------------------------------------------
EMPLOYEES At December 31, 1997, BAC's staff level on a full-time-
equivalent basis was approximately 77,000. BAC had
approximately 90,500 employees, both full-time and part-
time, at December 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
================================================================================
Due to the nature of its business, BAC and the Bank are
subject to various threatened or filed legal actions. Some
of these actions allege damages, or seek penalties or other
relief, in very large amounts.
The Bank has been named in one such suit by the City of San
Francisco and several related public entities, and by the
State of California, in an action entitled State of
California, etc ex rel Stull v. Bank of America NT&SA, et
al. (No. 968-484). The case was instituted on April 1, 1995
in the Superior Court for the City and County of San
Francisco. The City of San Francisco and related public
entities intervened in the case on May 1, 1997, and the
State of California took over prosecution of the case on May
5, 1997. The chief allegation of this suit is that the Bank
retained unclaimed funds related to bonds and coupons which
were not presented by bondholders rather than returning them
to certain bond issuers or escheating such funds to the
State. The suit also alleges False Claims Act exposure for
alleged fee overcharges and claims that the Bank improperly
invested bond program funds. The amount of any ultimate
exposure cannot be determined with certainty at this time.
Based on the results of BAC's investigation to date, BAC
does not expect the final outcome of the threatened or filed
suits, including the suit described above, to have a
material adverse effect on its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
================================================================================
None.
17
<PAGE>
PART II
================================================================================
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
================================================================================
Information on dividend restrictions, dividend payments, the
principal market for and trading price of the Parent's
common stock, and the number of holders of such stock is
incorporated by reference from pages 21, 22, 50 through 52,
Note 30 on pages 88 through 90, and Note 32 on page 92 of
the 1997 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
================================================================================
Selected financial data is incorporated by reference from
pages 21 and 22 of the 1997 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
================================================================================
Management's Discussion and Analysis of Financial Condition
and Results of Operations is incorporated by reference from
pages 21 through 53 of the 1997 Annual Report to
Shareholders.
FORWARD-LOOKING From time to time, the Parent makes forward-looking
STATEMENTS statements. Forward-looking statements include financial
projections, statements of plans and objectives for future
operations, statements of future economic performance, and
statements of assumptions relating thereto.
The Parent may include forward-looking statements in its
periodic reports to the Securities and Exchange Commission
on Forms 10-K, 10-Q, and 8-K, in its annual report to
shareholders, in its proxy statement, in other written
materials, and in statements made by senior management to
analysts, institutional investors, representatives of the
media, and others.
By their very nature, forward-looking statements are subject
to uncertainties, both general and specific, and risks exist
that predictions, forecasts, projections and other forward-
looking statements will not be achieved. Actual results may
differ materially due to a variety of factors. Among the
uncertainties to which the Parent's forward-looking
statements are subject are Year 2000 on page 28, Recent
International Developments and Regional Foreign Exposures on
pages 35 through 37, and Risk Management and Capital
Management on pages 44 through 53 of the Parent's 1997
Annual Report to Shareholders. In addition, various events
can create uncertainties to which the Parent's forward-
looking statements are subject. These events include, but
are not limited to, technological changes; the effects of
competition or of legislative or regulatory developments
(see "Competition" and "Supervision and Regulation" on pages
14 through 17); changes in fiscal monetary and tax policies
of the United States and other countries in which the Parent
does business; political or social developments, including
war, civil unrest or terrorist activity; the possibility of
foreign exchange controls, expropriation, nationalization or
confiscation of assets in countries in which the Parent
conducts business; and natural disasters (including
earthquakes).
18
<PAGE>
================================================================================
When relying on forward-looking statements to make decisions
with respect to the Parent, investors and others should
carefully consider these and other uncertainties and events,
whether or not the statements are described as forward-
looking.
Forward-looking statements made by the Parent are intended
to apply only at the time they are made, unless explicitly
stated to the contrary. Moreover, whether or not stated in
connection with a forward-looking statement, the Parent
undertakes no obligation to correct or update a forward-
looking statement should the Parent later become aware that
it is not likely to be achieved. If the Parent were to
update or correct a forward-looking statement, investors and
others should not conclude that the Parent will make
additional updates or corrections thereafter.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
================================================================================
Qualitative and Quantitative Disclosures About Market Risk
is incorporated by reference from pages 45 through 49 of the
1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
================================================================================
The Report of Independent Auditors, the consolidated
financial statements, and the notes to consolidated
financial statements are incorporated by reference from
pages 55 through 92 of the 1997 Annual Report to
Shareholders. See Item 14 of this report for information
concerning financial statements and schedules filed with
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
================================================================================
None.
19
<PAGE>
PART III
================================================================================
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
================================================================================
Reference is made to the text under the captions, "Executive
Compensation, Benefits and Related Matters" (excluding the
material under the headings "Report of the Executive
Personnel and Compensation Committee" and "Shareholder
Return Performance Graph" therein) and "Item No. 1--Election
of Directors" in the Proxy Statement for the May 21, 1998
Annual Meeting of Shareholders of the Parent for
incorporation of information concerning directors and
persons nominated to become directors. Information
concerning executive officers of the Parent as of March 1,
1998 is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH REGISTRANT
<S> <C> <C>
David A. Coulter 50 Chairman of the Board, President,
and Chief Executive Officer
Kathleen J. Burke 46 Vice Chairman - Human Resources
H. Eugene Lockhart 48 President, Global Retail Bank
Jack L. Meyers 55 Vice Chairman - Risk Management
Michael J. Murray 53 President, Global Wholesale Bank
Michael E. O'Neill 51 Vice Chairman and Chief Financial Officer
Martin A. Stein 57 Vice Chairman - Technology, Operations
and Payments
</TABLE>
DAVID A. COULTER was appointed Chairman of the Board on May
23, 1996 and as Chief Executive Officer of the Parent and
the Bank on January 1, 1996, in addition to his title as
President. He was appointed to the Board of Directors of the
Parent and the Bank on October 2, 1995. He was appointed
President of the Parent and the Bank on August 7, 1995.
Previously, he was Vice Chairman of the Parent and the Bank
from February 1993 to August 1995. He was appointed Group
Executive Vice President of the Bank on April 27, 1992.
KATHLEEN J. BURKE was appointed Vice Chairman of the Parent
and the Bank on March 14, 1994, in addition to her title as
Personnel Relations Officer of the Parent. She was
appointed Executive Vice President and Personnel Relations
Officer of the Parent and Executive Vice President of the
Bank on April 22, 1992 and Group Executive Vice President of
the Bank on April 27, 1992.
H. EUGENE LOCKHART was appointed President, Global Retail
Bank of the Parent and the Bank on April 28, 1997 when he
joined the Bank. Prior to joining the Bank, Mr. Lockhart was
President and CEO of MasterCard International from March
1993 to April 1997. From 1986 to 1993, Mr. Lockhart was CEO
of Midland Bank PLC.
20
<PAGE>
================================================================================
JACK L. MEYERS was appointed Vice Chairman of the Parent and
the Bank on October 4, 1993. He became Chief Credit
Officer of the Bank on September 3, 1993. He was Group
Executive Vice President responsible for the Bank's
Commercial Business Group from 1991 to 1993.
MICHAEL J. MURRAY was appointed President, Global Wholesale
Bank of the Parent and the Bank on April 28, 1997. He was
appointed Vice Chairman of the Parent and the Bank on
October 2, 1995. Previously, he was Group Executive Vice
President responsible for the Bank's U.S. Corporate Group
from September 1994 to September 1995. From 1992 to August
1994, Mr. Murray served as Vice Chairman of Continental.
MICHAEL E. O'NEILL was appointed Vice Chairman and Chief
Financial Officer of the Parent and the Bank on December 4,
1995. Previously, he was Group Executive Vice President of
the Bank and head of the Global Equity Investments Group
from September 1994 to November 1995. From 1991 to August
1994, Mr. O'Neill served as Chief Financial Officer of
Continental.
MARTIN A. STEIN was appointed Vice Chairman of the Parent
and the Bank on April 27, 1992.
The present term of office for the officers named above will
expire on May 21, 1998 or on their earlier retirement,
resignation, or removal. There is no family relationship
among any such officers.
21
<PAGE>
================================================================================
ITEM 11. EXECUTIVE COMPENSATION
================================================================================
Information concerning executive compensation is
incorporated by reference from the text under the captions,
"Corporate Governance-Director Remuneration, Stock Ownership
Guidelines, Retirement, and Director Attendance" and
"Executive Compensation, Benefits and Related Matters"
(excluding the material under the headings "Report of the
Executive Personnel and Compensation Committee" and
"Shareholder Return Performance Graph" therein), in the
Proxy Statement for the May 21, 1998 Annual Meeting of
Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
================================================================================
Information concerning ownership of equity stock of the
Parent by certain beneficial owners and management is
incorporated by reference from the text under the caption,
"Security Ownership of Certain Beneficial Owners", in the
Proxy Statement for the May 21, 1998 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
================================================================================
Information concerning certain relationships and related
transactions with officers and directors is incorporated by
reference from the text under the caption, "Executive
Compensation, Benefits and Related Matters" (excluding the
material under the headings "Report of the Executive
Personnel and Compensation Committee" and "Shareholder
Return Performance Graph" therein), in the Proxy Statement
for the May 21, 1998 Annual Meeting of Shareholders.
22
<PAGE>
PART IV
================================================================================
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
================================================================================
(a)(1) FINANCIAL The report of independent auditors and the
STATEMENTS following consolidated financial statements of BAC
are incorporated herein by reference from the 1997
Annual Report to Shareholders. Page number
references are to the 1997 Annual Report to
Shareholders.
<TABLE>
<CAPTION>
PAGE
<S> <C>
BankAmerica Corporation:
Report of Independent Auditors......................... 55
Consolidated Statement of Operations--
Years Ended December 31, 1997, 1996, and 1995........ 56
Consolidated Balance Sheet--December 31, 1997 and 1996. 57
Consolidated Statement of Cash Flows--Years Ended
December 31, 1997, 1996, and 1995.................... 58
Consolidated Statement of Changes in Stockholders'
Equity--Years Ended December 31, 1997, 1996, and 1995. 59
Notes to Consolidated Financial Statements.............. 60
</TABLE>
- --------------------------------------------------------------------------------
(a)(2)FINANCIAL Schedules to the consolidated financial statements
STATEMENT SCHEDULES (Nos. I and II of Rule 9-07) for which provision
is made in the applicable accounting regulation of
the Securities and Exchange Commission (Regulation
S-X) are inapplicable and therefore, are not
included.
Financial statements and summarized financial
information of unconsolidated subsidiaries or 50
percent or less owned persons accounted for by the
equity method are not included as such
subsidiaries do not, either individually or in the
aggregate, constitute a significant subsidiary.
- -------------------------------------------------------------------------------
(a)(3)EXHIBITS
<TABLE>
<CAPTION>
Incorporated by Reference From File
No. 1-7377:
-------------------------------------
Report on Form
-------------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3.a. BankAmerica Corporation Certificate of 6/30/97 3.a
Incorporation, as amended and restated.
3.b. BankAmerica Corporation By-laws, as amended. 6/30/97 3.b
4.a. The Parent and certain of its consolidated
subsidiaries have outstanding certain long-term
debt. See Notes 13, 14, and 15 on pages 71
through 73 of the 1997 Annual Report to
Shareholders. None of such debt exceeds 10 percent
of the total assets of the Corporation; therefore,
copies of constituent instruments defining the rights
of holders of such debt are not included as exhibits.
The Parent agrees to furnish copies of such
instruments to the Securities and Exchange
Commission upon request.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Incorporated by Reference From
File No. 1-7377:
---------------------------------
Report on Form
------------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4.b. Rights Agreement dated as of April 11, 1988, 12/31/94 4.b
between the Parent and Manufacturers Hanover
Trust Company of California, as Rights Agent, as
amended.
4.c. Description of BankAmerica Corporation's
confidential voting policy (incorporated by
reference to paragraph entitled "Confidential
Voting" in BankAmerica Corporation's
Proxy Statement dated March 23, 1998,
File No. 1-7377)
10.a. BankAmerica Corporation 1992 Management X
Stock Plan, as amended./a/
10.b. BankAmerica Corporation 1987 Management X
Stock Plan, as amended through November 3,
1997./a/
10.c. Continental Bank Corporation 1991 Equity X
Performance Incentive Plan, as last amended
November 3, 1997./a/
10.d. Continental Bank Corporation 1982 Performance, X
Restricted Stock and Stock Option Plan, as
last amended November 3, 1997./a/
10.e. BankAmerica Corporation Performance Equity X
Program, as amended./a/
10.f. Security Pacific Corporation Stock Option Plan X
as last amended November 3, 1997./a/
10.g. Security Pacific Corporation StockBased X
Incentive Award Plan, as last amended
November 3, 1997./a/
10.h. Form of BankAmerica Corporation and Bank of X
America National Trust and Savings Association
Deferred Compensation Plan for Directors,
as amended and restated./a/
10.i. Employment agreement between Ladder Merger X
Corporation and Sanford R. Robertson dated
June 8, 1997./a/
10.j. Employment letter from BankAmerica X
Corporation to H. Eugene Lockhart dated
March 4, 1997, as amended./a/
10.k. BankAmerica Corporation Deferred Compensation X
Plan as amended and restated./a/
10.l. BankAmerica Corporation Management Stock X
Plan Option Gain Deferral Program./a/
10.m. BankAmerica Corporation Retirement Plan for 12/31/95 10.a
Nonofficer Directors, as amended./a/
</TABLE>
- -------------------------
/a/ Management contract or compensatory plan, contract, or arrangement.
24
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
Incorporated by Reference From File
No. 1-7377:
---------------------------------------
Report on Form
---------------------------
10-Q or 10-K
Filed 8-K for the Period Exhibit
No. Description Herewith Dated Ending No.
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10.n. BankAmerica Corporation Senior Management 12/31/95 10.d
Incentive Plan, as amended (formerly the "Annual
Management Incentive Plan")./a/
10.o. Supplemental Retirement Plan (formerly the 12/31/96 10.e
"CareerAccounts Plan")./a/
10.p. BankAmerica Corporation Executive Compensation 3/31/97 10.b
Program - Benefits/Perquisites Summary,
as amended./a/
10.q. BankAmerica Corporation Management Incentive 9/30/95 10.c
Stock Plan, as amended./a/
10.r. BankAmerica Corporation 1991 Stock Appreciation 6/30/92 10(a)
Rights Plan./a/
10.s. Employment Agreement dated April 30, 1987 12/31/92 10(k)
between R.M. Rosenberg and the Parent and
the Bank, and Supplemental Benefits Agreement
dated as of November 21, 1985 between
R.M. Rosenberg and Seafirst Corporation and
Seattle-First National Bank./a/
10.t. Supplemental Benefits Agreement Dated July 9, 12/31/95 10.l
1990 and December 6, 1990 between M.A. Stein
and the Parent./a/
10.u. Change in Control Severance Pay Program./a/ 12/31/95 10.o
10.v. General Release and Settlement Agreement 3/31/97 10.a
between T.E. Peterson and the Parent effective
March 27, 1997./a/
10.w. Continental Illinois Corporation 1979 Stock 12/31/96 10.n
Option Plan, as amended./a/
12. Ratios of Earnings to Fixed Charges and Ratios of X
Earnings to Combined Fixed Charges and Preferred
Stock Dividends.
13. 1997 Annual Report to Shareholders. Portions not X
incorporated by reference are furnished for
informational purposes and are not filed herewith.
21. BankAmerica Corporation Subsidiaries. X
23. Consent of Ernst & Young LLP. X
24. Powers of Attorney. X
27. Financial Data Schedule. X
</TABLE>
- ------------------------
/a/ Management contract or compensatory plan, contract, or arrangement.
25
<PAGE>
================================================================================
(b)REPORTS ON During the fourth quarter of 1997, the Parent filed reports
FORM 8-K on Form 8-K dated October 1, 1997 and October 15, 1997. The
October 1, 1997 report disclosed, pursuant to Item 5 of
the report, the closing of the previously announced
acquisition by BankAmerica Corporation of Robertson
Stephens & Company. The October 15, 1997 report filed,
pursuant to Items 5 and 7 of the report, a copy of the
Parent's press release titled "BankAmerica Third Quarter
Earnings." After the fourth quarter of 1997, the Parent
filed reports on Form 8-K dated January 21, 1998, February
2, 1998 and March 4, 1998. The January 21, 1998 report
filed, pursuant to Items 5 and 7 of the report, a copy of
the Parent's press release titled "BankAmerica Fourth
Quarter Earnings." The February 2, 1998 report filed,
pursuant to Items 5 and 7 of the report, a copy of the
Parent's press release titled "BankAmerica Board Extends
Stock Repurchase Program, Increases Common Stock
Dividend." The March 4, 1998 report disclosed, pursuant to
Item 5 of the report, the Parent's intention to sell the
consumer branch and small business operations of Bank of
America Texas, N.A.
26
<PAGE>
SIGNATURES
================================================================================
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
March 13, 1998 BANKAMERICA CORPORATION
by /s/ JOHN J. HIGGINS
--------------------------
(John J. Higgins
Executive Vice President
and Chief Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
Principal Executive Officer and Director:
/s/ DAVID A. COULTER Chairman of the Board, President
---------------------------------------------------- and Chief Executive Officer
(David A. Coulter)
Principal Financial Officer:
/s/ MICHAEL E. O'NEILL Vice Chairman and Chief
---------------------------------------------------- Financial Officer
(Michael E. O'Neill)
Principal Accounting Officer:
/s/ JOHN J. HIGGINS Executive Vice President
---------------------------------------------------- and Chief Accounting Officer
(John J. Higgins)
</TABLE>
Directors:
JOSEPH F. ALIBRANDI* Director WALTER E. MASSEY* Director
PETER B. BEDFORD* Director JOHN M. RICHMAN* Director
RICHARD A. CLARKE* Director SANFORD R. ROBERTSON* Director
TIMM F. CRULL* Director RICHARD M. ROSENBERG* Director
KATHLEEN FELDSTEIN* Director A. MICHAEL SPENCE* Director
DONALD E. GUINN* Director SOLOMON D. TRUJILLO* Director
FRANK L. HOPE, JR.* Director
A majority of the members of the Board of Directors.
*By /s/ CHERYL A. SOROKIN
-------------------------------------
(Cheryl A. Sorokin, Attorney-in-Fact)
Dated: March 13, 1998
27
<PAGE>
Other information about BankAmerica Corporation may be found in its quarterly
Analytical Review and Form 10-Q and its Annual Report to Shareholders. These
reports, as well as additional copies of this Form 10-K, may be obtained from:
BANK OF AMERICA
CORPORATE PUBLIC RELATIONS #13124
P.O. BOX 37000
SAN FRANCISCO, CA 94137
Information Online - 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).
[LOGO OF BANKAMERICA CORPORATION]
BANKAMERICA
- --------------------------------------------------------------------------------
NL-9 3-98 [RECYCLED PAPER LOGO] RECYCLED PAPER
<PAGE>
Exhibit 10.a
[LOGO OF BANK OF AMERICA]
BANKAMERICA CORPORATION
1992 MANAGEMENT STOCK PLAN
AS ADOPTED MARCH 2, 1992 AND
AMENDED THROUGH FEBRUARY 2, 1998
<PAGE>
BANKAMERICA CORPORATION
1992 MANAGEMENT STOCK PLAN
TABLE OF CONTENTS
PAGE
----
ARTICLE I GENERAL...................................................... 1
1.1 Background of Plan........................................... 1
1.2 Purpose of the Plan.......................................... 1
1.3 Definitions.................................................. 1
1.4 Administration of Plan....................................... 5
1.5 Eligibility to Receive Grants and Awards..................... 6
1.6 Types of Grants and Awards Under Plan........................ 6
1.7 Limitation on Available Shares............................... 6
1.8 Effective Date and Term of Plan.............................. 7
1.9 Limitation on Options and SARs Awardable to
Any Single Participant....................................... 8
ARTICLE II INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS...... 8
2.1 Grant of Stock Options....................................... 8
2.2 Award Agreements............................................. 8
2.3 Option Price................................................. 8
2.4 Option Period................................................ 9
2.5 Limitation on ISOs........................................... 9
2.6 Manner of Paying Option Price................................ 9
2.7 Exercise of Option........................................... 10
2.8 Cancellation of SARs......................................... 10
2.9 Cancellation and Regrant of Options.......................... 10
2.10 Deferral of Option Gain...................................... 10
ARTICLE III STOCK APPRECIATION RIGHTS.................................... 10
3.1 Grant of Stock Appreciation Rights........................... 10
3.2 Form and Timing of Payment................................... 11
3.3 Cancellation of Related Options.............................. 11
ARTICLE IV RESTRICTED STOCK AND RESTRICTED STOCK UNITS.................. 12
4.1 Introduction................................................. 12
4.2 Award of Restricted Stock and Restricted Stock Units......... 12
4.3 Minimum Restrictions on Disposition.......................... 12
4.4 Optional Restrictions........................................ 13
4.5 Termination of Employment of Restricted Stockholder
for Gross Misconduct......................................... 13
4.6 Termination of Employment of Restricted Stockholder
not Involving Gross Misconduct............................... 13
4.7 Registration and Escrow...................................... 14
4.8 Payment in Respect of Restricted Stock Units................. 14
4.9 Dividends on Restricted Stock................................ 15
i
<PAGE>
Page
----
ARTICLE V OTHER STOCK-BASED AWARDS..................................... 15
5.1 Other Stock-Based Awards..................................... 15
ARTICLE VI MISCELLANEOUS................................................ 15
6.1 Notices...................................................... 15
6.2 Amendments of Plan........................................... 16
6.3 Leaves of Absence............................................ 16
6.4 Dilution and Other Adjustments............................... 16
6.5 General Restriction.......................................... 17
6.6 Change in Control............................................ 17
6.7 Withholding Taxes............................................ 18
6.8 Non-Assignability............................................ 18
6.9 No Right to Employment....................................... 19
6.10 Rights as Shareholder........................................ 19
6.11 Entire Plan.................................................. 19
6.12 Governing Law................................................ 20
6.13 Delegation................................................... 20
6.14 Foreign Employees............................................ 20
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BANKAMERICA CORPORATION
1992 MANAGEMENT STOCK PLAN
ARTICLE I
GENERAL
1.1 Background of Plan. BankAmerica Corporation hereby establishes
the BankAmerica Corporation 1992 Management Stock Plan (the "Plan"). The Plan
provides for the grant of stock options on BankAmerica Corporation Common Stock,
and for the grant of restricted stock, restricted stock units, stock
appreciation rights, and other stock-based awards. The Plan is the successor to
the BankAmerica Corporation 1987 Management Stock Plan.
1.2 Purpose of the Plan. The purpose of the Plan is to provide
contingent financial incentive to key executive officers of BankAmerica
Corporation and its present and future Subsidiaries (as defined below) and other
employees whose participation in the Plan is deemed to be in the best interests
of BankAmerica Corporation. The Plan will offer competitive levels of incentive
compensation related to long-term corporate financial performance to those key
officers and other employees of the Company who, by virtue of their position and
efforts, contribute to or substantially influence the financial success of
BankAmerica Corporation over multiple-year periods. The Plan is also intended as
a means of increasing officer shareholdings, thereby strengthening the
commonality of interest between BankAmerica shareholders and key officers and
other employees in the Company's management, and as an aid in attracting,
retaining and motivating key officers and other employees of outstanding
abilities and specialized skills.
1.3 Definitions. As used in the Plan and the related Award
Agreements, the following terms, when written with initial capital letters, will
have the meanings stated below:
(a) Award means any grant or award of an Option, Restricted Stock,
Restricted Stock Unit, SAR or Other Stock-Based Award under the Plan.
(b) Award Agreement means any written agreement between
BankAmerica and an employee of the Company pursuant to which a grant
or award is made under the Plan. The Committee shall determine the
provisions of each Award Agreement subject to the provisions hereof.
(c) BankAmerica means BankAmerica Corporation, a Delaware
corporation.
(d) Board means Board of Directors of BankAmerica.
(e) Change in Control means that one of the following events
has occurred:
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(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either (i) the then outstanding shares of common stock of
BankAmerica (the "Outstanding BankAmerica Common Stock") or
(ii) the combined voting power of the then outstanding voting
securities of BankAmerica entitled to vote generally in the
election of directors (the "Outstanding BankAmerica Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from
BankAmerica, (B) any acquisition by BankAmerica, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or (D) any acquisition by
any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) below.
(ii) Individuals who, as of August 7, 1995, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to August 7,
1995 whose election, or nomination for election by BankAmerica's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board.
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of BankAmerica or its principal
Subsidiary (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding BankAmerica Common
Stock and Outstanding BankAmerica Voting Securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 70% (80% in the case of any Award made
prior to February 5, 1996) of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities
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entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns BankAmerica or all or
substantially all of BankAmerica's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding BankAmerica Common Stock
and Outstanding BankAmerica Voting Securities, as the case may
be, (provided, however, that, for the purposes of this clause
(A), any shares of common stock or voting securities of such
resulting corporation received by such beneficial owners in such
Business Combination other than as the result of such beneficial
owners' ownership of Outstanding BankAmerica Common Stock or
Outstanding BankAmerica Voting Securities immediately prior to
such Business Combination shall not be considered to be owned by
such beneficial owners for the purposes of calculating their
percentage of ownership of the outstanding common stock and
voting power of the resulting corporation), (B) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation unless such Person owned
20% or more of the Outstanding BankAmerica Common Stock or
Outstanding BankAmerica Voting Securities immediately prior to
the Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board (or, in the case of BankAmerica's principal Subsidiary,
the corresponding board of directors) at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination.
(iv) Approval by the shareholders of BankAmerica of a
complete liquidation or dissolution of BankAmerica.
(f) Committee means the Executive Personnel and Compensation
Committee of the Board.
(g) Common Stock means shares of BankAmerica's common stock, $1.5625
par value per share.
(h) Company means BankAmerica and its Subsidiaries,
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collectively.
(i) The Fair Market Value of a share of Common Stock on any date
means the average of the high and low sales prices of a share of Common
Stock as reflected in the report of consolidated trading of New York
Stock Exchange listed securities for that day (or, if no shares were
publicly traded on that day, the immediately preceding day that shares
were so traded) published in The Wall Street Journal or in any other
publication selected by the Committee; provided, however, that if shares
of Common Stock shall not have been publicly traded for more than ten
days immediately preceding such date, then the fair market value of a
share of Common Stock shall be determined by the Committee in such manner
as it may deem appropriate.
(j) Major Combination means a merger, acquisition or other business
combination in which the number of shares of Common Stock outstanding as of
the close of business on the effective date of the combination is at least
10% greater than the number of shares of Common Stock outstanding prior to
the effective date of the combination.
(k) 1987 Plan means the plan adopted by the Board of Directors of
BankAmerica Corporation on April 6, 1987, as amended, pursuant to which
BankAmerica Corporation has issued non-qualified stock options, incentive
stock options, performance stock options, and restricted stock to key
officers and other employees of BankAmerica and to other individuals whose
participation in the 1987 Plan was deemed to be in the best interests of
BankAmerica.
(l) Option means an option to purchase shares of the Common Stock,
and shall be one of two kinds: (i) Incentive Stock Options ("ISOs") and
(ii) Non-Qualified Stock Option ("NQSOs"). The Company intends the ISOs
shall meet the requirements of Section 422A of the Internal Revenue Code
and the regulations thereunder applicable to incentive stock options, and
that NQSOs shall not meet such requirements.
(m) Optionee means the holder of an Option.
(n) Other Stock-Based Award means an Award granted pursuant to
Section 5.1 of the Plan.
(o) Participant means an officer or employee designated to receive
a grant or award under the Plan.
(p) Restricted Stock means Common Stock issued or delivered
pursuant to Article IV with the restrictions set forth therein.
(q) Restricted Stock Unit means any right granted
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pursuant to Article IV that is denominated in shares of Common Stock.
(r) Retirement means, with respect to grants and awards made on or
after August 2, 1993, the last day of employment with BankAmerica or one
of its subsidiaries prior to the employee's retirement at normal
retirement age under a retirement program of BankAmerica or one of its
Subsidiaries; and, with respect to grants and awards made before August
2, 1993, the last day of employment with BankAmerica or one of its
subsidiaries prior to the employee's retirement under a retirement
program of BankAmerica or one of its subsidiaries.
(s) Stock Appreciation Right ("SAR") has the meaning set forth in
Section 3.1.
(t) Subsidiary means any corporation of which BankAmerica owns,
directly or indirectly, twenty percent or more of the voting stock.
(u) Window Period means the time period described in Section 3.2
hereof.
1.4 Administration of Plan. (a) The Plan shall be administered by the
Committee. The Committee shall consist of at least three members of the Board,
none of whom shall be, while serving on the Committee, eligible to receive a
grant or award under the Plan or under any other plan of the Company or its
affiliates under which the participants are entitled to acquire Common Stock,
stock options, restricted stock, restricted stock units, and related rights,
stock appreciation rights or other stock-based awards of the Company or any of
its affiliates. Members of the Committee shall serve at the pleasure of the
Board. Notwithstanding the foregoing, all grants and awards under the Plan to
the Chief Executive Officer of BAC shall be approved or ratified by the Board.
(b) Subject to the provisions of the Plan, the Committee shall have
sole, final, and conclusive authority to determine:
(i) the employees to whom Awards shall be made;
(ii) the number of shares of Common Stock to be optioned,
granted or awarded to each such employee;
(iii) whether and to what extent an Optionee may use
already-owned shares of Common Stock to exercise Options;
(iv) the restrictions to be imposed on each share of
Restricted Stock and on Restricted Stock Units awarded pursuant to
Article IV of this Plan, which shall
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not be less than the minimum restrictions set forth therein;
(v) which Options granted shall be Incentive Stock Options,
and which shall be Non-Qualified Stock Options;
(vi) the price to be paid for the shares upon the exercise of
each Option, which shall be not less than 100% of the Fair Market
Value per share, as determined by the Committee, of the Common Stock
at the time of granting the Option;
(vii) the period within which each Option shall be exercised;
(viii) the terms and conditions of each Award Agreement between
BankAmerica and an employee to whom the Committee has made an Award,
which, however, shall be in accordance with the provisions of the
Plan; and
(ix) subject to the provisions of Section 6.13, the Committee
shall have the power, authority, and sole discretion to construe,
interpret and administer the Plan. The Committee's decisions
construing, interpreting and administering the Plan shall be
conclusive and binding on all parties.
1.5 Eligibility to Receive Grants and Awards. Employees of BankAmerica or
of any of its Subsidiaries who shall, in the judgment of the Committee be
qualified by position, training or ability to contribute substantially to the
progress of BankAmerica, shall be eligible to receive grants and awards under
the Plan.
1.6 Types of Grants and Awards Under Plan. Grants and awards under the
Plan may be in the form of any one or more of the following: (i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, (iii) Stock Appreciation Rights, (iv)
Restricted Stock Units, (v) Restricted Stock or (vi) Other Stock-Based Awards.
1.7 Limitation on Available Shares. For each calendar year from and
including 1995 a number of shares of Common Stock in an amount of up to one and
one-half percent (1.5%) of the number of shares of Common Stock outstanding as
reported in the annual report to shareholders of BankAmerica for the preceding
year shall become available for delivery with respect to Awards under the Plan,
provided, however, that as of the effective date of any Major Combination (as
- -------- -------
defined in Section 1.3) the number of shares available for delivery in that year
with respect to Awards under the Plan shall be increased to one and one-half
percent (1.5%) of the number of shares of Common Stock outstanding as of the
close of business on the effective date of that Major Combination. Shares of
Common Stock delivered under the Plan may be original issue shares, shares
purchased in the open market or otherwise or other
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treasury stock.
In addition, (a) any shares of Common Stock which as of the effective date
of the Plan are reserved for delivery under the 1987 Plan and which are not
thereafter delivered, and (b) any shares of Common Stock available for delivery
under the Plan in previous years but not actually delivered, shall be added to
the aggregate number of shares of Common Stock available for delivery in that
calendar year under the Plan; provided, however, that no more than 30 percent
-------- -------
(30%) of the shares of Common Stock available for delivery under the Plan in any
calendar year shall be delivered in respect of Restricted Stock or Restricted
Stock Units. Notwithstanding the foregoing, but subject to adjustment as
provided in Section 6.4, no more than 5,000,000 shares shall be cumulatively
available under the Plan for delivery upon the exercise of ISOs. The Committee
shall have no obligation to grant or award all or any portion of the shares
available for delivery in any year. The Board may, by resolution, limit the
number of shares that may be available for delivery with respect to Awards under
the Plan in any calendar year to a number of shares lower than would otherwise
be available for delivery hereunder.
Shares of Common Stock subject to Awards under the Plan that for any reason
are cancelled or terminated, or expire, shall again be available for delivery
under the Plan.
Shares of Restricted Stock and Restricted Stock Units that for any reason
are reacquired by BankAmerica pursuant hereto shall again be available for
delivery under the Plan; provided, however, that shares of Restricted Stock or
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Restricted Stock Units as to which dividends or payments equivalent to dividends
have been paid to or reinvested for the account of the Restricted Stockholder
prior to reacquisition by BankAmerica shall not again be available for delivery
under the Plan after such reacquisition.
Notwithstanding the foregoing, neither (i) shares of Common Stock
transferred or relinquished to the Company upon the exercise of an Option or in
satisfaction of any withholding obligation, nor (ii) shares of Common Stock
subject to an Award denominated in shares of Common Stock but settled by the
payment of cash in accordance with the Plan, shall again be available for
delivery under the Plan.
1.8 Effective Date and Term of Plan. (a) The Plan shall become effective
on March 2, 1992 and the Committee may, in its discretion, make grants and
awards to eligible key officers and other employees of the Company as of that
date, subject, however, to the approval of the Plan by the shareholders of
BankAmerica at the 1992 annual meeting of shareholders. In the event the Plan
is not approved at such meeting, the Plan and all grants and awards hereunder
shall be void, and the Company shall have no obligation to any recipients of
such grants and awards.
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(b) The Committee may make grants and awards under the Plan beginning
March 2, 1992 and during each subsequent year until such time as the Plan
may be terminated by the Board in its sole discretion, or as hereinafter
provided.
(c) Unless the shareholders of BankAmerica shall approve an extension
or renewal of the Plan for such new or additional term as they may
determine, no grants and awards shall be made after March 2, 2002. However,
all grants and awards made under the Plan prior to such date shall remain
in effect until such grants and awards shall have been satisfied,
terminated, or paid out, or expire, in accordance with the Plan and the
terms of such grants and awards.
1.9 Limitation on Options and SARs Awardable to Any Single Participant.
The maximum number of shares of Common Stock underlying Options and SARs that
may be awarded under the Plan to any single Participant during the period from
March 2, 1992, the effective date of the Plan, through March 2, 2002, is
10,000,000. The minimum price at which each Option is exercisable and the
minimum grant price of each SAR are specified in Sections 2.3 and 3.1,
respectively, of the Plan.
ARTICLE II
INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS
2.1 Grant of Stock Options. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to any eligible employee Incentive Stock Options
("ISOs" or "Options") and/or Non-Qualified Stock Options ("NQSOs" or "Options")
(as these terms are defined in Section 1.3) to purchase, for cash and/or for
already-owned shares of Common Stock, such number of shares of Common Stock as
the Committee shall determine.
2.2 Award Agreements. The grant of an ISO or NQSO shall be evidenced
by a written Award Agreement in such form as the Committee may from time to time
determine in accordance with the provisions of the Plan, executed by
BankAmerica. Each Award Agreement pursuant to which Options are granted shall
state the number of shares of Common Stock subject to the Option, the Option
price, the Option Period, and any limitations on the Option, the restrictions on
assigning and transferring the Option described in Section 6.8, the manner of
payment for shares of Common Stock, and such other terms as the Committee shall
determine.
2.3 Option Price. The purchase price per share of Common Stock which
the Optionee must deliver upon the exercise of an ISO or NQSO shall be fixed by
the Committee, but shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted.
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2.4 Option Period. (a) Each Option granted as an ISO or NQSO shall
become exercisable in part or in full at such time or times as the Committee may
determine and specify in each Award Agreement; provided, however, that no Option
-------- -------
will be exercisable before the date six months after the date the Option was
granted and no ISO shall be exercisable after the expiration of 10 years from
the date the ISO was granted.
(b) Each Award Agreement shall set forth the extent to which the
Optionee shall have the right to exercise the Option following the
Optionee's retirement, death or termination of the Optionee's employment
with the Company (including termination that, pursuant to the Award
Agreement, may be deemed to occur upon a change in ownership of the
Optionee's employer such that the Optionee's employer ceases to be
BankAmerica or one of its Subsidiaries). Such provisions shall be
determined in the sole discretion of the Committee and need not be uniform
among all Options issued pursuant to the Plan.
(c) The Committee may determine in its sole discretion from time to
time to permit the Optionee to purchase all shares of Common Stock covered
by the Optionee's Options, upon or after the Optionee's death, retirement,
or termination of employment with the Company (including termination that,
in the sole discretion of the Committee, may be deemed to occur upon a
change in ownership of the Optionee's employer such that the Optionee's
employer ceases to be BankAmerica or one of its Subsidiaries), without
regard to whether the Options were fully exercisable upon death, retirement
or termination of employment under the terms of the Award Agreements with
respect to such Options.
2.5 Limitation on ISOs. Notwithstanding any other provisions in the
Plan or in any ISO agreement, to the extent the aggregate Fair Market Value
(determined at the time the option is granted) of stock with respect to which
ISOs granted after December 31, 1986 are exercisable for the first time by an
Optionee during any calendar year under all plans of BankAmerica and its
subsidiaries exceeds $100,000, such options shall be treated as NQSOs. This
rule shall be applied by taking options into account in the order in which they
were granted so that options with the earliest grant date will receive ISO
treatment.
No ISO shall be granted to any person who at the time owns more than ten
percent of total combined voting power of all classes of stock of BankAmerica
or of any Subsidiaries.
2.6 Manner of Paying Option Price. On exercise of each ISO or NQSO,
the Option Price shall be paid as follows: (a) in cash, (b) in already-owned
shares of Common Stock, or (c) in some combination of cash and shares, as
specified in the Award Agreement or as otherwise permitted by the Committee.
Already-owned shares of Common Stock must have been owned by the Optionee at the
time of exercise for at least the period of time specified in the Award
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Agreement, and shall be valued at their Fair Market Value on the date of
exercise.
2.7 Exercise of Option. The Committee shall establish, and shall set
forth in each Award Agreement, the procedures governing the exercise of an ISO
or NQSO. In general, subject to such specific provisions, an ISO or NQSO shall
be exercised as follows:
(a) the Optionee shall deliver written notice that he or she
intends to exercise the Option to the Company department or officer
designated in the Award Agreement;
(b) the Optionee shall pay the full Option Price at the time of
exercise, according to Section 2.6 above; and
(c) as soon as practicable after receipt of such notice and
payment, the Company shall direct BankAmerica's transfer agent to
register the shares of Common Stock in the name of the Optionee.
2.8 Cancellation of SARs. Each Award Agreement shall specify whether the
exercise of an ISO or NQSO with respect to a share of Common Stock shall cancel
any SAR related to such share.
2.9 Cancellation and Regrant of Options. The Committee may cancel
particular NQSOs and regrant to the same Optionee NQSOs to purchase the same or
a different number of shares of Common Stock, only (i) with the consent of the
Optionee, and (ii) if the Option Price for the NQSOs so regranted is no less
than the higher of (A) the Option Price for the NQSOs so cancelled, or (B) the
Fair Market Value of the Common Stock on the date of regrant.
2.10 Deferral of Option Gain. The Committee may permit an Optionee to
elect to defer the receipt of the shares of Common Stock upon exercise of an
Option under such rules as the Committee may determine in its sole discretion.
If such an election is made, upon exercise of the Option, the Company shall not
direct BankAmerica's transfer agent to register the shares of Common Stock in
the name of the Optionee until the date determined under the Committee's rules
and the Participant's election.
ARTICLE III
STOCK APPRECIATION RIGHTS
3.1 Grant of Stock Appreciation Rights. The Committee is hereby
authorized to grant Stock Appreciation Rights ("SARs") to Participants. The
terms and conditions of the SARs shall be as provided in the Award Agreement
with respect to such SARs. Each Award Agreement shall specify the grant price,
term, methods of exercise, methods of settlement, disposition of the SARs on
retirement, death or termination of employment of the holder of the
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SARs, and such other terms and conditions of the SARs as shall be determined
by the Committee. The Committee may impose such conditions or restrictions on
the exercise of any SAR as it may deem appropriate. SARs may be granted either
alone or in tandem with grants of Options under the Plan. SARs granted in
tandem with Options are referred to herein as "Tandem SARs".
The Committee shall not grant an SAR in tandem with an ISO unless,
pursuant to applicable law and rules and regulations of the Internal Revenue
Service, the SAR may be attached to the ISO without causing the ISO to fail to
meet the requirements of Section 422A of the Internal Revenue Code.
Subject to the terms of the Plan and the applicable Award Agreement,
an SAR shall confer on the holder thereof a right to receive payment (the "SAR
Value"), upon exercise thereof, equal to the excess of (i) the Fair Market Value
of one share of Common Stock on the date of exercise over (ii) the grant price
of the SAR as specified by the Committee, which shall be not less than the Fair
Market Value of one share of Common Stock on the date of grant of the SAR.
3.2 Form and Timing of Payment. (a) Exercise of Tandem SARs for Cash
or Common Stock. Tandem SARs exercised during the Window Period described below
shall be payable only in cash, and Tandem SARs exercised outside the Window
Period shall be payable only in shares of Common Stock. A "Window Period" is a
period (i) beginning on the third business day following the date of public
release of BankAmerica's quarterly or annual summary statements of revenues and
earnings and (ii) ending on the twelfth business day following such date.
(b) Amount of Cash Payable on Exercise of Tandem SARs. When
Tandem SARs are exercised during the Window Period, the Optionee shall
receive a cash amount equal to (i) the number of Tandem SARs exercised
multiplied by (ii) the difference between (A) the highest Fair Market
Value of one share of Common Stock as of any day during the Window
Period, and (B) the Option Price specified for the related Option.
(c) Number of Shares Issuable or Deliverable on Exercise of
Tandem SARs. When Tandem SARs are exercised outside the Window Period,
the Optionee shall receive the number of whole shares of Common Stock
equal to (i) the aggregate SAR Value (as defined in Section 3.1) of
the Tandem SARs exercised divided by (ii) the Fair Market Value (as
defined in Section 1.3) on the date of exercise. The Company shall
deliver cash in lieu of fractional shares.
3.3 Cancellation of Related Options. Each Award Agreement shall
specify whether the exercise of an SAR shall cancel any NQSO to which it
relates, to the extent of the exercise. Any exercise of an SAR with respect to
an ISO must be made in accordance with
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Section 3.1.
ARTICLE IV
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
4.1 Introduction. BankAmerica has outstanding shares of restricted
stock granted under the 1987 Plan, the BankAmerica Corporation Restricted Stock
Bonus Plan (the "Bonus Plan") and the BankAmerica Corporation Management
Incentive Stock Plan ("MISP"). Restricted stock already granted under the 1987
Plan, the Bonus Plan and the MISP will continue to be held under the terms of
those plans, except as provided in Section 1.7 of this Plan. Only grants of
Restricted Stock and Restricted Stock Units made on or after the effective date
of this new Plan shall be governed by the terms of this Article IV.
4.2 Award of Restricted Stock and Restricted Stock Units. The
Committee may, from time to time and subject to the provisions of the Plan and
such other terms and conditions as the Committee may prescribe, award shares of
Common Stock or Restricted Stock Units to be held under the restrictions set
forth in this Article to any eligible employee (the "Restricted Stockholder").
If an eligible employee has been employed less than six months, any award of
Restricted Stock shall only be made from Common Stock which is held as treasury
stock by BankAmerica.
4.3 Minimum Restrictions on Disposition. A Restricted Stockholder
may not, under any circumstances, voluntarily dispose of any of the Restricted
Stock or Restricted Stock Units prior to the first to occur of the following
events:
(a) the date on which the Restricted Stockholder completes the
period of continuous service, which shall not be less than one year,
with the Company following the award date specified by the Committee
for such award;
(b) delivery of the Restricted Stock to the Restricted
Stockholder following a Committee determination pursuant to Section
6.6 hereof in connection with a Change in Control;
(c) the Restricted Stockholder's retirement or death; or
(d) delivery of the Restricted Stock to the Restricted
Stockholder following his or her termination of employment prior to
retirement or death pursuant to a determination by the Committee
under Section 4.6.
The limitations in this Section 4.3 will hereinafter be referred to
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as the "minimum restrictions."
4.4 Optional Restrictions. In addition to the minimum restrictions, the
Committee may impose additional restrictions ("optional restrictions") upon the
Restricted Stockholder's voluntary disposition of the Restricted Stock or
Restricted Stock Units, either at the time the Committee makes an award of such
Restricted Stock or Restricted Stock Units or at any subsequent time before the
minimum restrictions expire. The Committee may impose optional restrictions
(such as, without limitation, permitting such disposition and release only in
installments over a period of years) as it may deem in the best interests of the
Restricted Stockholder, or in the case of the Restricted Stockholder's death, of
the heirs or legatees who become entitled to such Restricted Stock or Restricted
Stock Units by the applicable laws of inheritance or under the terms of the
Restricted Stockholder's will.
4.5 Termination of Employment of Restricted Stockholder for Gross
Misconduct. If a Restricted Stockholder's services are terminated for cause for
gross misconduct, all shares of Restricted Stock and Restricted Stock Units
awarded to any Restricted Stockholder under this Plan shall be forfeited, and
the Committee shall direct such shares of Restricted Stock and Restricted Stock
Units to be transferred and delivered to BankAmerica. Gross misconduct
includes, but is not limited to, acts of dishonesty, such as theft,
embezzlement, and falsification of the Company's records with intent to deceive;
breach of trust; knowing violation of rules established by the Company; and any
crime determined by the Company to result in termination of employment.
4.6 Termination of Employment of Restricted Stockholder not Involving
Gross Misconduct.
(a) Should a Restricted Stockholder who was employed by the Company
at the date of grant terminate his or her employment with the Company
prior to (i) the date on which he or she completes the period of
continuous service for the Company following the award date specified by
the Committee for such award, or (ii) his or her death or retirement, or
(b) should the Company terminate his or her employment for any reason
other than for a cause set forth in Section 4.5 above, BankAmerica shall
reacquire all the Restricted Stock and Restricted Stock Units without the
payment of consideration in any form to such Restricted Stockholder and the
Restricted Stockholder shall unconditionally forfeit any right, title or
interest to such Restricted Stock and Restricted Stock Units, unless the
Committee, up to 90 days after such termination, determines in its sole
discretion to permit the Restricted Stockholder to (i) retain all or any
part of the Restricted Stock, and/or (ii) to waive in whole
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or in part any or all remaining restrictions on Restricted Stock Units, and
to deliver shares of Common Stock to the Restricted Stockholder in respect
of such Restricted Stock Units. Upon direction of the Committee, all
forfeited Restricted Stock and Restricted Stock Units shall be transferred
and delivered to BankAmerica. Termination of a Restricted Stockholder's
employment with the Company shall be deemed to include a change in
ownership of the Restricted Stockholder's employer such that the Restricted
Stockholder's employer ceases to be BankAmerica or one of its Subsidiaries.
4.7 Registration and Escrow. Any Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event that any stock certificate is issued
in respect of shares of Restricted Stock granted under the Plan, such
certificate shall be registered in the name of the Restricted Stockholder and
shall either bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, or, at the direction of the
Committee, be held by Bank of America National Trust and Savings Association
(the "Bank") (or another escrow agent appointed by the Committee) in escrow
subject to delivery to the Restricted Stockholder or to BankAmerica at such
times and in such amounts as the Committee shall direct under the terms of the
Plan. When an employee accepts an award of Restricted Stock pursuant to the
Plan, he or she thereby grants an irrevocable power of attorney to the Bank or
any other escrow agent appointed by the Committee to cause the transfer and
delivery to BankAmerica of any such Restricted Stock which the Committee shall
direct to be so transferred and delivered pursuant hereto.
4.8 Payment in Respect of Restricted Stock Units.
(a) Each Restricted Stock Unit shall represent one share of Common
Stock, and shall, at the time and to the extent it becomes vested, be
payable by the delivery of one share of Common Stock. The Committee is
authorized to grant Restricted Stock Units under which the Restricted
Stockholder shall be entitled to receive payments equivalent to dividends
with respect to a number of shares of Common Stock determined by the
Committee, and the Committee may determine that such amounts (if any)
shall be paid to the Restricted Stockholder in cash from time to time, or
be deemed to have been reinvested in additional shares of Common Stock or
additional Restricted Stock Units, or otherwise reinvested. Restricted
Stock Units shall have no voting rights.
(b) The Committee may, in its discretion, provide that payment to
the Restricted Stockholder in respect of Restricted Stock Units shall be
deferred until such date or dates, not later than the Restricted
Stockholder's death, retirement or other termination of employment with
the Company, as the Restricted Stockholder may elect. Any such election
shall be filed in writing
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with the Committee in accordance with such rules and regulations,
including any time periods within which such election shall be made, as
the Committee may specify.
4.9 Dividends on Restricted Stock. Even while the Restricted Stock is
held in escrow, the Committee may determine that all dividends BankAmerica pays
on the Restricted Stock shall be delivered directly to the Restricted
Stockholder, not the escrow account.
4.10 Voting Rights. Even while the Restricted Stock is held in escrow,
the Committee may determine that the Restricted Stockholder shall have the same
voting rights with respect to the Restricted Stock as those provided to other
shareholders of Common Stock.
ARTICLE V
OTHER STOCK-BASED AWARDS
5.1 Other Stock-Based Awards. The Committee is hereby authorized to grant
to Participants such awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, shares of
Common Stock (including, without limitation, securities convertible into shares
of Common Stock) as are deemed by the Committee to be consistent with the
purposes of the Plan; provided, however, that such grants must comply with Rule
-------- -------
16b-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and applicable law, except that Options may be
transferable to the extent permitted by, and in accordance with the provisions
of, Section 6.8 of the Plan. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the terms and
conditions of such awards. Shares of Common Stock or other securities delivered
pursuant to a purchase right granted under this Section 5.1 shall be purchased
for such consideration, which may be paid by such method or methods and in such
form or forms, including, without limitation, cash, shares of Common Stock,
other securities, other awards, or other property, or any combination thereof,
as the Committee shall determine, the value of which consideration, as
established by the Committee, shall not be less than the Fair Market Value of
such shares of Common Stock or other securities as of the date such purchase
right is granted.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or messenger,
addressed
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(a) if to the Company, at
BankAmerica Corporation
1 South Van Ness Avenue, 7th Floor
San Francisco, CA 94103
Attn: c/o Bank of America NT&SA
Executive Product Services #3005
(b) if to the Participant, at the last address shown on the
Company's personnel records, or
(c) to such address as either the Company or the Participant shall
later designate by notice to the other.
6.2 Amendments of Plan. BankAmerica may, at any time and from time to
time, modify, amend, suspend or terminate the Plan in any respect by action of
the Board or by written amendment executed by a duly authorized officer of
BankAmerica. Notwithstanding the above, however, any modification, amendment,
suspension or termination of the Plan shall not affect a Participant's rights to
a grant or award previously made, except as provided in Section 1.8(a), or
except with his or her consent.
6.3 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence from the Company taken by the recipient of any
grant or award under the Plan. Without limiting the generality of the
foregoing, the Committee shall be entitled to determine (a) whether or not any
such leave of absence shall be treated as a termination of employment with the
Company within the meaning of the Plan and (b) the impact, if any, of any such
leave of absence on grants and awards under the Plan.
6.4 Dilution and Other Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
shares of Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, or exchange of shares of Common Stock or
other securities of BankAmerica, issuance of warrants or other rights to
purchase shares of Common Stock or other securities of BankAmerica, or other
similar corporate transaction or event, affects the Common Stock, such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
shall deem equitable, adjust any or all of (i) the number and type of shares of
Common Stock which thereafter may be made the subject of Awards, (ii) the number
and type of shares of Common Stock (or other
16
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securities or property) subject to outstanding Awards, and (iii) the grant,
purchase or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to Awards of ISOs no
-------- -------
such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422A of the Internal Revenue Code or any
successor provision thereto; and provided further that the number of shares of
-------- -------
Common Stock subject to any Award denominated in shares of Common Stock shall
always be a whole number.
6.5 General Restriction. Each grant and award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (a) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (b) the consent or approval of any government regulatory body,
or (c) an agreement by the recipient of a grant or award with respect to the
disposition of shares of Common Stock, is necessary or desirable as a condition
of, or in connection with, the making of a grant or award or the issue, delivery
or purchase of shares of Common Stock thereunder, then such grant or award shall
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
6.6 Change in Control. If BankAmerica undergoes a Change in Control (as
defined in Section 1.3(e)), the following shall apply:
(a) Except as provided in subsection (b) below, (i) all outstanding
Options and SARs shall be immediately exercisable in full and (ii) all
Restricted Stock, Restricted Stock Units, and Other Stock-Based Awards
shall be immediately released free from all restrictions and shall be
delivered or paid, as the case may be, to the Participant as soon as
practicable following the Change in Control.
(b)(i) The Performance Share Units awarded on November 7, 1994 (and
any subsequent awards of Performance Share Units) under the BankAmerica
Corporation 1992 MSP Performance Share Program shall vest in the time or
times specified in Section 4.1 of the Performance Share Program whether
or not the Participant continues in employment with the Company. However,
following a Change in Control, the Committee shall no longer have
discretion to not vest Performance Share Units after the end of the term
of the Award if BAC ranks 1 or 2 in total shareholder return relative to
its peer banks for the term of the Award.
(b)(ii) In the event (i) any Award has been made to a person who,
at the time of a Change in Control is an officer or director of
BankAmerica, as such terms are defined in
17
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Section 16 of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder, and (ii) such Award has
not satisfied the applicable minimum vesting provisions of the Plan, this
Section 6.6 shall apply to such Award immediately after the satisfaction
of any such applicable minimum vesting period, whether or not the person
remains an employee of the Company at that time.
(c) Except as provided in the following sentence (and, if
applicable, the expiration of the minimum vesting period in (b)), in the
event a Participant terminates employment with the Company following a
Change in Control, his or her Options and SARs shall remain exercisable
for a period of three years following termination of employment, not to
exceed the original term of the Option or SAR. The preceding sentence
shall not apply to an incentive stock option unless the option agreement
gives the Committee discretion to permit the incentive stock option to
remain exercisable following termination of the optionholder's
employment, in which case the incentive stock option shall be exercisable
for three months following termination of employment without further
Committee action.
(d) Section 6.7 of the Plan regarding payment of withholding taxes
shall remain applicable.
6.7 Withholding Taxes. The Company shall have the right to deduct from
any settlement of an Award made under the Plan, including the delivery or
vesting of shares, an amount sufficient to cover withholding required by law for
any federal, state or local taxes or to take such other action as may be
necessary to satisfy any such withholding obligations. The Committee may permit
shares to be used to satisfy required tax withholding and such shares shall be
valued at the Fair Market Value as of the settlement date of the applicable
award.
6.8 Non-Assignability. Except as provided below, no Participant shall have
the right to alienate, assign, encumber, hypothecate or pledge his or her
interest in any Award under the Plan, voluntarily or involuntarily, and any
attempt to so dispose of any such interest prior to payment thereof shall be
void.
A Participant who is designated by the Committee, in its sole discretion,
as being eligible for this option transfer provision shall have the right,
subject to the conditions specified in the following paragraph, to irrevocably
transfer to Immediate Family Members (as defined below) Options granted at any
time under the Plan to such Participant. For purposes of this Section, the term
Immediate Family Members means (a) the spouse and lineal descendents of the
Participant, (b) a trust for the benefit of such family members, or (c) a
partnership in which such family members are the only partners.
As conditions to such transferability of any Options, (a) the Participant
may not receive any consideration for the transfer; (b) the Participant and/or
the transferee shall execute such documents and comply with such rules as the
Committee may specify from time to time, and (c) the Options so transferred must
continue to be subject to the same terms and conditions that were applicable to
such Options prior to their transfer.
The transferee of any Options transferred in accordance with the terms and
conditions of the Plan shall have the right to exercise such Options and to have
the shares of Common Stock covered by such Options registered in the name of
such transferee, as though such transferee were the Optionee for purposes of
Section 2.7 of the Plan.
Nothwithstanding anything contained in this Section 6.8, the Company shall
have the right to offset from any unpaid or deferred Award any amounts due and
owing from the Participant to the extent permitted by law; provided, however,
-------- -------
that with respect to any Options that are transferred in accordance with the
terms and conditions of the Plan, such right shall cease upon the transfer.
18
<PAGE>
6.9 No Right to Employment. Nothing in the Plan nor in any agreement
entered into pursuant to the Plan shall confer upon any Participant the right to
continue in the employment of the Company, nor affect any right which the
Company may have to terminate the employment of such person.
6.10 Rights as Shareholder. No Participant shall have rights as a
shareholder with respect to shares of Common Stock awarded to him or her unless
and until the certificates for such shares are delivered to him or her. The
Committee may determine that Restricted Stockholders have full voting rights
with respect to Restricted Stock, as provided in Section 4.9 hereof.
6.11 Entire Plan. This document is a complete statement of the Plan. As
of its effective date this document supersedes all prior plans, representations
and proposals, written or oral, relating to its subject matter, except as
otherwise provided in Section 1.7 hereof. The Company shall not be bound by or
liable to
19
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any person for any representation, promise or inducement made by any employee
or agent of it which is not embodied in this document.
6.12 Governing Law. The Plan shall be construed and enforced in
accordance with California law.
6.13 Delegation. The Committee may delegate to one or more officers of
the Company or any of its Subsidiaries, or to a committee of such officers, the
authority, subject to such terms and limitations as the Committee shall
determine, to make grants and awards to, or to cancel, modify, waive rights with
respect to, alter, discontinue, suspend, or terminate grants or awards held by,
officers or employees of the Company, who are not officers or directors of the
Company for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended.
6.14 Foreign Employees. In order to facilitate the making of any grant or
award under the Plan, the Committee may provide for such special terms for
grants and awards to participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Committee may consider necessary or appropriate to accommodate differences in
local law, policy or custom. Moreover, the Committee may approve such
supplements to or amendments, restatements, or alternative versions of the Plan
including supplements, amendments or alternative versions providing for Other
Stock-Based Awards as it may consider necessary or appropriate for such
purposes, without thereby affecting the terms of the Plan as in effect for any
other purpose. No such special terms, supplements, amendments or restatements,
however, shall include any provisions that are inconsistent with the terms of
the Plan as then in effect unless the Plan could have been amended to eliminate
such inconsistency without further approval by the shareholders of BankAmerica.
The resolution amending Sections 1.3(e) and 6.6 provided that no
modification, suspension, amendment or termination of the Plan may be made which
would adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option, stock appreciation right, restricted
stock unit or other stock based award granted under the Plan prior to the date
of such modification, suspension, amendment or termination.
20
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Exhibit 10.b
[LOGO OF BANKAMERICA]
BANKAMERICA CORPORATION
1987 MANAGEMENT STOCK PLAN
As adopted April 6, 1987
and amended through
November 3, 1997
<PAGE>
BANKAMERICA CORPORATION
1987 MANAGEMENT STOCK PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I General.......................................................... 1
1.1 Background of Plan................................................. 1
1.2 Purpose of Plan.................................................... 1
1.3 Definitions........................................................ 1
1.4 Administration of Plan............................................. 4
1.5 Eligibility to Receive Grants and Awards........................... 5
1.6 Types of Grants and Awards Under Plan.............................. 6
1.7 Limitation on Available Shares..................................... 6
1.8 Effective Date and Term of Plan.................................... 6
ARTICLE II Incentive Stock Options and Non-Qualified Stock Options.......... 7
2.1 Grant of Stock Options............................................. 7
2.2 Stock Option Agreements............................................ 7
2.3 Option Price....................................................... 7
2.4 Option Period...................................................... 7
2.5 Limitation on ISOs................................................. 8
2.6 Manner of Paying Option Price...................................... 8
2.7 Exercise of Option................................................. 8
2.8 Cancellation of SARs............................................... 9
2.9 Cancellation and Regrant of Non-Qualified Stock Options............ 9
2.10 Retirement of Optionee at Age Sixty-Five or Later................. 9
2.11 Early Retirement of Optionee...................................... 9
2.12 Termination on Leave of Absence or Extraordinary Circumstances.... 10
2.13 Termination of Employment of Optionee............................. 10
2.14 Death of Optionee................................................. 11
2.15 Deferral of Option Gain........................................... 11
ARTICLE III Performance Stock Options........................................ 12
3.1 Grant of Performance Stock Options................................. 12
3.2 Stock Option Agreements............................................ 12
3.3 Option Price....................................................... 12
3.4 Option Period...................................................... 12
3.5 Dividend Equivalent Credit......................................... 13
3.6 Granting of Dividend Equivalent Credits............................ 13
3.7 Manner of Paying Option Price...................................... 13
3.8 Exercise of Options................................................ 14
3.9 Surrender of Performance Stock Options............................. 14
3.10 Payments from the DEC Account..................................... 14
3.11 Cancellation of SARs.............................................. 15
3.12 Cancellation and Regrant of Performance Stock Options............. 15
3.13 Retirement of Optionee at Age Sixty-Five or Later................. 15
</TABLE>
i
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<TABLE>
<S> <C>
3.14 Early Retirement of Optionee...................................... 15
3.15 Termination on Leave of Absence or Extraordinary Circumstances.... 16
3.16 Termination of Employment of Optionee............................. 16
3.17 Death of Optionee................................................. 16
ARTICLE IV Stock Appreciation Rights....................................... 17
4.1 Grant of Stock Appreciation Rights................................. 17
4.2 Agreements Evidencing SARs......................................... 17
4.3 Exercise of SARs................................................... 17
4.4 Amount of Payment.................................................. 17
4.5 Form and Timing of Payment......................................... 18
4.6 Cancellation of Related Options.................................... 18
4.7 Termination of Employment of Optionee.............................. 18
4.8 Death of Optionee.................................................. 18
ARTICLE V Restricted Stock................................................ 19
5.1 Introduction....................................................... 19
5.2 Award of Restricted Stock.......................................... 19
5.3 Minimum Restrictions on Disposition of Stock Awards................ 19
5.4 Optional Restrictions.............................................. 20
5.5 Termination of Employment of Restricted Stockholder for Gross
Misconduct....................................................... 20
5.6 Termination of Employment of Restricted Stockholder not Involving
Gross Misconduct................................................. 20
5.7 Escrow............................................................. 21
5.8 Dividends on Restricted Stock...................................... 21
5.9 Voting Rights...................................................... 21
ARTICLE VI Miscellaneous................................................... 21
6.1 Notices............................................................ 21
6.2 Amendments of Plan................................................. 22
6.3 Leaves of Absence.................................................. 22
6.4 Dilution and Other Adjustments..................................... 22
6.5 General Restriction................................................ 22
6.6 Change in Control.................................................. 22
6.7 Withholding Taxes.................................................. 23
6.8 Non-Assignability.................................................. 23
6.9 No Right to Employment............................................. 23
6.10 Rights as Shareholder............................................. 23
6.11 Entire Plan....................................................... 24
6.12 Governing Law..................................................... 24
</TABLE>
ii
<PAGE>
BANKAMERICA CORPORATION
1987 MANAGEMENT STOCK PLAN
ARTICLE I
General
1.1 Background of Plan. BankAmerica Corporation hereby establishes the
BankAmerica Corporation 1987 Management Stock Plan (the "Plan"). The Plan
provides for the grant of three types of stock options on BankAmerica
Corporation Common Stock, and for the grant of restricted stock. The Plan is the
successor to the BankAmerica Corporation Management Incentive Stock Plan.
1.2 Purpose of Plan. The purpose of the Plan is to provide contingent
financial incentive to key executive officers of BankAmerica Corporation and its
present and future Subsidiaries (as defined in Section 1.3(m), and other
individuals whose participation in the Plan is deemed to be in the best
interests of BankAmerica Corporation. The Plan will offer competitive levels of
incentive compensation related to long-term corporate financial performance to
those key officers and other employees of the Company and other individuals who,
by virtue of their position and efforts, contribute to or substantially
influence the financial success of BankAmerica Corporation over multiple-year
periods. The Plan is also intended as a means of increasing officer
shareholdings, thereby strengthening the commonality of interest between
BankAmerica shareholders and key officers and other employees in the Company's
management, and as an aid in attracting, retaining and motivating key officers
and other employees of outstanding abilities and specialized skills.
1.3 Definitions. As used in the Plan and the related Stock Option
Agreements, the following terms, when written with initial capital letters, will
have the meanings stated below:
(a) BankAmerica means BankAmerica Corporation, a Delaware corporation.
(b) Board means Board of Directors of BankAmerica.
(c) Change in Control means that one of the following events has
occurred:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of BankAmerica (the "Outstanding BankAmerica Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of BankAmerica entitled to vote generally in the
election of directors (the "Outstanding BankAmerica Voting
1
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Securities"); provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from BankAmerica (ii) any
acquisition by BankAmerica, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii)
below.
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by BankAmerica's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of BankAmerica or its principal Subsidiary (a "Business Combination"),
in each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding BankAmerica Common
Stock and Outstanding BankAmerica Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 80% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns BankAmerica or all or substantially
all of BankAmerica's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding BankAmerica Common Stock and Outstanding BankAmerica
Voting Securities, as the case may be, (provided, however, that, for
the purposes of this clause (A), any shares of common stock or voting
securities of such resulting corporation received by such beneficial
owners in such Business Combination other than as the result of such
beneficial owners' ownership of Outstanding BankAmerica Common Stock
or Outstanding BankAmerica Voting Securities immediately prior to such
Business Combination shall not be considered to be owned by such
beneficial owners for the purposes of calculating their percentage of
ownership of the outstanding common stock and voting power of the
resulting corporation), (B) no Person (excluding any
2
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corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation unless such Person
owned 20% or more of the Outstanding BankAmerica Common Stock or
Outstanding BankAmerica Voting Securities immediately prior to the
Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board (or, in the
case of BankAmerica's principal Subsidiary, the corresponding board
of directors) at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination.
(iv) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
(d) Committee means the Executive Personnel and Compensation
Committee of the Board.
(e) Common Stock means shares of BankAmerica's common stock, $1.5625
par value per share.
(f) Company means BankAmerica and its Subsidiaries, collectively.
(g) Dividend Equivalent Credit ("DEC") and Dividend Equivalent Credit
Account ("DEC Account") have the meanings set forth in Section 3.5.
(h) The Fair Market Value of a share of Common Stock on any date
means the average of the high and low sales prices of a share of Common
Stock as reflected in the report of consolidated trading of New York Stock
Exchange listed securities for that day (or, if no shares were publicly
traded on that day, the immediately preceding day that shares were so
traded) published in The Wall Street Journal or in any other publication
selected by the Committee; provided, however, that if shares of Common
Stock shall not have been publicly traded for more than ten days
immediately preceding such date, then the fair market value of a share of
Common Stock shall be determined by the Committee in such manner as it may
deem appropriate.
(i) Management Incentive Stock Plan ("MISP") means the plan adopted
by the Board of Directors of BankAmerica Corporation on December 6, 1982,
as amended, pursuant to which BankAmerica Corporation has issued
non-qualified stock options, incentive stock options, performance stock
options, and restricted stock to key officers and other employees of
BankAmerica.
3
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(j) Option means an option to purchase shares of the Common Stock,
and shall be one of three kinds: (i) Incentive Stock Options ("ISOs") and
(ii) Non-Qualified Stock Option ("NQSOs"), granted pursuant to Article II;
and (iii) Performance Stock Options ("PSOs") granted pursuant to Article
III. The Company intends the ISOs shall meet the requirements of Section
422A of the Internal Revenue Code and the regulations thereunder applicable
to incentive stock options, and that NQSOs and PSOs shall not meet such
requirements.
(k) Optionee means the holder of an Option.
(l) Restricted Stock means Common Stock issued or delivered pursuant
to Article V with the restrictions set forth in Sections 5.3 and 5.4.
(m) Retirement (including Early Retirement) means the last day of
employment with the BankAmerica or one of its Subsidiaries prior to the
employee's retirement under a retirement program of BankAmerica or one of
its Subsidiaries.
(n) Stock Appreciation Right ("SAR") has the meaning set forth in
Section 4.1.
(o) Stock Option Agreement means any written agreement between
BankAmerica and an employee of the Company or other individual pursuant to
which an Option is granted. The Committee shall determine the terms of each
Stock Option Agreement subject to the provisions of Section 2.2 with
respect to ISOs and NQSOs, and to the provisions of Section 3.2 with
respect to PSOs.
(p) Subsidiary means any corporation of which BankAmerica owns,
directly or indirectly, twenty percent or more of the voting stock.
(q) Window Period means the time period described in Section 4.5(a)
hereof.
(r) Section 16 means Section 16 of the Securities Exchange Act of
1934 and the rules thereunder.
1.4 Administration of Plan. (a) The Plan shall be administered by the
Committee. The Committee shall consist of at least three members of the Board,
none of whom shall be, while serving on the Committee, eligible to receive a
grant or award under the Plan or under any other plan of the Company or its
affiliates under which the participants are entitled to acquire Common Stock,
stock options, restricted stock, and related rights, or stock appreciation
rights of the Company or any of its affiliates. Members of the Committee shall
serve at the pleasure of the Board.
4
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(b) Subject to the provisions of the Plan, the Committee shall have
sole, final, and conclusive authority to determine:
(i) the employees and other individuals to whom Options,
Restricted Stock, and related rights, shall be granted or awarded;
(ii) the number of shares of Common Stock to be optioned,
granted or awarded to each such employee or other individual;
(iii) whether and to what extent an Optionee may use
already owned-shares of Common Stock to exercise Options;
(iv) the restrictions to be imposed on each share of
Restricted Stock awarded pursuant to Article V of this Plan, which
shall not be less than the minimum restrictions set forth in Section
5.3;
(v) which Options granted shall be Incentive Stock Options,
which shall be Non-Qualified Stock Options, and which shall be
Performance Stock Options;
(vi) the price to be paid for the shares upon the exercise of
each Option, which shall be not less than 100% of the Fair Market
Value per share, as determined by the Committee, of the Common Stock
at the time of granting the Option;
(vii) the period within which each Option shall be exercised;
(viii) the terms and conditions of each Stock Option Agreement
between BankAmerica and an employee or other individual to whom the
Committee has granted an Option, which, however, shall be in
accordance with the provisions of the Plan; and
(ix) the Committee shall have the power, authority, and sole
discretion to construe, interpret and administer the Plan. The Committee's
decisions construing, interpreting and administering the Plan shall be
conclusive and binding on all parties.
1.5 Eligibility to Receive Grants and Awards. Employees of BankAmerica
or of any of its Subsidiaries who shall, in the judgment of the Committee be
qualified by position, training or ability to contribute substantially to the
progress of BankAmerica, shall be eligible to receive grants and awards under
the Plan. The Committee may also make grants and awards to such other
individuals whose participation in the Plan is determined to be in the best
interest of BankAmerica, provided that the shares of Common Stock to be received
by such individuals are eligible to be registered on Securities and Exchange
Commission Form S-8 (or any successor to such form) under the rules and
regulations in effect at the time of grant or award.
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1.6 Types of Grants and Awards Under Plan. Grants and awards under the
Plan may be in the form of any one or more of the following: (i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, (iii) Performance Stock Options, (iv)
Stock Appreciation Rights, and (v) Restricted Stock.
1.7 Limitation on Available Shares. The maximum number of shares of
Common Stock that shall be available for issuance or delivery under the Plan
with respect to grants and awards made under the Plan on or after April 6, 1987
shall be 7,706,037, plus a maximum of 4,605,338 shares either as of April 6,
1987 subject to outstanding options, or outstanding as restricted stock, granted
under the BankAmerica Corporation Management Incentive Stock Plan as described
in the final paragraph of this Section 1.7. The number of shares available
under the Plan may be, in whole or in part, authorized but unissued shares of
Common Stock or issued shares of Common Stock that have been reacquired by
BankAmerica. Shares of Common Stock shall be issued or delivered upon the
exercise of Options, and may be issued or delivered in payment of Dividend
Equivalent Credits, Stock Appreciation Rights, and Restricted Stock awards in
the discretion of the Committee.
Any shares of Common Stock subject to an Option which for any reason is
cancelled (including shares subject to an Option which is cancelled upon the
exercise of related SARs) or terminated without having been exercised, or which
expires, shall again be available for issuance or delivery under the Plan.
Any shares of Restricted Stock that for any reason are reacquired by
BankAmerica pursuant to Section 5.5 or 5.6, shall again be available for
delivery under the Plan.
Finally, any shares of Common Stock subject to an MISP option that for any
reason is cancelled (including shares subject to an MISP option which is
cancelled upon the exercise of related SARs) or terminated without having been
exercised, or which expires, and any shares of MISP Restricted Stock that for
any reason are reacquired by BankAmerica pursuant to Section 5.5 or 5.6 of the
MISP, shall again be available for issuance or delivery under this Plan.
1.8 Effective Date and Term of Plan. (a) The Plan shall become effective
on April 6, 1987 and the Committee may, in its discretion, make grants and
awards to eligible key officers and other employees of the Company as of that
date, subject, however, to the approval of the Plan by the shareholders of
BankAmerica at the 1987 annual meeting of shareholders. In the event the Plan
is not approved at such meeting, the Plan and all grants and awards hereunder
shall be void, and the Company shall have no obligation to any recipients of
such grants and awards.
(b) The Committee may make grants and awards under the Plan beginning
April 6, 1987 and during each subsequent year until such time as the Plan may be
terminated by the Board in its sole discretion, or as hereinafter provided.
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(c) Unless the shareholders of BankAmerica shall approve an extension
or renewal of the Plan for such new or additional term as they may
determine, no grants and awards shall be made after April 5, 1997. However,
all grants and awards made under the Plan prior to such date shall remain in
effect until such grants and awards shall have been satisfied, terminated,
or paid out, or expire, in accordance with the Plan and the terms of such
grants and awards.
ARTICLE II
Incentive Stock Options and Non-Qualified Stock Options
2.1 Grant of Stock Options. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant to any eligible employee or other individual
Incentive Stock Options ("ISOs" or "Options") and/or Non-Qualified Stock Options
("NQSOs" or "Options") (as these terms are defined in Section 1.3), to purchase,
for cash and/or for already-owned shares of Common Stock, such number of shares
of Common Stock as the Committee shall determine.
2.2 Stock Option Agreements. The grant of an ISO or NQSO shall be
evidenced by a written Stock Option Agreement in such form as the Committee may
from time to time determine in accordance with the provisions of the Plan,
executed by BankAmerica. Each Stock Option Agreement shall state the number of
shares of Common Stock subject to the Option, the Option price, the Option
Period, any limitations on the Option, the restrictions on assigning and
transferring the Option described in Section 6.8, the manner of payment for
shares of Common Stock, and such other terms as the Committee shall determine.
2.3 Option Price. The purchase price per share of Common Stock which the
Optionee must deliver upon the exercise of an ISO or NQSO shall be fixed by the
Committee, but shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is granted.
2.4 Option Period. Each Option granted as an ISO or NQSO shall become
exercisable in part or in full at such time or times as the Committee may
determine and specify in each Stock Option Agreement; provided, however, that no
Option will be exercisable before the date six months after the date the Option
was granted, nor after the first to occur of the following dates:
(a) ten years after the date the Option is granted;
(b) in the case of ISOs, three months after the date of the
Optionee's retirement;
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(c) in the case of NQSOs, three years after the date of the Optionee's
retirement;
(d) three years after death of the Optionee; and
(e) except as provided in Sections 2.4(a) through 2.4(d) above,
termination of the Optionee's employment with the Company, unless the
Committee, in its sole discretion, decides otherwise, in which case the
Committee shall have discretion both (i) to accelerate the exercisability
of any Option (held by an Optionee who is not subject to Section 16) which
would not otherwise become exercisable by the termination of the Optionee's
employment under the terms of the relevant Stock Option Agreement, and (ii)
to extend the exercisability of any exercisable Option (including an Option
that became exercisable pursuant to Section 2.4(e)(i), above) beyond the
termination of the Optionee's employment.
2.5 Limitation on ISOs. Notwithstanding any other provisions in the Plan
or in any ISO agreement, to the extent the aggregate Fair Market Value
(determined at the time the option is granted) of stock with respect to which
ISOs granted after December 31, 1986 are exercisable for the first time by an
Optionee during any calendar year exceeds $100,000, under this Plan and under
all plans of BankAmerica and its subsidiaries, such options shall be treated as
NQSOs. This rule shall be applied by taking options into account in the order
in which they were granted so that options with the earliest grant date will
receive ISO treatment.
No ISO shall be granted to any person who at the time owns more than ten
percent of total combined voting power of all classes of stock of BankAmerica or
of any Subsidiaries.
2.6 Manner of Paying Option Price. On exercise of each ISO or NQSO, the
Option Price shall be paid as follows: (a) in cash, (b) in already-owned shares
of Common Stock, or (c) in some combination of cash and shares, as specified in
the Stock Option Agreement or as otherwise permitted by the Committee.
Already-owned shares of Common Stock must have been owned by the Optionee at the
time of exercise for at least the period of time specified in the Stock Option
Agreement, and shall be valued at their Fair Market Value on the date of
exercise.
2.7 Exercise of Option. The Committee shall establish, and shall set
forth in each Stock Option Agreement, the procedures governing the exercise of
an ISO or NQSO. In general, subject to such specific provisions, an ISO or NQSO
shall be exercised as follows:
(a) the Optionee shall deliver written notice that he or she intends
to exercise the Option to the Company department or officer designated in
the Stock Option Agreement;
(b) the Optionee shall pay the full Option Price at the time of
exercise, according to Section 2.6 above; and
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(c) as soon as practicable after receipt of such notice and payment,
the Company shall direct BankAmerica's transfer agent to register the
shares of Common Stock in the name of the Optionee.
2.8 Cancellation of SARs. The exercise of an ISO or NQSO with respect to
a share of Common Stock shall cancel any SAR related to such share.
2.9 Cancellation and Regrant of Non-Qualified Stock Options. With the
consent of the Optionee of a NQSO, the Committee in its sole discretion may
cancel particular NQSOs, and regrant to the same Optionee NQSOs to purchase the
same or a different number of shares of Common Stock. The Committee shall
regrant NQSOs on such terms as it may determine in its sole discretion, provided
that the Option Price shall be not less than the Fair Market Value of the Common
Stock on the date of regrant.
2.10 Retirement of Optionee at Age Sixty-Five or Later. Upon retirement at
age sixty-five or later, the Optionee (other than an individual not employed by
the Company at the date of grant) shall become immediately entitled to purchase:
(1) all shares of Common Stock covered by Optionee's NQSOs and,
(2) shares of Common Stock covered by Optionee's ISOs subject to the
rules set forth in the first sentence of Section 2.5
without regard to whether the NQSOs or ISOs were fully exercisable at the
retirement date under the terms of the Stock Option Agreements and the Plan. The
Optionee may purchase any or all of the shares he or she is entitled to purchase
at any time or times during the period, if any, beginning on the date the Option
first becomes exercisable and ending on the first to occur of the following
dates:
(a) the end of the Option Period as provided in Section 2.4 above;
(b) in the case of ISOs, three months after the date of the
Optionee's retirement.
2.11 Early Retirement of Optionee. Upon retirement prior to age
sixty-five, the Optionee (other than an individual not employed by the Company
at the date of grant) may
(a) exercise any Option to the extent such Option was exercisable on
the retirement date; or
(b) within the sole discretion of the Committee, become immediately
entitled to purchase:
(1) all shares of Common Stock covered by Optionee's NQSOs and,
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(2) shares of Common Stock covered by Optionee's ISOs subject to
rules set forth in the first sentence of Section 2.5
without regard to whether the NQSOs or ISOs were fully exercisable at the
retirement date under the terms of the Stock Option Agreements and the Plan. The
Optionee may purchase any or all of the shares he or she is entitled to purchase
at any time or times during the period, if any, beginning on the date the Option
first becomes exercisable and ending on the first to occur of the following
dates:
(a) the end of the Option Period as provided in Section 2.4 above;
(b) in the case of ISOs, three months after the date of the Optionee's
early retirement; and
(c) in the case of NQSOs, three years after the date of the Optionee's
early retirement.
2.12 Termination on Leave of Absence or Extraordinary Circumstances. With
respect to Optionees who were employed by the Company on the date of grant, upon
termination of the Optionee's employment with the Company by reason of (a) leave
of absence treated as termination of employment pursuant to Section 6.3 or (b)
extraordinary circumstances, as determined by the sole discretion of the
Committee, the Optionee may exercise any ISO or NQSO to the extent such Option
was exercisable on the date of termination of employment at any time or times up
to and including the first to occur of the following dates:
(i) the end of the Option Period as provided in Section 2.4
above; and
(ii) three months after the date of the Optionee's termination.
2.13 Termination of Employment of Optionee. With respect to Optionees who
were employed by the Company on the date of grant, except as provided in
Sections 2.4(e), 2.10, 2.11, 2.12 and 2.14, all ISOs and NQSOs shall become
non-exercisable upon termination of the Optionee's employment with the Company.
Termination of an Optionee's employment with the Company shall be deemed to
include a change in ownership of the Optionee's employer such that the
Optionee's employer ceases to be BankAmerica or one of its Subsidiaries,
PROVIDED, HOWEVER, that at any time within thirty (30) days prior to such a
change in ownership, or within ninety (90) days after termination of the
Optionee's employment with the Company, within the sole discretion of the
Committee, the Optionee may become immediately entitled to purchase:
(1) all shares of Common Stock covered by Optionee's NQSOs and,
(2) shares of Common Stock covered by Optionee's ISOs subject to
the rules set forth in the first sentence of Section 2.5
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without regard to whether the NQSOs or ISOs were fully exercisable immediately
prior to termination under the terms of the Stock Option Agreements and the
Plan.
2.14 Death of Optionee. If any Optionee entitled to exercise an ISO or
NQSO
(a) terminates employment with the Company by reason of death, or
(b) dies after termination of employment with the Company and during
the Option Period, or
(c) with respect to an individual who was not employed by the Company
at the date of grant, dies during the Option Period
(A) the Optionee's estate and/or (B) a person who acquires the right to exercise
such Option by bequest or inheritance, may
(a) exercise such Option to the extent of the number of shares of
Common Stock which could have been purchased by the Optionee on the date of
death; or
(b) within the sole discretion of the Committee, become immediately
entitled to purchase:
(1) all shares of Common Stock covered by Optionee's NQSOs and,
(2) shares of Common Stock covered by Optionee's ISOs subject to
the rules set forth in the first sentence of Section 2.5
without regard to whether the NQSOs or ISOs were fully exercisable at the date
of death under the terms of the Stock Option Agreements and the Plan. The shares
covered by the Options may be purchased at any time or times during the period,
if any, beginning on the date the Option first becomes exercisable and ending on
the first to occur of the following dates:
(a) the end of the Option Period as provided in Section 2.4 above;
and
(b) three years following the date of the Optionee's death.
2.15 Deferral of Option Gain. The Committee may permit an Optionee to
elect to defer the receipt of the shares of Common Stock upon exercise of an
Option under such rules as the Committee may determine in its sole discretion.
If such an election is made, upon exercise of the Option, the Company shall not
direct BankAmerica's transfer agent to register the shares of Common Stock in
the name of the Optionee until the date determined under the Committee's rules
and the Participant's election.
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ARTICLE III
Performance Stock Options
3.1 Grant of Performance Stock Options. The Committee may, from time to
time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any eligible employee or
other individual Performance Stock Options ("PSOs" or "Options") (as these terms
are defined in Section 1.3) to purchase, for cash and/or for alreadyowned shares
of Common Stock, such number of shares of Common Stock as the Committee shall
determine.
3.2 Stock Option Agreements. The grant of a PSO shall be evidenced by a
written Stock Option Agreement in such form as the Committee may from time to
time determine in accordance with the provisions of the Plan, executed by
BankAmerica. Each Stock Option Agreement shall state the number of shares of
Common Stock subject to the Option, the Option Price, the Option Period, any
limitations on the Option, the restrictions on assigning and transferring the
Option described in Section 6.8, the manner of payment for shares of Common
Stock, and such other terms as the Committee shall determine.
3.3 Option Price. The purchase price per share of Common Stock which the
Optionee must deliver upon the exercise of a PSO shall be fixed by the
Committee, but shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date the Option is granted.
3.4 Option Period. Each Option granted as a PSO shall become exercisable
in part or in full at such time or times as the Committee may determine and
specify in each Stock Option Agreement; provided, however, that no PSO will be
exercisable before the date six months after the date the Option was granted,
nor after the first to occur of the following dates:
(a) ten years after the date the Option is granted;
(b) three years after the date of the Optionee's retirement;
(c) three years after death of the Optionee; and
(d) except as provided in Sections 3.4(a) through 3.4(c) above,
termination of the Optionee's employment with the Company, unless the
Committee, in its sole discretion, decides otherwise, in which case the
Committee shall have discretion both (i) to accelerate the exercisability
of any Option (held by an Optionee who is not subject to Section 16) which
would not otherwise become exercisable by the termination of the Optionee's
employment under the terms of the relevant Stock Option Agreement, and (ii)
to extend the exercisability of any exercisable Option (including an Option
that became exercisable pursuant to Section 3.4(d)(i), above) beyond the
termination of the Optionee's employment.
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3.5 Dividend Equivalent Credit. A Dividend Equivalent Credit ("DEC") is
the amount credited to the account of an Optionee (the "DEC Account") equal to a
percentage designated by the Committee in each Stock Option Agreement, of the
dividends per share paid by BankAmerica on its Common Stock. The Committee
shall maintain one DEC Account with respect to each outstanding Stock Option
Agreement for PSOs. Amounts credited to the DEC Account shall be measured in
terms of shares of Common Stock (the "Share Equivalents"), although the DEC
Accounts shall be wholly unfunded until the amounts credited are paid out
pursuant to Sections 3.8, 3.9 and 3.10 below.
DECs shall be credited as of any date on which BankAmerica pays dividends
on its Common Stock. DECs shall be credited in the form of the number of Share
Equivalents equal to
(a) the product of (i) the number of shares with respect to which a
DEC is being credited pursuant to Section 3.6 below, multiplied by (ii) the
dollar amount of the dividends per share paid on that date, all multiplied
by (iii) the percentage specified in the Stock Option Agreement
DIVIDED BY
(b) the Fair Market Value of one share of Common Stock on the date the
related dividends are paid.
Except as provided in Section 3.12, the balance in any DEC Account shall be
reduced to zero upon cancellation of the related PSO(s).
3.6 Granting of Dividend Equivalent Credits. The Committee shall, subject
to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, grant the Optionee one DEC with respect to (a) each
share of Common Stock subject to a PSO outstanding and unexercised as of the
record date for the related dividend whether or not such PSO is then exercisable
under the Plan and the Stock Option Agreement, and (b) each Share Equivalent
previously credited to the Optionee's DEC Account, as those terms are defined in
Section 3.5. However, after the Optionee's employment with the Company is
terminated, no portion of any dividend paid by BankAmerica on its Common Stock
shall be credited to the Optionee's DEC Account(s).
3.7 Manner of Paying Option Price. On exercise of each PSO, the Option
Price shall be paid as follows: (a) in cash, (b) in already-owned shares of
Common Stock, or (c) in some combination of cash and shares, as specified in the
Stock Option Agreement or as otherwise permitted by the Committee. Already-owned
shares of Common Stock must have been owned by the Optionee at the time of
exercise for at least the period of time specified in the Stock Option
Agreement, and shall be valued at their Fair Market Value on the date of
exercise.
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3.8 Exercise of Options. The Committee shall establish, and shall set
forth in each Stock Option Agreement, the procedures governing the exercise of a
PSO. In general, subject to such specific provisions, a PSO shall be exercised
as follows:
(a) the optionee shall deliver written notice that he or she intends
to exercise the Option to the Company department or officer designated in
the Stock Option Agreement;
(b) the Optionee shall pay the full Option Price at the time of
exercise, according to Section 3.7 above; and
(c) as soon as practicable after receipt of such notice and payment,
the Company shall
(i) direct BankAmerica's transfer agent to register the shares
of Common Stock in the name of the Optionee, and
(ii) deliver to the Optionee all or that portion of the related
DEC Account which equals (A) the total DEC Account, multiplied by
(B) the quotient of (1) the number of PSOs being exercised, divided
by (2) the total number of PSOs then outstanding under the Stock
Option Agreement,
all payable according to Section 3.10 below.
3.9 Surrender of Performance Stock Options. At any time when (a) the
Option Price of a PSO exceeds the Fair Market Value of the Common Stock and (b)
all PSOs granted pursuant to the same Stock Option Agreement are fully
exercisable, the Optionee may surrender all but not less than all of his or her
PSOs by delivering written notice to the Company department or officer
designated in the Stock Option Agreement, without payment of the Option Price.
As soon as practicable after receipt of such notice, the Company shall deliver
to the Optionee the greater of the following:
(a) the "Net Underwater Amount," equal to (i) the total DEC Account
reduced by (ii) the difference between (A) the aggregate Option Price of
the PSOs surrendered, and (B) the aggregate Fair Market Value on the date
of surrender of the Common Stock issuable or deliverable with respect to
the PSOs surrendered; and
(b) a percentage, determined by the Committee and specified in the
Stock Option Agreement, of the related DEC Account. Payments of the DEC
Accounts shall be made according to Section 3.10 below.
3.10 Payments from the DEC Account. Amounts payable to the Optionee from
his or her DEC Account upon exercise of PSOs or the related SARs or surrender of
PSOs may be paid either (a) in shares of Common Stock; (b) in cash; or (c) in
some combination of shares and cash, as determined by the Committee, PROVIDED
THAT at any time when the Option
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constitutes Stock Appreciation Rights pursuant to Article IV of the Plan, (i) if
the Optionee exercises the SAR or surrenders the related PSO during the Window
Period described in Section 4.5(a), the DEC Account shall be paid out in cash
and valued as provided in Section 4.5(b), and (ii) if the Optionee exercises the
SAR or surrenders the related PSO at any time outside that Window Period, the
DEC Account shall be paid out in shares of Common Stock and valued as provided
in Section 4.5(c).
3.11 Cancellation of SARs. The exercise of a PSO with respect to a share
of Common Stock shall cancel any SAR related to such share.
3.12 Cancellation and Regrant of Performance Stock Options. With the
consent of the holder of a Performance Stock Option, the Committee in its sole
discretion may cancel particular PSOs, and regrant to the same Optionee PSOs to
purchase the same or a different number of shares of Common Stock. The
Committee shall regrant PSOs on such terms as it may determine in its sole
discretion, provided (a) that the Option Price shall not be less than the Fair
Market Value of the Common Stock on the date of regrant, and (b) that the DEC
Account shall not thereby become payable in whole or in part to the Optionee.
The Committee may, in its sole discretion, provide that some or all of the DEC
Account maintained with respect to the PSOs cancelled may be immediately
credited to the PSOs which are regranted.
3.13 Retirement of Optionee at Age Sixty-Five or Later. Upon retirement at
age sixty-five or later, the Optionee (other than an individual not employed by
the Company at the date of grant) shall become immediately entitled to purchase
all shares of Common Stock covered by the PSO without regard to whether the
Option was fully exercisable at the retirement date under the terms of the Plan
and the Stock Option Agreement. The Optionee may purchase any or all of the
shares he or she is entitled to purchase at any time or times up to and
including the first to occur of the following dates:
(a) the end of the Option Period as provided in Section 3.4 above;
and
(b) three years after the Optionee's retirement.
3.14 Early Retirement of Optionee. Upon early retirement prior to age
sixty-five, the Optionee (other than an individual not employed by the Company
at the date of grant) may
(a) exercise any Option to the extent such Option was exercisable on
the retirement date; or
(b) within the sole discretion of the Committee, become immediately
entitled to purchase all shares of Common Stock covered by the Option
without regard to whether the PSO was fully exercisable at the retirement
date under the terms of the Plan and the Stock Option Agreement.
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The Optionee may purchase any or all of the shares he or she is entitled to
purchase at any time or times up to and including the first to occur of the
following dates:
(a) the end of the Option Period as provided in Section 3.4 above; and
(b) three years after the date of the Optionee's early retirement.
3.15 Termination on Leave of Absence or Extraordinary Circumstances. With
respect to Optionees who were employed by the Company on the date of grant, upon
termination of the Optionee's employment with the Company by reason of (a) leave
of absence treated as termination of employment pursuant to Section 6.3 or (b)
extraordinary circumstances, as determined in the sole discretion of the
Committee, the Optionee may exercise any Option to the extent such Option was
exercisable on the date of termination of employment at any time or times up to
and including the first to occur of the following dates:
(a) the end of the Option Period as provided in Section 3.4 above; and
(b) three months after the date of the Optionee's termination.
3.16 Termination of Employment of Optionee. With respect to Optionees who
were employed by the Company at the date of grant, except as provided in
Sections 3.4(d), 3.13, 3.14, 3.15 and 3.17, all Options shall become
non-exercisable upon termination of the Optionee's employment with the Company.
Termination of an Optionee's employment with the Company shall be deemed to
include a change in ownership of the Optionee's employer such that the
Optionee's employer ceases to be BankAmerica or one of its Subsidiaries,
PROVIDED, HOWEVER, that at any time within thirty (30) days prior to such a
change in ownership or within ninety (90) days after termination of the
Optionee's employment with the Company, within the sole discretion of the
Committee, the Optionee may become immediately entitled to purchase all shares
of Common Stock covered by the Option without regard to whether the Option would
be fully exercisable at the effective date of the change in ownership under the
terms of the Plan and the Stock Option Agreement.
3.17 Death of Optionee. If an Optionee entitled to exercise a PSO
(a) terminates employment with the Company by reason of death, or
(b) dies after termination of employment with the Company and during
the Option Period, or
(c) with respect to an individual who was not employed by the Company
on the date of grant, dies during the Option Period,
(A) the Optionee's estate and/or (B) a person who acquires the right to exercise
such Option by bequest or inheritance, may
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(a) exercise such Option to the extent of the number of shares of
Common Stock which could have been purchased by the Optionee on the date of
death; or
(b) within the sole discretion of the Committee, become immediately
entitled to purchase all shares of Common Stock covered by the Option
without regard to whether the Option was fully exercisable at the date of
death under the terms of the Plan and the Stock Option Agreement at any
time or times up to and including the first to occur of the following
dates:
(a) the end of the Option Period as provided in Section 3.4
above; and
(b) three years following the date of the Optionee's death.
ARTICLE IV
Stock Appreciation Rights
4.1 Grant of Stock Appreciation Rights. The Committee may in its sole
discretion grant Stock Appreciation Rights ("SARs") in tandem with Options. The
Committee may also grant Options without SARs.
Except as provided in Section 4.5(c) below, an SAR shall represent the
right to receive payment (the "SAR Value") equal to the amount, if any, by which
(a) the Fair Market Value of one share of Common Stock on the date of exercise
of the SAR exceeds (b) the Option Price of one share of Common Stock which is
subject to the SAR's related Option.
The Committee shall not grant an SAR with respect to an ISO unless,
pursuant to applicable law and rules and regulations of the Internal Revenue
Service, the SAR may be attached to the ISO without causing the ISO to fail to
meet the requirements of Section 422A of the Internal Revenue Code.
4.2 Agreements Evidencing SARs. SARs granted under the Plan shall be
included in the written Stock Option Agreement between BankAmerica and the
Optionee.
4.3 Exercise of SARs. An Optionee who has been granted SARs may, from
time to time, elect to exercise one or more SARs and thereby become entitled to
receive payment in the amount and from and within the time determined pursuant
to Sections 2.4 and 3.4. An SAR shall be exercisable only to the same extent and
subject to the same conditions as the Option related thereto is exercisable.
The Committee may, in its discretion, prescribe additional conditions on the
exercise of any SAR.
4.4 Amount of Payment. Upon the exercise of each SAR, the Optionee shall
be entitled to receive
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(a) payment of the amount represented by the SAR, together with
(b) all or that portion of the DEC Account which equals the product of
(i) the total DEC Account, multiplied by (ii) the quotient of (A) the
number of SARs being exercised, divided by (B) the total number of related
PSOs then outstanding under the related Option.
4.5 Form and Timing of Payment. (a) Exercise of SARs for Cash or Common
Stock. SARs exercised during the Window Period described below shall be payable
only in cash, and SARs exercised outside the Window Period shall be payable only
in shares of Common Stock. A "Window Period" is a period (i) beginning on the
third business day following the date of public release of BankAmerica's
quarterly and annual summary statements of revenues and earnings and (ii) ending
on the twelfth business day following such date.
(b) Amount of Cash Payable on Exercise of SARs. When SARs are
exercised during the Window Period, the Optionee shall receive a cash
amount equal to (i) the number of SARs exercised multiplied by (ii) the
difference between (A) the highest Fair Market Value of one share of Common
Stock as of any day during the Window Period, and (B) the Option Price
specified for the related Option.
(c) Number of Shares Issuable or Deliverable on Exercise of SARs. When
SARs are exercised outside the Window Period, the Optionee shall receive
the number of whole shares of Common Stock equal to (i) the aggregate SAR
Value (as defined in Section 4.1) of the SARs exercised divided by (ii) the
Fair Market Value (as defined in Section 1.3) on the date of exercise. The
Company shall deliver cash in lieu of fractional shares.
4.6 Cancellation of Related Options. The exercise of an SAR shall cancel
any NQSO or PSO to which it relates, to the extent of the exercise. Any
exercise of an SAR with respect to an ISO must be made in accordance with
Section 4.1.
4.7 Termination of Employment of Optionee. Except as provided in Section
4.8 below, in the event that the holder of an SAR ceases to be employed with the
Company for any reason, his or her SAR shall be exercisable only to the same
extent and upon the same conditions that the Option related thereto is
exercisable only until the sooner of (a) six months after the date he or she
ceases to be an officer or director as defined in Section 16, and (b) the end of
the Option Period of the related Options.
4.8 Death of Optionee. In the event that the holder of an SAR dies, his
or her SAR shall terminate, and only the related Option shall be exercisable,
pursuant to Sections 2.14 and 3.17.
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ARTICLE V
Restricted Stock
5.1 Introduction. BankAmerica has outstanding shares of restricted stock
granted under the BankAmerica Corporation Restricted Stock Bonus Plan (the
"Bonus Plan") and the MISP. Restricted stock already granted under the Bonus
Plan and the MISP will continue to be held under the terms of those plans,
except as provided in Section 1.7 of this Plan. Only grants of Restricted Stock
made on or after the effective date of this new Plan shall be governed by the
terms of this Article V.
5.2 Award of Restricted Stock. The Committee may, from time to time and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award shares of Common Stock to be held under the
restrictions set forth in this Article to any eligible employee or other
individual. If an eligible employee has been employed less than six months, any
award shall only be made from Common Stock which is held as treasury stock by
BankAmerica. BankAmerica shall issue or deliver shares of registered Restricted
Stock awarded hereunder in the name of the employee or other individual
concerned (the "Restricted Stockholder").
5.3 Minimum Restrictions on Disposition of Stock Awards. With respect to a
Restricted Stockholder who was employed by the Company on the date of grant, the
Restricted Stockholder may not, under any circumstances, voluntarily dispose of
any of the Restricted Stock prior to the first to occur of the following events:
(a) the date on which the Restricted Stockholder completes the period
of continuous service with the Company following the award date specified
by the Committee for such award;
(b) delivery of the Restricted Stock to the Restricted Stockholder
following a Committee determination pursuant to Section 6.6 hereof in
connection with a Change in Control;
(c) the Restricted Stockholder's retirement or death; or
(d) delivery of the Restricted Stock to the Restricted Stockholder
following his or her termination of employment prior to retirement or
death.
With respect to any other individual, the Restricted Stockholder may not, under
any circumstances, voluntarily dispose of any of the Restricted Stock prior to
the first to occur of the following events:
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(a) the date on which the individual satisfies the conditions
specified in the grant;
(b) the Restricted Stockholder's death.
The limitations in this Section 5.3 will hereinafter be referred to as the
"minimum restrictions."
5.4 Optional Restrictions. In addition to the minimum restrictions, the
Committee may impose additional restrictions ("optional restrictions") upon the
Restricted Stockholder's voluntary disposition and release from escrow of the
Restricted Stock, either at the time the Committee makes an award of such
Restricted Stock or at any subsequent time before the minimum restrictions
expire. The Committee may impose optional restrictions (such as, without
limitation, permitting such disposition and release only in installments over a
period of years) as it may deem in the best interests of the Restricted
Stockholder, or in the case of the Restricted Stockholder's death, of the heirs
or legatees who become entitled to such Restricted Stock by the applicable laws
of inheritance or under the terms of the Restricted Stockholder's will.
5.5 Termination of Employment of Restricted Stockholder for Gross
Misconduct. If a Restricted Stockholder's services are terminated for cause for
gross misconduct, all shares awarded to any Restricted Stockholder under this
Plan shall be forfeited, and the Committee shall direct such shares to be
transferred and delivered to BankAmerica. Gross misconduct includes, but is not
limited to, acts of dishonesty, such as theft, embezzlement, and falsification
of the Company's records with intent to deceive; breach of trust; knowing
violation of rules established by the Company; and any crime determined by the
Company to result in termination of employment.
5.6 Termination of Employment of Restricted Stockholder not Involving
Gross Misconduct.
(a) Should a Restricted Stockholder who was employed by the Company at
the date of grant terminate his or her employment with the Company prior to
(i) the date on which he or she completes the period of continuous service
for the Company following the award date specified by the Committee for
such award, or (ii) his or her death or retirement: or
(b) Should the Company terminate his or her employment for any reason
other than for a cause set forth in Section 5.5 above,
BankAmerica shall reacquire all the Restricted Stock without the payment of
consideration in any form to such Restricted Stockholder and the Restricted
Stockholder shall unconditionally forfeit any right, title or interest to such
Restricted Stock, unless the Committee, within 90 days of such termination,
determines in its sole discretion to permit the Restricted Stockholder to
retain all or any part of the Restricted Stock. Upon direction of the
Committee, all forfeited
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Restricted Stock shall be transferred and delivered to BankAmerica. Termination
of a Restricted Stockholder's employment with the Company shall be deemed to
include a change in ownership of the Restricted Stockholder's employer such that
the Restricted Stockholder's employer ceases to be BankAmerica or one of its
Subsidiaries.
5.7 Escrow. In order to administer the restrictions set forth in Sections
5.3, 5.4, 5.5 and 5.6 above, the certificates evidencing Restricted Stock,
although issued in the name of the Restricted Stockholder, shall be held by Bank
of America National Trust and Savings Association (the "Bank") in escrow subject
to delivery to the Restricted Stockholder or to BankAmerica at such times and in
such amounts as the Committee shall direct under the terms of this Plan. When
an employee or other individual accepts an award of Restricted Stock pursuant to
the Plan, he or she thereby grants an irrevocable power of attorney to the Bank
to cause the transfer and delivery to BankAmerica of any of such Restricted
Stock which the Committee shall direct to be so transferred and delivered
pursuant to Sections 5.5 and 5.6 above.
5.8 Dividends on Restricted Stock. Even while the Restricted Stock is
held in escrow, all dividends BankAmerica pays on the Restricted Stock shall be
delivered directly to the Restricted Stockholder, not the escrow account.
5.9 Voting Rights. Even while the Restricted Stock is held in escrow, the
Restricted Stockholder shall have the same voting rights with respect to the
Restricted Stock as those provided to other shareholders of Common Stock.
ARTICLE VI
Miscellaneous
6.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or messenger, addressed
(a) if to the Company, at
BankAmerica Corporation
555 California Street
San Francisco, CA 94104
Attn: c/o Bank of America NT&SA
Executive Product Services #3005
Corporate Human Resources
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(b) if to the Optionee, at the last address shown on the Company's
personnel records, or
(c) to such address as either the Company or the Optionee shall later
designate by notice to the other.
6.2 Amendments of Plan. The Board may, at any time and from time to time,
modify, amend, suspend or terminate the Plan in any respect. Notwithstanding
the above, however, any modification, amendment, suspension or termination of
the Plan shall not affect an Optionee's or Restricted Stockholder's rights to a
grant or award previously made, except as provided in Section 1.8(a), or except
with his or her consent.
6.3 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence from the Company taken by the recipient of any
grant or award under the Plan. Without limiting the generality of the
foregoing, the Committee shall be entitled to determine (a) whether or not any
such leave of absence shall be treated as a termination of employment with the
Company within the meaning of the Plan and (b) the impact, if any, of any such
leave of absence on grants and awards under the Plan.
6.4 Dilution and Other Adjustments. In the event of any change in the
outstanding Common Stock by reason of a stock dividend or stock split,
recapitalization, merger, consolidation, exchange of shares or other similar
corporate change, then the Committee may appropriately adjust the aggregate
number of shares of Common Stock which is available for issuance or delivery
under the Plan (as set forth in Section 1.7), the number of shares of Common
Stock subject to Options and SARs granted under the Plan, the number of Share
Equivalents credited to DEC Accounts pursuant to Section 3.5, the Option Price
of Options granted under the Plan, the number of shares of Restricted Stock held
in escrow pursuant to Section 5.7, and any and all other matters deemed
appropriate by the Committee.
6.5 General Restriction. Each grant and award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (a) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or federal law, (b) the consent or approval of any government regulatory body,
or (c) an agreement by the recipient of a grant or award with respect to the
disposition of shares of Common Stock, is necessary or desirable as a condition
of, or in connection with, the making of a grant or award or the issue, delivery
or purchase of shares of Common Stock thereunder, then such grant or award shall
not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
6.6 Change in Control. If BankAmerica undergoes a Change in Control (as
defined in Section 1.3(c)), the following shall apply:
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(a)(i) All outstanding Options and related SARs shall be immediately
exercisable in full; (ii) all DEC Accounts related to any PSOs shall be
paid in full as soon as practicable following the Change in Control; and
(iii) all Restricted Stock shall be immediately released free from all
restrictions and shall be delivered to the Restricted Stockholder as soon
as practicable following the Change in Control.
(b) Except as provided in the following sentence, in the event an
employee terminates employment with the Company following a Change in
Control, his or her Options and related SARs shall remain exercisable for a
period of three years following termination of employment, not to exceed
the original term of the Option or related SAR. The preceding sentence
shall not apply to an incentive stock option unless the option agreement
gives the Committee discretion to permit the incentive stock option to
remain exercisable following termination of the optionholder's employment,
in which case the incentive stock option shall be exercisable for three
months following termination of employment without further Committee
action.
(c) [intentionally left blank]
(d) The Company shall have the right to deduct from any
settlement of any Option, SAR or Restricted Stock an amount sufficient to
cover withholding required by law for any federal, state or local taxes, of
to take such other action as may be necessary to satisfy any such
withholding obligation.
6.7 Withholding Taxes. Whenever the Company proposes to deliver shares of
Common Stock under the Plan, the Company shall have the right to require the
individual who is to receive the shares to remit to the Company, prior to the
delivery of any certificate or certificates for such shares, an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements. Whenever, under the Plan, payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements.
6.8 Non-Assignability. No Optionee or Restricted Stockholder shall have
the right to alienate, assign, encumber, hypothecate or pledge his or her
interest in any award under the Plan, voluntarily or involuntarily, and any
attempt to so dispose of any such interest prior to payment thereof shall be
void. Notwithstanding the preceding sentence, the Company shall have the right
to offset from any unpaid or deferred award any amounts due and owing from the
Optionee or Restricted Stockholder to the extent permitted by law.
6.9 No Right to Employment. Nothing in the Plan nor in any agreement
entered into pursuant to the Plan shall confer upon any Optionee or Restricted
Stockholder the right to continue in the employment of the Company, nor affect
any right which the Company may have to terminate the employment of such person.
6.10 Rights as Shareholder. No Optionee shall have rights as a
shareholder with respect to shares of Common Stock awarded to him or her unless
and until the certificates for
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such shares are delivered to him or her. Restricted Stockholders have full
voting rights with respect to Restricted Stock, as outlined in Section 5.9
hereof.
6.11 Entire Plan. This document is a complete statement of the Plan. As
of its effective date this document supersedes all prior plans, representations
and proposals, written or oral, relating to its subject matter, except as
otherwise provided in Section 1.7 hereof. The Company shall not be bound by or
liable to any person for any representation, promise or inducement made by any
employee or agent of it which is not embodied in this document.
6.12 Governing Law. The Plan shall be construed and enforced in
accordance with California law.
The resolution amending Sections 1.3(c) and 6.6 provided that no
modification, suspension, amendment or termination of the Plan may be made which
would adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option, stock appreciation right, restricted
stock unit or other stock based award granted under the Plan prior to the date
of such modification, suspension, amendment or termination.
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Exhibit 10.c
CONTINENTAL BANK CORPORATION
1991 EQUITY PERFORMANCE INCENTIVE PLAN
As amended
Last Amended November 3, 1997
<PAGE>
CONTINENTAL BANK CORPORATION
1991 EQUITY PERFORMANCE INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to promote the long-term
financial interests of the Company by (i) rewarding key employees of the Company
or one or more of its Affiliates for their contributions to the success of the
Company; (ii) attracting and encouraging long service by key employees
possessing outstanding abilities; (iii) providing key employees with additional
incentives in the form of Incentive Stock Options, Non-Qualified Stock Options,
Stock Appreciation Rights and Restricted Stock Units; and (iv) furthering the
identity of interests of key employees with those of the Company's stockholders
through opportunities for interested stock ownership and awards based on
corporate stock performance.
2. Definitions.
"Affiliate" means a corporation, partnership, joint venture or other entity
in which the Company has an ownership interest.
"Award" means an award of Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units
under the Plan.
"Award Agreement" means an agreement entered into between the Company and a
Participant, setting forth the terms and conditions applicable to an award
granted to the Participant.
"Board of Directors" or "Board" means the Board or Directors of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Committee" means the Human Resources Committee or the Board of Directors,
or such other committee as may be designated by the Board of Directors and so
constituted as to permit the Plan to comply with Rule 16b-3 under the Exchange
Act or any successor rule or regulation.
"Common Stock" means the Company's common stock, $4.00 par value per share.
"Company" means Continental Bank Corporation, a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Fair Market Value" means, as of any given date, the mean of the highest
and lowest market prices of the Common Stock, or other security for which Fair
Market Value is being determined,
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as reported on the composite tape of New York Stock Exchange issues (or such
other reporting system as shall be selected by the Committee) on such date or,
if no sale of Common Stock or such other security is reported for such date,
the next preceding day for which there was a reported sale. If such Common
Stock or other security is not traded on the New York Stock Exchange, the Fair
Market Value shall be such amount as shall be reasonably determined by the
Committee.
"Incentive Stock Option" means any Stock Option intended to meet the
requirements of an "incentive stock option" within the meaning of Section 422 of
the Code, or any successor Code section.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Participant" means an employee of the Company or its Affiliates who is
designated as a Participant in the Plan by the Committee pursuant to Section 4
below.
"Plan" means the Continental Bank Corporation 1991 Equity Performance
Incentive Plan, as set forth herein and as amended from time to time.
"Restricted Stock" means Common Stock which has been awarded to a
Participant subject to the restrictions referred to in Section 9 below, so long
as such restrictions are in effect.
"Restricted Stock Unit" means a right to receive a payment determined by
the price of Common Stock as described in Section 10 below.
"Stock Appreciation Right" means a right to receive a payment determined by
the appreciation in Common Stock as described in Section 8 below.
"Stock Option" or "Option" means a right to purchase shares of Common Stock
(including Restricted Stock, if the Committee so determines) as described in
Section 7 below.
3. Administration. The Plan and all Awards granted pursuant thereto
shall be administered, construed and interpreted by the Committee. The decision
or a majority of the members of the Committee voting shall constitute the
decision of the Committee and the Committee may act either at a meeting at which
a majority of the members of the Committee is present, or by writing signed by
all members of the Committee. The Committee shall have the sole, final and
conclusive authority to interpret the Plan and all Awards granted pursuant
thereto. Notwithstanding the foregoing provisions of this Section 3, and
subject to the restrictions set forth in Section 14 below, the Committee may
delegate to the Chairman or, except as to the issuance of Common Stock, the
Chief Human Resources Officer of the Company any or all authority otherwise
delegated to the
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Committee under the Plan with respect to granting Awards to or administering
Awards granted to, or held by, persons who, at the time such authority is
exercised, are not subject to Section 16(a) or Section 16(b) of the Exchange
Act.
4. Participation. The Committee shall, from time to time, determine and
designate the key employees of the Company or its Affiliates (any of whom may be
members of the Board of Directors) who shall be Participants in the Plan and the
types, terms and size of Awards to be made to each such Participant. Any such
Award may be granted singly or in combination or in tandem with other Awards and
may be made in tandem with or in lieu of current or deferred compensation and
may be conditioned on a Participant's purchase and/or retention of shares of
Common Stock, all as the Committee may determine.
5. Stock Subject to Plan. Shares of stock subject to the Plan shall be
shares of the Company's Common Stock. Subject to adjustment as provided in
Section 12 below, the aggregate number of shares of Common Stock with respect to
which Awards may be granted under the Plan shall not exceed 3,500,000 shares.
The grant of an Award shall be deemed to be a grant of shares equal to the
greater of the number of shares that may be issued under the Award or the number
of shares on the basis of which the Award is calculated. To the extent that any
Award terminates by expiration, cancellation, forfeiture, surrender or otherwise
(other than by reason of the exercise of an Award granted in tandem therewith)
without the issuance of shares or without payment therefor or, in the case of
Restricted Stock, without vesting, any shares subject to such Award or on the
basis of which such Award would have been calculated shall again be available
for future Awards. Either authorized and unissued shares or treasury shares may
be used for Plan purposes; provided, however, that unissued shares shall not be
awarded to any Participant who has been employed by the Company or its
Affiliates for less than one year, unless the Committee expressly determines,
after consideration of all other remuneration paid or payable to the
Participant, that the services already rendered to the Company and its
Affiliates by the Participant for which the Participant is being granted the
Award have a value of not less than the par value of the shares being awarded.
6. Award Agreement. Each Award under this Plan shall be evidenced by an
Award Agreement which shall include provisions governing the disposition of the
Award in the event of retirement, disability, death or other termination of a
Participant's employment by or relationship to the Company or any of its
Affiliates, and such other terms and conditions, including the criteria for
determining vesting of Awards and the amount or value of Awards, as the
Committee shall deem necessary and appropriate to effect an Award Agreement with
the Participant to whom the Award is granted.
7. Options. Each Option shall entitle the Participant to
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<PAGE>
whom it is granted the right to purchase a specified number of shares of
Common Stock (including Restricted Stock, if the Committee so determines) at a
fixed price subject to the following terms and conditions, and to such other
terms and conditions not inconsistent with the Plan as shall be prescribed by
the Committee in its sole discretion:
(a) Option Price. The price at which a share of Common Stock may be
purchased pursuant to the exercise of an Option shall be determined by the
Committee at the time such Option is granted, but shall not be less than
the greater of (i) the Fair Market Value of a share of Common Stock on the
date of grant or (ii) the par value or the Common Stock.
(b) Exercisability of Option. An Option or any part thereof shall
become exercisable at such date or dates as shall be fixed by the Committee
at the time such Option is granted or at such earlier time as may
subsequently be determined by the Committee but in no event earlier than
six months after the date of grant. Options shall be exercised in whole or
in part by written notice to the Company and payment in full of the option
price. Payment of the option price may be made, at the discretion of the
optionee, and to the extent permitted by the Committee, (A) in cash
(including check, bank draft, or money order), (B) in Common Stock (valued
at the Fair Market Value thereof on the date of exercise), (C) by a
combination of cash and Common Stock or (D) with any other consideration
(including payment in accordance with a cashless exercise program under
which, if so instructed by the Participant, shares of Common Stock may be
issued directly to the Participant's broker or dealer upon receipt of the
option price in cash from the broker or dealer).
(c) Termination of Option. An Option shall terminate as determined
by the Committee at the time such Option is granted; provided, however, no
Option shall be exercisable after the expiration of ten years from the date
such Option is granted.
(d) Limitation on Amount of Incentive Stock Options. The aggregate
Fair Market Value (determined at the time the Option is granted) of the
shares with respect to which Incentive Stock Options are exercisable for
the first time by any Participant in any calendar year under this Plan and
each other stock option plan of the Company and any "parent" and
"subsidiary" corporations (as those terms are defined in Sections 424(c)
and 424(f) of the Code, respectively, or any successor Code section) shall
not exceed $100,000.
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(e) Deferral of Option Gain. The Committee may permit a Participant to
elect to defer the receipt of the shares of Common Stock upon exercise of
an Option under such rules as the Committee may determine in its sole
discretion. If such an election is made, upon exercise of the Option, the
Company shall not direct the Company's transfer agent to register the
shares of Common Stock in the name of the Participant until the date
determined under the Committee's rules and the Participant's election.
8. Stock Appreciation Rights. Each Stock Appreciation Right shall
entitle the Participant to whom it is granted to receive, upon exercise of the
Stock Appreciation Right (or of both the Stock Appreciation Right and the
related Option, or of a portion of either, in the case of a Stock Appreciation
Right granted in tandem with all or a portion of a related Stock Option),
without any payment of cash (except for applicable employee withholding taxes),
that number of shares of Common Stock (including Restricted Stock, if the
Committee so determines) having an aggregate Fair Market Value on the date of
exercise equal to the excess of the aggregate Fair Market Value on the exercise
date of the shares of Common Stock for which the Stock Appreciation Right is
exercised, over the exercise price of such right, which price shall be not less
than the Fair Market Value of such shares on the date the right was granted (or,
in the case of a right granted in tandem with an Option, the option price the
Participant would otherwise have been required to pay for such shares). Each
Stock Appreciation Right shall be subject to the terms and conditions set forth
in this Section 8 and to such other terms and conditions not inconsistent with
the Plan as shall be specified in a related Award Agreement, including, but not
limited to, limitations on the period or periods within which the Stock
Appreciation Right shall be exercisable and any restrictions as to the amount of
appreciation that may be recognized upon exercise of such Stock Appreciation
Right. No Stock Appreciation Right shall become exercisable prior to six months
after the date of grant. A Stock Appreciation Right granted in tandem with all
or a portion of a related Stock Option may be granted either at the time of the
grant of the related Option or, unless the related Option is an incentive Stock
Option, at any time thereafter during the term of the Option and shall be
exercisable only to the extent that the related Option is exercisable. The
Company may (if the Committee so determines) settle all or part of the Company's
obligation arising out of the exercise of a Stock Appreciation Right by the
payment of cash equal to the aggregate Fair Market Value of the shares of Common
Stock the Company would otherwise be obligated to deliver.
9. Restricted Stock. Restricted Stock is Common Stock that is subject to
forfeiture, restrictions on transfer and/or such other restrictions on incidents
of ownership, as the Committee may determine. A Restricted Stock Award shall
entitle the Participant to whom it is granted to receive, on the date or
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dates designated in the Award Agreement, subject to such terms and conditions
as the Committee may determine, the number of shares of Common Stock specified
in the Award Agreement and shall require no payment or consideration by the
Participant, either on the date of grant or the date the restrictions are
removed, unless specifically required by the terms of the Award Agreement. The
Committee in its sole discretion may specify at the time a Restricted Stock
Award is granted that the recipient thereof is entitled to receive, currently
or on deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the Award, and the
Committee may specify that such amounts (if any) shall be deemed to have been
reinvested in additional Common Stock or otherwise reinvested.
10. Restricted Stock Units. Each Restricted Stock Unit shall entitle
the Participant to whom it is awarded to receive from the Company upon its
surrender, on or as soon as practicable after the date designated in the Award
Agreement, a payment, subject to such terms and conditions as the Committee
may determine (including those related to the form of such payment), equal to
the Fair Market Value of a share of Common Stock on the date the restrictions
lapse. The Committee in its sole discretion may specify at the time a
Restricted Stock Unit is awarded that the recipient thereof is entitled to
receive, currently or on a deferred basis, interest or dividends or interest
or dividend equivalents with respect to the number of shares covered by the
Award, and the Committee may specify that such amounts (if any) shall be
deemed to have been reinvested in Common Stock or otherwise reinvested.
11. Compliance With Applicable Laws. Notwithstanding any other
provisions of the Plan, the Committee may subject shares of Common Stock
(including Restricted Stock) awarded under the Plan to such conditions,
limitations or restrictions as the Committee determines to be necessary or
desirable to comply with any law or regulation or with the requirements of any
securities exchange.
12. Changes in Capitalization, Similar Changes and Changes in Control.
In the event of any change in the outstanding shares of Common Stock by reason
of any stock dividend or split, recapitalization, merger, reorganization
(including, but not limited to, any spinoff, extraordinary dividend or other
distribution), consolidation, combination or exchange of shares or other
similar corporate change, the maximum aggregate number and class of shares
with respect to which Awards may be granted under the Plan and (where
applicable) the exercise or purchase price of and the number and class of
shares covered by outstanding Awards shall be equitably adjusted by the
Committee. Such determination of the Committee shall be conclusive; provided
that in no event shall the Committee adjust the exercise or purchase price for
an Award under which shares may be issued to a price less than the par value
of the stock on the date of the adjustment. Furthermore, if there is an
adjustment
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in the number of shares, no fraction of a share (or, if applicable, fraction
of one cent) shall be delivered with respect to any Restricted Stock or upon
any exercise of any other Award and, if an adjustment of the exercise or
purchase price shall result in a fraction of one cent, a full cent shall be
included in such price in lieu of such fraction. Any shares of stock or other
securities received by a Participant with respect to Restricted Stock in
connection with such an adjustment shall be subject to the same restrictions
as was the Restricted Stock at the time of the adjustment. If the Company
shall be consolidated or merged with another corporation, any stock,
securities or other property which any Participant is entitled to receive by
reason of such Participant's ownership of the shares of Restricted Stock shall
be deposited with the Company or its successor. Subject to the provisions of
Section 9 above, such stock, securities or other property shall also be
subject to the same restrictions as such Restricted Stock, and shall bear an
appropriate legend with respect thereto. Notwithstanding the foregoing
provisions of this Section 12 or any other provision of the Plan, other than
Section 14, the Committee may, in its sole discretion, at the time of granting
any Award under the Plan or at any time thereafter, provide for the
acceleration of vesting or the modification of any other terms of such Award
in the event of a change in control of the Company and may establish the
conditions under which such a change in control will be deemed to have
occurred.
13. Employees' and Participants' Rights. Notwithstanding any other
provision of the Plan:
(a) No Right to Receive Award. No employee of the Company or any
Affiliate or other person shall have any claim or right to receive an Award
under the Plan except as the Committee (or, if authority is delegated as
provided in Section 3, the Chairman or the Chief Human Resources Officer)
shall have conferred in its discretion in the administration of the Plan.
(b) No Right to Continued Employment. Participation in the Plan
shall not confer upon any Participant any right with respect to
continuation of employment by the Company or any Affiliate, nor interfere
with the right of the Company or such Affiliate to terminate at any time
employment of any Participant.
(c) Rights as a Stockholder. A Participant shall have no rights
as a stockholder with respect to any shares covered by an Award until the
date the Participant or the Participant's nominee becomes the stockholder
of record of the shares. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date the
Participant
7
<PAGE>
or the Participant's nominee becomes the stockholder of record of the
shares, unless the Award Agreement specifically requires such adjustment.
(d) Withholding. Except as otherwise provided by the Committee, the
deduction of withholding and any other taxes required by law will be made
from all amounts paid in cash. In the case of payments of Awards in shares
of Common Stock, the Participant shall be required to pay the amount of any
taxes required to be withheld prior to receipt of such stock; provided,
however, that the Committee may permit the withholding obligation to be met
in whole or in part by withholding a number of shares otherwise deliverable
under the Award, the Fair Market Value of which equals the amount required
to be withheld.
(e) Non-Assignability. An Award shall not be assignable or
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employees Retirement Income Security Act, or the rules
thereunder (but only if permitting such transfer will not affect the status
of the Award under the Code).
14. Amendment and Termination. The Board of Directors may amend,
suspend or terminate the Plan or any portion thereof at any time; provided,
however, that no such amendment, suspension or termination shall impair the
rights of Participants with respect to any outstanding Awards. Notwithstanding
any other provision of the Plan to the contrary, the Committee may amend the
Plan to the extent necessary for the efficient administration of the Plan, or
to make it practically workable or to conform to the provisions of any federal
or state law or regulation. Notwithstanding the foregoing provisions of this
Section 14, in no event shall any amendment be made without stockholder
approval, as long as such approval is required by Rule 16b-3 of the Exchange
Act or by the rules of the New York Stock Exchange, which shall:
(a) increase the total number of shares with respect to which Awards
may be granted under Section 5 of the Plan (subject to adjustment in
accordance with Section 12 above);
(b) reduce the option price under any Option below the Fair Market
Value of the stock subject to the Option determined as of the date of
grant;
(c) materially modify the requirements as to eligibility for
participation in the Plan; or
(d) withdraw the administration of the Plan from the Committee.
8
<PAGE>
The Plan shall terminate automatically on February 25, 2001, except as to
outstanding Awards.
15. Effective Date. This Plan shall be effective as of February 25, 1991
subject to the approval by the affirmative vote of a majority of the shares
present or represented by proxy at the Annual Meeting of Stockholders to be held
on April 22, 1991 or any adjournment thereof and any necessary regulatory
approval. All Awards are subject to such approval and, notwithstanding any
other provision of the Plan, if any such approval is not obtained, all such
Awards as well as dividends paid or payable with respect to such Awards shall be
forfeited.
The following provision was added to the plan by the BAC Board of Directors
on August 7, 1995. For purposes of this provision, "BankAmerica" means
BankAmerica Corporation and "Company" means BankAmerica and its subsidiaries
collectively.
Notwithstanding any other provision in the Plan, the following shall apply
in the event of a Change in Control, as defined below, in BankAmerica:
Change in Control means that one of the following events has occurred:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of BankAmerica (the "Outstanding BankAmerica Common Stock")
or (ii) the combined voting power of the then outstanding voting
securities of BankAmerica entitled to vote generally in the election of
directors (the "Outstanding BankAmerica Voting Securities"); provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from BankAmerica (ii) any acquisition by
BankAmerica, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of subsection (iii) below.
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by BankAmerica's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
9
<PAGE>
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
BankAmerica or its principal subsidiary (a "Business Combination"), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding BankAmerica Common Stock and
Outstanding BankAmerica Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
80% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns BankAmerica or all or substantially all of BankAmerica's assets
either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding BankAmerica Common Stock and Outstanding
BankAmerica Voting Securities, as the case may be, (provided, however,
that, for the purposes of this clause (A), any shares of common stock or
voting securities of such resulting corporation received by such
beneficial owners in such Business Combination other than as the result
of such beneficial owners' ownership of Outstanding BankAmerica Common
Stock or Outstanding BankAmerica Voting Securities immediately prior to
such Business Combination shall not be considered to be owned by such
beneficial owners for the purposes of calculating their percentage of
ownership of the outstanding common stock and voting power of the
resulting corporation), (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation unless such Person owned 20% or more of the Outstanding
BankAmerica Common Stock or Outstanding BankAmerica Voting Securities
immediately prior to the Business Combination and (C) at least a majority
of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board (or,
in the case of BankAmerica's principal subsidiary, the corresponding
board of directors) at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
(iv) Approval by the shareholders of BankAmerica of a
10
<PAGE>
complete liquidation or dissolution of BankAmerica.
(a) All outstanding stock options and stock appreciation rights under the
Plan shall be immediately exercisable in full if BankAmerica undergoes a Change
in Control.
(b) Except as provided in the following sentence and in (c) below, if
applicable to the Plan, in the event an employee terminates employment with the
Company following a Change in Control, his or her stock options and stock
appreciation rights granted under the Plan shall remain exercisable for a period
of three years following termination of employment, not to exceed the original
term of the stock option or stock appreciation right. The preceding sentence
shall not apply to an incentive stock option unless the option agreement gives
the Plan committee discretion to permit the incentive stock option to remain
exercisable following termination of the optionholder's employment, in which
case the incentive stock option shall be exercisable for three months following
termination of employment without further committee action.
(c) [intentionally left blank]
(d) The Company shall have the right to deduct from any settlement of any
stock option or stock appreciation right an amount sufficient to cover
withholding required by law for any federal, state or local taxes, of to take
such other action as may be necessary to satisfy any such withholding
obligation.
The resolution adding the above provision provided that no modification,
suspension, amendment or termination of the Plan may be made which would
adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option or stock appreciation right granted
under the Plan prior to the date of such modification, suspension, amendment or
termination.
11
<PAGE>
Exhibit 10.d
CONTINENTAL BANK CORPORATION
1982 PERFORMANCE, RESTRICTED STOCK
AND STOCK OPTION PLAN
As amended
Last Amended November 3, 1997
<PAGE>
CONTINENTAL BANK CORPORATION
1982 PERFORMANCE, RESTRICTED STOCK
AND STOCK OPTION PLAN
1. Purpose. The purpose of the 1982 Performance, Restricted Stock and
Stock Option Plan (the "Plan") of Continental Bank Corporation (the "Company")
is to promote the long-term financial interests of the Company by (i) rewarding
key executives of the Company and its Subsidiaries (as defined below) for their
contributions to the success of the Company, (ii) attracting and encouraging
long service by key executives possessing outstanding abilities, (iii) providing
competitive incentive compensation in the form of incentive stock options,
non-qualified stock options, stock appreciation rights and restricted stock; and
(iv) furthering the identity of interests of key executives with those of the
Company's stockholders through opportunities for increased stock ownership and
awards based on corporate performance. The term "Subsidiary" means any
corporation of which the Company owns or controls, directly or indirectly, 50
percent or more of the outstanding shares of stock normally entitled to vote for
the election of directors.
2. Administration. The Plan shall be administered, construed and
interpreted by a Committee of not less than three members, which, subject to the
following provisions of this Section 2, shall be the Compensation Committee of
the Board of Directors of the Company until such Board of Directors determines
otherwise. No member of the Committee shall be eligible, or within one year
prior to such membership shall have been eligible, for selection as a person to
whom stock may be awarded or allocated or to whom stock options or stock
appreciation rights may be granted under the Plan or any other plan of the
Company (or of any of its affiliates) entitling participants therein to acquire
stock, stock options or stock appreciation rights of the Company (or of any of
its affiliates). The decision of a majority of the members of the Committee
shall constitute the decision of the Committee and the Committee may act either
at a meeting at which a majority of the members of the Committee is present, or
by writing signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to interpret the Plan. Notwithstanding the
foregoing provisions of this Section 2, the Chairman of the Company shall
exercise all authority otherwise delegated to the Committee under the Plan with
respect to stock options, stock appreciation rights and Restricted Stock (as
described in Section 8) awarded to, or held by, person who, at the time such
authority is exercised, are not subject to Section 16(a) or Section 16(b) of the
Securities Exchange Act of 1934.
3. Participation. The Committee shall, from time to time, determine
and designate the officers (including officers who are members of the Board of
Directors) and other key
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<PAGE>
employees of the Company and its Subsidiaries who shall be Participants in the
Plan and the number of stock options, stock appreciation rights and shares of
Restricted Stock to be awarded to each such Participant. In making any such
award the Committee shall take into account the past performance of the Company
and its Subsidiaries, the Participant's contributions to such performance, the
capacity of the Participant to contribute in a substantial measure to such
performance in the future, and such other factors as the Committee may consider
relevant.
4. Stock Subject to Plan. Shares of stock subject to the Plan shall
be shares of the Company's common stock, par value $4 per share ("Common
Stock"). Subject to adjustment as provided in Section 11, the aggregate number
of shares of Common Stock which may be delivered under the Plan shall not exceed
4,000,000 shares. Any shares subject to any grant which terminates by
expiration, cancellation, forfeiture, surrender or otherwise without the
issuance of shares or without payment therefore or, in the case of Restricted
Stock, without vesting shall again be available for future grants under the
Plan. Either authorized and unissued shares or treasury shares may be delivered
under the Plan; provided, however, that unissued shares shall not be awarded as
Restricted Stock to any Participant who has been employed by the Company and its
Subsidiaries for less than one year, unless the Committee expressly determines,
after consideration of all other remuneration paid or payable to the
Participant, that the services already rendered to the Company and its
Subsidiaries by the Participant for which he is being awarded Restricted Stock
have a value of not less than the par value of the shares awarded to him.
5. Terms of Option. Each option granted pursuant to the Plan shall be
evidenced by a Stock Option Agreement between the Company and the Participant,
and shall be subject to the following terms and conditions, and to such other
terms and conditions not inconsistent therewith as the Committee may deem
appropriate in each case:
(a) Option Price. The price at which a share of Common Stock
may be purchased pursuant to the exercise of an option
shall be determined by the Committee at the time such
option is granted, but shall not be less than the greater
of (i) the fair market value, as determined by the
Committee, of a share of Common Stock on the date of grant
or (ii) the par value of such stock.
(b) Period for Exercise of Option. The option or any part
thereof shall become exercisable at such date or dates as
shall be fixed by the Committee at the time such option is
granted or at such earlier time as may subsequently be
determined by the Committee; provided that an incentive
stock option granted prior to January 1, 1987, by its
terms, shall not be exercisable while there is outstanding,
within the meaning of
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<PAGE>
Section 422A(b)(7) of the Internal Revenue Code of 1954,
any other incentive stock option which was granted to the
Participant before the granting of the option and which
other incentive stock option is for the purchase of shares
of stock in the Company, in a corporation which at the time
of the granting of the other incentive stock option was a
parent or subsidiary corporation of the Company, or in a
predecessor corporation of any such corporations.
(c) Purchase of Shares. The option price of each share of
Common Stock purchased upon exercise of an option shall be
paid in full at the time of exercise, which payment shall
be in cash or, unless otherwise determined by the
Committee, by delivery of shares of Common Stock having a
fair market value equal to the option price, or by a
combination of such shares and cash. Each option may be
exercised in whole or in part, at any time or from time to
time, during the period such option is exercisable, except
that no option may be exercised for less than fifty shares
of stock, unless the exercise for a lesser number of shares
will exhaust such option.
(d) Termination of Option. Except as otherwise provided for
below, any option granted pursuant to the Plan shall
terminate not more than ten years after the date on which
such option is granted. If a Participant ceases to be an
employee of the Company or any Subsidiary for any reason
other than retirement or death, any option granted to him
pursuant to the Plan shall forthwith terminate. A leave of
absence approved by the Committee, or a transfer of
employment from the Company to any Subsidiary or from a
Subsidiary to the Company or any other Subsidiary, shall
not constitute a cessation of employment. If any
Participant ceases to be an employee of the Company or a
Subsidiary by reason of a retirement which entitles him to
pension benefits, other than a deferred vested pension,
under any pension plan then maintained by the Company or a
Subsidiary, any option granted to him pursuant to the Plan
may be exercised by him within three years after the date
of his retirement (but not later than ten years after the
date such option was granted) to the full extent such
option was exercisable on the date of such cessation. In
the event of the death of a Participant while in the employ
of the Company or a Subsidiary or within three years after
the date of his retirement, any option which had not
previously terminated may be exercised within three years
after the date of his death by his estate or by the person
or persons entitled thereto by will or by applicable laws
of descent and distribution, to the full extent such option
was exercisable on the date of his death;
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<PAGE>
provided, however, that an incentive stock option may not
be exercised after the expiration of ten years from the
date the option was granted.
(e) Limitation on Amount of Incentive Stock Options. The
aggregate fair market value (determined at the time the
option is granted) of the shares with respect to which
incentive stock options granted after December 31, 1986 are
exercisable for the first time by any Participant in any
calendar year under this Plan and each other stock option
plan of the Company and any parent and subsidiary
corporations shall not exceed $100,000.
(f) Deferral of Option Gain. The Committee may permit a
Participant to elect to defer the receipt of the shares of
Common Stock upon exercise of an option under such rules as
the Committee may determine in its sole discretion. If such
an election is made, upon exercise of the option, the
Company shall not direct the Company's transfer agent to
register the shares of Common Stock in the name of the
Participant until the date determined under the Committee's
rules and the Participant's election.
6. Stock Appreciation Rights. The Committee may, in its discretion,
grant a stock appreciation right to any Participant under the Plan. Each stock
appreciation right shall be evidenced by a Stock Appreciation Rights Agreement
between the Company and the Participant, and shall relate to and be associated
with all or any part of a specific option. A stock appreciation right may be
granted either at the time of the grant of the related option or at any time
thereafter. A stock appreciation right shall be exercisable only if the fair
market value of a share of Common Stock exceeds the option price for the related
option and then shall be exercisable to the extent, and only to the extent, that
the related option is exercisable. The Committee may at the time of granting
any stock appreciation right add such additional conditions and limitations to
the stock appreciation right as it shall deem advisable, including, but not
limited to, limitations on the period or periods within which the stock
appreciation right shall be exercisable and the maximum amount of appreciation
to be recognized with regard to such stock appreciation right. In the case of
Participants who are subject to Section 16(a) and Section 16(b) of the
Securities Exchange Act of 1934, the Committee may at any time add such
additional conditions and limitations to such stock appreciation right which, in
its discretion, the Committee deems necessary or desirable in order to comply
with Section 16(a) or Section 16(b) and the rules and regulations thereunder, or
in order to obtain any exemption therefrom. A stock appreciation right shall
entitle the Participant to whom it is granted (including his estate or other
successor in interest upon his death as provided in the last sentence of
paragraph 5(d)) the right to elect, so long as such
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<PAGE>
stock appreciation right is exercisable and subject to such limitations as the
Committee shall have imposed, to surrender any then exercisable portion of his
related option, in whole or in part, and receive from the Company in exchange,
without any payment of cash (except for applicable employee withholding taxes),
that number of shares of Common Stock having an aggregate fair market value on
the date of surrender equal to the product of (i) the excess of the fair market
value of a share of Common Stock on the date of surrender over the per share
option price under such option and (ii) the number of shares of Common Stock
subject to such option or portion thereof which is surrendered. Any option or
portion thereof which is surrendered shall no longer be exercisable. The
Committee, in its sole discretion, may allow the Company to settle all or part
of the Company's obligation arising out of the exercise of a stock appreciation
right by the payment of cash equal to the aggregate fair market value of the
shares of Common Stock the Company would otherwise be obligated to deliver.
7. Transferability. Options and stock appreciation rights are not
transferable except by will or the laws of descent and distribution. Options
and stock appreciation rights may be exercised during the lifetime of the
Participant only by the Participant and, after the death of the Participant,
only as provided in paragraph 5(d).
8. Terms and Conditions of Restricted Stock Awards. All shares of
Common Stock awarded to Participants under the Plan ("Restricted Stock") shall
be subject to the following terms and conditions and to such other terms and
conditions, not inconsistent with the Plan, as shall be prescribed by the
Committee in its sole discretion:
(a) Restricted Period. Shares of Restricted Stock awarded to
Participants may not be sold, assigned, transferred,
pledged or otherwise encumbered during a "Restricted
Period" commencing on the date of the award and ending on
the September 30th coincident with or next following the
fourth anniversary thereof, or such later date as the
Committee may designate at the time of the award, subject
to the following:
(i) Except as otherwise provided by the Committee at the
time of an award of Restricted Stock, if a
Participant's employment with the Company and its
Subsidiaries is terminated by reason of his death,
disability (as determined by the Committee) or a
retirement which entitles him to pension benefits
other than a deferred vested pension under a pension
plan then maintained by the Company or a Subsidiary,
then the Restricted Period shall end as of the date
of such termination with respect to such number of
shares (disregarding any fractional shares) of
Restricted Stock granted to him under such prior
award as is
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<PAGE>
proportionate to the ratio of (A) the number of
whole calendar months elapsed between the date of
the award and the date of such termination to (B)
the number of whole calendar months in the original
Restricted Period.
(ii) The Committee may, at the time of an award or at
any time thereafter, reduce or terminate the
Restricted Period otherwise applicable to all or
any portion of any Restricted Stock award;
provided, however, that no such reduction under
this subparagraph (i) shall be applicable to
Restricted Stock held by a Participant who
voluntarily terminates his employment within one
year of the date such Restricted Stock was awarded.
For purposes of this subparagraph (ii), termination
of employment by reason of disability (as
determined by the Committee) or mandatory
retirement shall not be deemed a voluntary
termination.
Subject to the provisions of paragraphs (b) and (f) next
below, at the end of the Restricted Period for any shares
of Restricted Stock, such shares will be transferred free
of all restrictions to the Participant or, in the event of
his death, to the beneficiary or beneficiaries designated
by the Participant under this Plan or, if none, to his
estate. Delivery of shares in accordance with the preceding
sentence shall be made within the thirty-day period
following the end of the Restricted Period.
(b) Forfeitures. Except as otherwise provided in subparagraph
8(a)(i) and subject to the rights of the Committee under
subparagraph 8(a)(ii), a Participant shall forfeit all
shares of Restricted Stock and all dividends and interest
accumulated in accordance with the provisions of Section 9
if his employment with the Company and its Subsidiaries is
terminated prior to the last day of the applicable
Restricted Period.
(c) Certificates Deposited With Company. Each certificate
issued in respect of shares of Restricted Stock awarded
under the Plan shall be registered in the name of the
Participant and deposited with the Company. Each such
certificate shall bear the following (or a similar) legend:
"The transferability of this certificate and the
shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) contained in the
Continental Bank Corporation 1982 Performance, Restricted
Stock and Stock Option Plan and an Agreement entered into
between the registered owner and Continental
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<PAGE>
Bank Corporation. A copy of such Plan and Agreement is on file at
the principal office of Continental Bank Corporation at 231 South
LaSalle Street, Chicago, Illinois 60697."
(d) Restricted Stock Agreement. The Participant shall enter into an
Agreement with the Company in a form specified by the Committee
agreeing to the terms and conditions of the award and such other
matters as the Committee shall, in its sole discretion, determine.
(e) Stockholder Rights. Subject to the foregoing restrictions and to
the provisions of Section 9, each Participant shall have all the
rights of a stockholder with respect to his shares of Restricted
Stock, including, but not limited to, the right to vote such
share.
(f) Substitution of Rights. Prior to the end of the Restricted Period
with respect to any shares of Restricted Stock awarded to a
Participant, the Committee may, with the consent of the
Participant, substitute an unsecured obligation of the Company to
pay cash or stock (on such reasonable terms and conditions as the
Committee may, in its sole discretion, determine) in lieu of its
obligations under this Section 8 and under Section 9 to deliver
unrestricted shares of Common Stock plus accrued dividends and
interest.
9. Dividends. Except as otherwise provided by the Committee,
dividends, including stock dividends, shall be accrued on each share of
Restricted Stock from the date as of which it is awarded and, if such share has
not been forfeited, shall be paid to the Participant, or in the event of his
death to his estate, as of the last day of the Restricted Period with respect to
such share. Such dividends shall not be held in a separate fund or separately
invested. Upon delivery of such dividends, interest shall be paid by the Company
on the amount of cash dividends withheld, including cash dividends on stock
dividends, at a rate equal to the rate of interest payable on amounts deferred
under the Continental Bank Corporation Deferred Incentive Plan, as such rate may
be adjusted from time to time.
10. Compliance With Applicable Laws. Notwithstanding any other
provision of the Plan, the Committee may subject shares of Common Stock awarded
under the Plan to such conditions, limitations or restrictions as the Committee
determines to be necessary or desirable to comply with any law or regulation or
with the requirements of any securities exchange.
11. Changes in Capitalization, Similar Changes and Changes in
Control. In the event of any change in the outstanding shares of Common stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange
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<PAGE>
of shares or other similar corporate change, the maximum aggregate number and
class of shares which may be delivered under the Plan and the option price under
and the number and class of shares covered by outstanding options and stock
appreciation rights shall be equitably adjusted by the Committee. Such
determination of the Committee shall be conclusive; provided that in no event
shall the Committee adjust the option price of the stock to a price less than
the par value of the stock on the date of the adjustment. Furthermore, if there
is an adjustment in the number of shares, no fraction of a share shall be
delivered upon any exercise of an option or with respect to any Restricted
Stock; and, if an adjustment of the option price shall result in a fraction of
one cent, a full cent shall be included in such price in lieu of such fraction.
Any shares of stock or other securities received by a Participant with respect
to Restricted Stock will be subject to the same restrictions and shall be
deposited with the Company. If the company shall be consolidated or merged with
another corporation, any stock, securities or other property which any
Participant is entitled to receive by reason of his ownership of the shares of
Restricted Stock shall be deposited with the Company or its successor. Subject
to the provisions of Section 8, such stock, securities or other property shall
also be subject to the same restrictions as such Restricted Stock, and shall
bear an appropriate legend similar in form to the legend set forth in paragraph
8(c). Notwithstanding the foregoing provisions of this Section 11, or any other
provision of the Plan, other than Section 14, the Committee may, in its sole
discretion, at the time of any award or grant under the Plan or at any time
thereafter, provide for the acceleration of rights under any grant or award in
the event of a change in control of the Company and may establish the conditions
under which such a change in control will be deemed to have occurred.
12. Withholding Tax. The Company shall have the right to withhold
with respect to any payments made to Participants under the Plan any taxes
required by law to be withheld because of such payments.
13. Employees' and Participants' Rights. No employee or other person
shall have any claim or right to be awarded stock options, stock appreciation
rights or Restricted Stock under the Plan except as the Committee shall have
conferred in its discretion in the administration of the Plan. Participation in
the Plan shall not confer upon any Participant any right with respect to
continuation of employment by the Company or a Subsidiary, nor interfere with
the right of the Company or such Subsidiary to terminate at any time employment
of any Participant.
14. Amendment and Termination. The Board of Directors may amend,
suspend or terminate the Plan or any portion thereof at any time. The
Compensation Committee of the Board of Directors, or any successor thereto
designated by the Board of Directors in accordance with the provisions of
Section 2, may amend the Plan
-8-
<PAGE>
to the extent necessary for the efficient administration of the Plan, or to make
it practically workable or to conform to the provisions of any federal or State
law or regulation. Notwithstanding the foregoing provisions of this Section 14,
in no event shall any amendment be made without stockholder approval which
shall:
(a) increase the total number of shares which may be awarded under
Section 4 of the Plan (subject to adjustment in accordance with
Section 11);
(b) reduce the option price under any option below the fair market
value of the stock subject to the option determined as of the date
of grant;
(c) extend the period during which an option or stock appreciation
right may be exercised beyond the period provided in paragraph
5(d); or
(d) withdraw the administration of the Plan from the Committee.
The Plan shall terminate automatically on April 26, 1993. In no event may any
amendment, suspension or termination impair the rights of any Participant,
without his consent, in any stock option, stock appreciation right or Restricted
Stock previously awarded under the Plan.
15. Effective Date. This Plan shall be effective as of January 1,
1982 subject to the approval by the affirmative vote of a majority of the shares
present or represented by proxy at the Annual Meeting of Stockholders to be held
on April 26, 1982 or any adjournment thereof. All awards of stock options, stock
appreciation rights and Restricted Stock are subject to such approval and,
notwithstanding any other provision of the Plan, if such stockholder approval is
not obtained, all such awards as well as dividends paid or payable with respect
to Restricted Stock shall be forfeited.
The following provision was added to the plan by the BAC Board of
Directors on August 7, 1995. For purposes of this provision, "BankAmerica" means
BankAmerica Corporation and "Company" means BankAmerica and its subsidiaries
collectively.
Notwithstanding any other provision in the Plan, the following shall
apply in the event of a Change in Control, as defined below, in BankAmerica:
Change in Control means that one of the following events has occurred:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange
-9-
<PAGE>
Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of BankAmerica (the "Outstanding BankAmerica
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of BankAmerica entitled to vote generally in the election of
directors (the "Outstanding BankAmerica Voting Securities"); provided, however,
that for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from BankAmerica
(ii) any acquisition by BankAmerica, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) below.
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by BankAmerica's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of BankAmerica or
its principal Subsidiary (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns BankAmerica or all or substantially all of BankAmerica's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities, as the case may be, (provided, however, that, for the purposes of
this clause (A), any shares of common stock or voting securities of such
resulting corporation received by such beneficial owners in such Business
Combination other than
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<PAGE>
as the result of such beneficial owners' ownership of Outstanding BankAmerica
Common Stock or Outstanding BankAmerica Voting Securities immediately prior to
such Business Combination shall be considered to be owned by such beneficial
owners for the purposes of calculating their percentage of ownership of the
outstanding common stock and voting power of the resulting corporation), (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation unless such Person owned 20% or more of the Outstanding BankAmerica
Common Stock or Outstanding BankAmerica Voting Securities immediately prior to
the Business Combination and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board (or, in the case of BankAmerica's principal
Subsidiary, the corresponding board of directors) at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination.
(iv) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
(a) All outstanding stock options and stock appreciation rights
under the Plan shall be immediately exercisable in full if BankAmerica
undergoes a Change in Control.
(b) [intentionally left blank]
(c) [intentionally left blank]
(d) The Company shall have the right to deduct from any settlement of
any stock option or stock appreciation right an amount sufficient to cover
withholding required by law for any federal, state or local taxes, or to take
such other action as may be necessary to satisfy any such withholding
obligation.
The resolution adding the above provision provided that no modification,
suspension, amendment or termination of the Plan may be made which would
adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option or stock appreciation right granted
under the Plan prior to the date of such modification, suspension, amendment or
termination.
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<PAGE>
CONTINENTAL ILLINOIS CORPORATION
231 South LaSalle Street
Chicago, Illinois 60697
SERIAL NUMBER
8290021
Optionee:
Shares: 9,000
Option Price: $16.875
Date of Grant: February 26, 1990
Expiration Date: February 24, 2000
ENDORSEMENTS
<TABLE>
<CAPTION>
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SHARES ISSUED
- ------------------------------------------------------------------------------------
ISSUE NUMBER OF BALANCE OF OPTION AUTHORIZED ENDORSEMENT DATE
DATE SHARES SHARES SIGNATURE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
====================================================================================
</TABLE>
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<PAGE>
Exhibit 10.e
[LOGO OF BANK OF AMERICA]
BANKAMERICA CORPORATION
PERFORMANCE EQUITY PROGRAM
AS ADOPTED FEBRUARY 3, 1997 AND
AMENDED THROUGH FEBRUARY 2, 1998
<PAGE>
BANKAMERICA CORPORATION PERFORMANCE EQUITY PROGRAM
TABLE OF CONTENTS
PAGE
----
ARTICLE I........................................................ 1
1.1 Name and Purpose......................................... 1
1.2 General Description...................................... 1
1.3 Eligibility.............................................. 1
1.4 Effective Date and Term of Plan.......................... 1
1.5 Limitation on Options and Limited SARs Awardable
to Any Single Participant........................................ 1
ARTICLE II............................................. ......... 3
2.1 Award.................................................... 3
2.2 Award Agreement.......................................... 3
2.3 BankAmerica.............................................. 3
2.4 Board.................................................... 3
2.5 Cause.................................................... 3
2.6 Change in Control........................................ 3
2.7 Committee................................................ 5
2.8 Common Stock............................................. 5
2.9 Company.................................................. 5
2.10 Disability............................................... 5
2.11 Early Retirement......................................... 5
2.12 Effective Date........................................... 5
2.13 Employment............................................... 6
2.14 Exchange Act............................................. 6
2.15 Executive Officer........................................ 6
2.16 Exercise Price........................................... 6
2.17 Fair Market Value........................................ 6
2.18 Final Measurement Period................................. 6
2.19 Grant Date............................................... 6
2.20 Grant Value.............................................. 6
2.21 Impact Level 1 Officer................................... 7
2.22 Index Stock.............................................. 7
2.23 Initial Grant............................................ 7
2.24 Initial Grant Pricing Date............................... 7
2.25 Internal Revenue Code.................................... 7
2.26 Limited Stock Appreciation Right or Limited SAR.......... 7
2.27 Market Index............................................. 7
2.28 Market Price Option...................................... 7
2.29 Normal Retirement........................................ 7
2.30 Option................................................... 7
2.31 Participant.............................................. 7
2.32 Performance Period....................................... 7
2.33 Plan..................................................... 8
2.34 Premium Price Option..................................... 8
2.35 Shareholder Return Performance Percentile................ 8
2.36 Subsidiary............................................... 8
2.37 Termination of Employment................................ 8
2.38 Total Shareholder Return................................. 8
2.39 Trading Day.............................................. 9
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Page
----
ARTICLE III...................................................... 10
3.1 Grant of Options......................................... 10
3.2 Option Agreement......................................... 10
3.3 Option Mix and Premium Price Option Exercise Price....... 10
3.3.1 Initial Grant to Executive Officers...................... 10
3.3.2 Initial Grant to Impact Level 1 Officers................. 10
3.3.3 Options Granted After Initial Grant...................... 11
3.3.4 Minimum Exercise Price for Premium Price Options..........11
3.4 Exercisability of Options................................ 11
3.4.1 Initial Grant............................................ 11
3.4.2 Initial Grant of Premium Price Options -
Effect of Shareholder Return Performance Percentile..... 12
3.4.3 Initial Grant of Premium Price Options -
Effect of Early or Normal Retirement or
Involuntary Termination Without Cause................... 12
3.4.4 Initial Grant of Premium Price Options -
Effect of Death or Disability........................... 13
3.4.5 Future Awards............................................ 13
3.4.6 Special Rule for Market Price Options on
Change in Control....................................... 13
3.4.7 Optional Provisions for Premium Price Options on
Change in Control....................................... 13
3.5 Expiration of Options.................................... 13
3.5.1 Premium Price Options.................................... 13
3.5.2 Market Price Options..................................... 14
3.6 Manner of Paying Option Price............................ 15
3.7 Exercise of Option....................................... 15
3.8 Deferral of Option Gain.................................. 15
ARTICLE IV....................................................... 17
4.1 Grant of Limited SARs.................................... 17
4.2 Exercise Price........................................... 17
4.3 Number of Limited SARs................................... 17
4.4 Exercisability........................................... 17
4.5 Expiration of Limited SARs............................... 17
4.6 Payment of Limited SARs.................................. 17
ARTICLE V........................................................ 19
5.1 Number of Shares......................................... 19
5.2 Source of Shares......................................... 19
5.3 Dilution and Other
Adjustments...................................................... 19
5.4 General Restriction...................................... 19
5.5 Rights as Shareholder.................................... 20
ARTICLE VI....................................................... 21
6.1 Amendment or Discontinuance of the Plan.................. 21
6.2 Plan Administration...................................... 21
ARTICLE VII...................................................... 23
7.1 Unsecured Status of Claim................................ 23
7.2 No Right to Employment................................... 23
7.3 Beneficiary Designations................................. 23
7.4 Domestic Relations Orders................................ 23
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Page
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7.5 Bona Fide Gifts.......................................... 23
7.6 Nonassignability......................................... 24
7.7 Separability, Validity................................... 24
7.8 Withholding Tax.......................................... 24
7.9 Applicable Law........................................... 25
7.10 Inurement of Rights and Obligations...................... 25
7.11 Notice................................................... 25
7.12 Entire Plan.............................................. 25
iii
<PAGE>
BANKAMERICA CORPORATION PERFORMANCE EQUITY PROGRAM
ARTICLE I
GENERAL
1.1 Name and Purpose. BankAmerica Corporation ("BankAmerica") hereby
establishes the BankAmerica Corporation Performance Equity Program (the "Plan").
The Plan is intended to (a) closely align the interests of shareholders of
BankAmerica and senior management of the Company, (b) attract key executives of
the highest quality, and (c) motivate Participants to generate superior returns
to shareholders of BankAmerica.
1.2 General Description. The Plan authorizes the granting of the
following forms of Awards:
(a) Options to purchase shares of BankAmerica's Common Stock at
Exercise Prices equal to the Fair Market Value of the shares on the
Grant Date ("Market Price Options").
(b) Options to purchase shares of BankAmerica's Common Stock at
Exercise Prices in excess of the Fair Market Value of the shares on the Grant
Date ("Premium Price Options"). Such Options shall be subject to forfeiture if
the Exercise Price is not attained within a specified time frame.
(c) Limited Stock Appreciation Rights granted in tandem with
Premium Price Options which become exercisable upon a Change in Control.
1.3 Eligibility. Each Executive Officer and each Impact Level 1
Officer is eligible to receive Awards under the Plan. In addition, the
Committee may designate other officers of the Company as being eligible to
receive Awards under the Plan. The Committee shall have the power and complete
discretion to select those eligible officers who are to receive an Award and
subject to Sections 3.3.1 and 3.3.2, the types of Awards to grant to eligible
officers.
1.4 Effective Date and Term of Plan. The Plan shall become effective
upon the date the shareholders of BankAmerica approve the Plan (the "Effective
Date"). Unless the shareholders of BankAmerica shall approve an extension or
renewal of the Plan for such new or additional term as they may determine, no
Awards shall be made after May 22, 2000. However, all Awards made under the
Plan prior to such date shall remain in effect until such Awards shall have been
satisfied, terminated, or paid out, or expire, in accordance with the Plan and
the terms of such Awards.
1.5 Limitation on Options and Limited SARs Awardable to Any Single
Participant. The maximum number of shares of Common Stock underlying Options
and Limited SARs that may be awarded under the
1
<PAGE>
Plan to any single Participant during any calendar year is 1,000,000.
2
<PAGE>
ARTICLE II
DEFINITIONS
The following terms, when written with initial capital letters, will
have the meanings stated below. Unless the context plainly indicates otherwise,
words in any gender include the other genders and the singular includes the
plural and vice versa:
2.1 "Award" means the grant of an Option or Limited SAR under the
Plan, either individually or collectively.
2.2 "Award Agreement" means the written agreement setting forth the
terms and conditions applicable to each Award.
2.3 "BankAmerica" means BankAmerica Corporation, a Delaware
corporation.
2.4 "Board" means the Board of Directors of BankAmerica.
2.5 "Cause" means (a) or (b) below:
(a) The willful and continued failure of the Participant to
substantially perform the Participant's duties with the Company (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for such performance is delivered to the Participant by the
Board or the chief executive officer of BankAmerica or of the Subsidiary
employing the Participant, which specifically identifies the manner in which the
Board or chief executive officer believes that the Participant has not
substantially performed the Participant's duties.
(b) The willful engaging by the Participant in illegal conduct
or gross misconduct which is injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Participant shall be considered "willful" unless it is done, or omitted to be
done, by the Participant in bad faith or without reasonable belief that the
Participant's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the chief executive officer of
BankAmerica or a senior officer of the Company or based upon the advice of legal
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Participant in good faith and in the best interests of the
Company.
2.6 "Change in Control" means that one of the following events has
occurred:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (a "Person") of beneficial
3
<PAGE>
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding shares of common stock of
BankAmerica (the "Outstanding BankAmerica Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of BankAmerica entitled
to vote generally in the election of directors (the "Outstanding BankAmerica
Voting Securities"); provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from BankAmerica (ii) any acquisition by BankAmerica,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) below.
(b) Individuals who, as of February 3, 1997 constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to February 3, 1997 whose election, or nomination for
election by BankAmerica's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board.
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
BankAmerica or its principal Subsidiary (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 70% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns BankAmerica or all or substantially all of BankAmerica's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities, as the case may be, (provided, however, that, for the purposes of
this clause (i), any shares of common stock or voting securities of such
resulting corporation received by such beneficial owners in such Business
Combination other than as the result of such beneficial owners' ownership of
Outstanding
4
<PAGE>
BankAmerica Common Stock or Outstanding BankAmerica Voting Securities
immediately prior to such Business Combination shall not be considered to be
owned by such beneficial owners for the purposes of calculating percentage of
ownership of the outstanding common stock and voting power of the resulting
corporation), (ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation unless such Person owned 20% or more of the
Outstanding BankAmerica Common Stock or Outstanding BankAmerica Voting
Securities immediately prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board (or, in the
case of BankAmerica's principal Subsidiary, the corresponding board of
directors) at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination.
(d) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
2.7 "Committee" means the Executive Personnel and Compensation
Committee of the Board or other such committee of the Board, comprised of not
less than two persons who qualify as "non-employee directors" as defined in Rule
16b-3(b)(3) under the Exchange Act, or any successor definition adopted by the
Securities and Exchange Commission, and as "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code.
2.8 "Common Stock" means shares of BankAmerica's common stock, $1.5625
par value per share.
2.9 "Company" means BankAmerica and its Subsidiaries, collectively.
2.10 "Disability" means a Termination of Employment under the policy of
the Company then in effect governing extended medical absences by reason of the
Participant becoming totally disabled.
2.11 "Early Retirement" means a Termination of Employment at age 55 or
later (but prior to Normal Retirement) by reason of the Participant's retirement
from the Company in accordance with the retirement policy of the Company then in
effect for the Participant.
2.12 "Effective Date" means the date the Plan is approved by the
shareholders of BankAmerica.
5
<PAGE>
2.13 "Employment" means employment (including an authorized leave of
absence) with the Company.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and regulations and rulings issued thereunder.
2.15 "Executive Officer" means an officer of BankAmerica designated by
the Board as an Executive Officer for purposes of the Securities and Exchange
Commission reporting and proxy regulations.
2.16 "Exercise Price" means the price at which a share of Common Stock
may be purchased by a Participant pursuant to the exercise of an Option or the
price specified in a Limited SAR used to determine the amount of appreciation in
a share of Common Stock.
2.17 "Fair Market Value" of a share of Common Stock (or the common
stock of an Index Stock) on any date means the closing price of a share as
reflected in the report of consolidated trading of New York Stock Exchange
listed securities for that day (or, if no shares were publicly traded on that
day, the immediately preceding day that shares were so traded) published in The
Wall Street Journal or in any other publication selected by the Committee,
provided, however, that if share prices are misquoted or omitted by the selected
publication(s), the Committee shall directly solicit this information from
officials of the stock exchanges or from other informed independent market
sources. If shares of Common Stock (or the common stock of an Index Stock) shall
not have been publicly traded for more than ten days immediately preceding such
date, then the fair market value of a share shall be determined by the Committee
in such manner as it may deem appropriate.
Notwithstanding the foregoing, for purposes of determining the
Exercise Price of a Market Price Option or Limited SAR, Fair Market Value
means the average of the high and low sales prices of a share of Common Stock
for the Grant Date as reflected in such report.
2.18 "Final Measurement Period" means, with respect to Premium Price
Options, the ten consecutive Trading Days immediately prior to the end of the
Performance Period.
2.19 "Grant Date" means, with respect to an Option or Limited SAR, the
date on which the Option or Limited SAR was granted.
2.20 "Grant Value" means the dollar value of an Award as of (a) the
Initial Grant Pricing Date, in the case of Premium Price Options granted in the
Initial Grant or (b) the Grant Date, in the case of all other Awards, determined
according to the Black-Scholes Option Price Model or other valuation methodology
approved by the Committee that attempts to equate the risk-adjusted present
value of the different types of Awards available
6
<PAGE>
under the Plan.
2.21 "Impact Level 1 Officer" means an officer of the Company who has
been designated as an Impact Level 1 officer by the Chief Executive Officer of
BankAmerica.
2.22 "Index Stock" means the shares of common stock of any corporation
(other than BankAmerica) included in the Market Index on each Trading Day during
both the Initial Measurement Period and the Final Measurement Period.
2.23 "Initial Grant" means the grant of Awards under the Plan to
Executive Officers and Impact Level 1 Officers on the Effective Date.
2.24 "Initial Grant Pricing Date" means February 3, 1997, the date the
Plan was adopted by the Board.
2.25 "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, and the regulations and rulings thereunder.
2.26 "Limited Stock Appreciation Right" or "Limited SAR" means an Award
granted under Article IV in connection with a related Premium Price Option, the
exercise of which shall require cancellation of the related Option or portion
thereof (and if and when the Option is exercised, the Limited SAR shall be
similarly canceled).
2.27 "Market Index" means the Standard & Poor's Financial Index, or in
the event such index is no longer available, such comparable stock market index
as may be selected by the Committee.
2.28 "Market Price Option" means an Option under which the shares of
Common Stock carry an Exercise Price equal to the Fair Market Value of a share
of Common Stock on the Grant Date.
2.29 "Normal Retirement" means a Termination of Employment on or after
age 65 by reason of the Participant's retirement from the Company in accordance
with the retirement policy of the Company then in effect for the Participant.
2.30 "Option" means an option to purchase shares of Common Stock which
is granted under Article III and which is not intended to be an incentive stock
option under Section 422 of the Internal Revenue Code.
2.31 "Participant" means an executive of the Company who is designated
by the Committee to be granted an Award under the Plan.
2.32 "Performance Period" means, with respect to each Premium Price
Option, the four, six or eight year period, as applicable, described in Section
3.4.1.(b), (c) and (d).
7
<PAGE>
2.33 "Plan" means the BankAmerica Corporation Performance Equity Plan
as set forth in this document and as amended from time to time.
2.34 "Premium Price Option" means an Option under which the shares of
Common Stock carry an Exercise Price in excess of the Fair Market Value of a
share of Common Stock on the Grant Date, or, in the case of an Option granted in
the Initial Grant, in excess of the average of the Fair Market Value of a share
of Common Stock for the 10 consecutive Trading Days immediately preceding the
Initial Grant Price Date, as provided in Article III.
2.35 "Shareholder Return Performance Percentile" means a figure
determined by (a) separately calculating the Total Shareholder Return of each
Index Stock over the applicable Performance Period; (b) ranking the Index Stocks
according to Total Shareholder Return; (c) ranking BankAmerica amongst the Index
Stocks according to the Total Shareholder Return of BankAmerica; (d) dividing
(i) the number of Index Stocks with a lower Total Shareholder Return than the
Total Shareholder Return of BankAmerica by (ii) the number of Index Stocks plus
1; and (e) multiplying such quotient by 100. For example, if there are 75 Index
Stocks and the Total Shareholder Return of BankAmerica exceeds the Total
Shareholder Return of 55 of the Index Stocks, then BankAmerica would rank in the
72nd Shareholder Return Performance Percentile.
2.36 "Subsidiary" means any corporation of which BankAmerica owns,
directly or indirectly, 20% or more of the voting stock.
2.37 "Termination of Employment" means the date the Employment of a
Participant ends for any reason.
2.38 "Total Shareholder Return" shall be calculated by (a) assuming
that one share (the "initial share") of Common Stock or of an Index Stock as the
case may be, is purchased on the Grant Date at the average Fair Market Value of
such share for the ten consecutive Trading Days immediately prior to the Grant
Date, (b) assuming that additional shares (or fractions of shares) are purchased
upon the payment of dividends or other distributions to holders of such shares
on the initial share and on shares accumulated through the assumed reinvestment
of dividends and other distributions at a price equal to the Fair Market Value
of such shares on the date such dividends or distributions are paid,
(c) calculating the number of shares (including fractions of shares), including
the initial share, that would be accumulated over the Performance Period,
adjusting as necessary for any stock split or similar events, (d) multiplying
the number of shares (including fractions of shares) determined in clause (c) by
the average Fair Market Value for the ten consecutive Trading Days immediately
prior to the last day of the Performance Period, and (e) determining the annual
compound growth rate during the Performance Period (or such shorter period)
based upon the value
8
<PAGE>
determined in clause (a) and the value determined in clause (d).
In the event any non-cash dividend or distribution is made to holders
of shares, the Committee shall, in its sole discretion, determine the value of
such dividend or distribution, which amount shall be assumed to be reinvested
in the manner provided for in clause (b) above.
2.39 "Trading Day" means, with respect to a share of Common Stock or
the Common Stock of an Index Stock, a day on which such Share is publicly
traded.
9
<PAGE>
ARTICLE III
STOCK OPTIONS
3.1 Grant of Options. Subject to the terms and provisions of the
Plan, Options may be granted to Participants at any time and from time to time
as determined by the Committee in its sole discretion. The Committee, in its
sole discretion, shall determine the number of shares of Common Stock subject to
each Option.
3.2 Option Agreement. Each Option shall be evidenced by an Award
Agreement. The Award Agreement shall specify the Exercise Price, the expiration
date of the Option, the number of shares of Common Stock to which the Option
pertains, any conditions to exercise the Option, and such other terms and
conditions as the Committee, in its sole discretion, shall determine.
3.3 Option Mix and Premium Price Option Exercise Price. The mix
between Premium Price Options and Market Price Options and the Exercise Price(s)
for Premium Price Options shall be determined by the Committee in accordance
with the provisions of this Section 3.3.
3.3.1 Initial Grant to Executive Officers. The Initial Grant to
Participants who are Executive Officers shall consist entirely of Premium Price
Options. The Exercise Price of the Initial Grant of Premium Price Options shall
be determined as follows:
(a) The Exercise Price of the shares comprising one-consecutive
Trading Days immediately prior to the Initial Grant third of the Grant Value
shall be 33 1/3 percent above the average of the Fair Market Value of the Common
Stock for th Pricing Date. The Exercise Price shall be rounded down to the
nearest whole dollar.
(b) The Exercise Price of the shares comprising one-third of
the Grant Value shall be 50 percent above the average of the Fair Market Value
of the Common Stock for the 10 consecutive Trading Days immediately prior to the
Initial Grant Pricing Date. The Exercise Price shall be rounded down to the
nearest whole dollar.
(c) The Exercise Price of the shares comprising one-third of
the Grant Value shall be 100 percent above the average Fair Market Value of the
Common stock for the 10 consecutive Trading Days immediately prior to the
Initial Grant Pricing Date. The Exercise Price shall be rounded down to the
nearest whole dollar.
3.3.2 Initial Grant to Impact Level 1 Officers. One-half of the
Grant Value of the Initial Grant to Participants who are Impact Level 1 Officers
shall consist of Market Price Options. In determining such Grant Value, the
Committee shall take into account any options granted on the same Grant Date
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under the BankAmerica Corporation 1992 Management Stock Plan to such
Participants. One-half of the Grant Value of the Initial Grant to Participants
who are Impact Level 1 Officers shall consist of Premium Price Options. The
Exercise Prices of the Initial Grant of Premium Price Options shall be the same
as in Section 3.3.1.
3.3.3 Options Granted After Initial Grant. In the case of Options
granted after the Initial Grant under the Plan, the mix between Premium Price
Options and Market Price Options, and the Exercise Price(s) of Premium Price
Options shall be determined by the Committee in its sole discretion, provided
that the Exercise Price(s) of Premium Price Options shall represent an
appropriate premium over the then Fair Market Value of a share of Common Stock,
as determined by the Committee.
3.3.4 Minimum Exercise Price for Premium Price Options. In no
event shall the Exercise Price of a Premium Price Option be less than the
Exercise Price of a Market Price Option granted on the same Grant Date.
3.4 Exercisability of Options. Each Option shall become exercisable
in accordance with the provisions of this Section 3.4.
3.4.1 Initial Grant. Each Option granted under the Initial Grant
shall become exercisable as follows, subject to the special rules contained in
Sections 3.4.3 and 3.4.4.
(a) With respect to a Market Price Option, 33 1/3 percent of
the shares of Common Stock covered by the Option shall become exercisable on the
first anniversary of the Grant Date, an additional 33 1/3 percent of such shares
shall become exercisable on the second anniversary of the Grant Date, and the
remaining shares shall become exercisable on the third anniversary of the Grant
Date, provided that in each case the Participant remains continuously in
Employment on the applicable anniversary date.
(b) With respect to a Premium Price Option with an Exercise
Price 33 1/3 percent above the average Fair Market Value of the shares of Common
Stock for the 10 consecutive Trading Days immediately prior to the Initial Grant
Pricing Date, 100 percent of the shares shall become exercisable on the tenth
Trading Day (occurring within a period of 20 consecutive Trading Days) on which
the Fair Market Value of the Common Stock share is at least equal to the
Exercise Price, provided that such 10th Trading Day occurs not later than four
years after the Grant Date.
(c) With respect to a Premium Price Option with an Exercise
Price 50 percent above the average Fair Market Value of the shares for the 10
consecutive Trading Days immediately prior to the Initial Grant Pricing Date,
100 percent of the shares shall become exercisable on the 10th Trading Day
(occurring within a period of 20 consecutive Trading Days) on which the Fair
Market Value of the Common Stock is at least equal to the
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Exercise Price, provide that such 10th Trading Day occurs not later than six
years after the Grant Date.
(d) With respect to a Premium Price Option with an Exercise
Price 100 percent above the average Fair Market Value of the shares of Common
Stock for the 10 consecutive Trading Days immediately prior to the Initial Grant
Pricing Date, 100 percent of the shares shall become exercisable on the 10th
Trading Day (occurring within a period of 20 consecutive Trading Days) on which
the Fair Market Value of the Common Stock is at least equal to the Exercise
Price, provided that such 10th Trading Day occurs not later than eight years
after the Grant Date.
(e) No Premium Price Option granted in the Initial Grant may be
exercised before the third anniversary of the date of the Initial Grant, even if
the Option has otherwise become exercisable before that date, except as provided
in Section 3.4.7.
3.4.2 Initial Grant of Premium Price Options - Effect of
Shareholder Return Performance Percentile. In the event any Premium Price Option
awarded in the Initial Grant does not become exercisable within the applicable
four, six or eight year Performance Period, the Committee may, in its sole
discretion, permit all or a portion of the shares subject to such Option to
become exercisable as of the last day of the Performance Period if BankAmerica
ranks in the 75th Shareholder Return Performance Percentile or higher over the
applicable Performance Period.
3.4.3 Initial Grant of Premium Price Options - Effect of Early or
Normal Retirement or Involuntary Termination Without Cause. If a Participant
incurs a Termination of Employment on account of Early Retirement, Normal
Retirement or involuntary termination without Cause within three years of the
date of the Initial Grant, Premium Price Options shall be treated as follows:
(a) If such Option had become exercisable under Section
3.4.1(b), (c) or (d) prior to the Participant's Termination of Employment, 100
percent of the Option shall remain outstanding, subject to Section 3.5, after
the Participant's Termination of Employment.
(b) If such Option had not become exercisable under Section
3.4.1(b), (c) or (d) prior to the Participant's Termination of Employment, a
portion of such Option shall remain outstanding, subject to Section 3.5, equal
to the percentage of such three year period which had elapsed at the time of the
Participant's Termination of Employment. In addition, the Committee, in its sole
discretion, may determine to permit up to 100 percent of the Option to remain
outstanding after such date. If such Termination of Employment occurs three
years or more after the date of the Initial Grant, 100 percent of such Option
shall remain outstanding, subject to Section 3.5, after the Participant's
Termination of Employment.
3.4.4 Initial Grant of Premium Price Options - Effect
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of Death or Disability. If a Participant incurs a Termination of Employment on
account of death or Disability, 100 percent of all Premium Price Options shall
remain outstanding, subject to Section 3.5, after the date of the Participant's
death or Disability.
3.4.5 Future Awards. The periods of exercisability of each Option
granted after the Initial Grant shall be determined by the Committee in
its sole discretion.
3.4.6 Special Rule for Market Price Options on Change in Control.
If a Change in Control occurs prior to the Participant's Termination of
Employment, 100 percent of the shares subject to a Market Price Option shall
become exercisable on the date that the Change in Control occurs.
3.4.7 Optional Provisions for Premium Price Options on Change in
Control. The Committee, in its discretion, may determine and specify in each
Premium Price Option Award Agreement that if a Change in Control occurs prior to
the Participant's Termination of Employment, the following shall be applicable;
(a) The Option shall become fully exercisable (with no change
in the Exercise Price) on the date that the Change in Control occurs without
regard to whether the Common Stock reaches the Exercise Price within the
applicable Performance Period specified in Section 3.4.1(b), (c) and (d) or
similar criteria established by the Committee in any future Award.
(b) The Option may be exercised before the third anniversary of
the date of the Initial Grant.
(c) In the case of Termination of Employment for any reason
following a Change in Control, the expiration date of the Option shall be the
period specified in Section 3.5.1(a).
3.5 Expiration of Options. The expiration date for each Option shall
occur on the first to occur of the following events:
3.5.1 Premium Price Options.
(a) The expiration of 10 years from the Grant Date or such
shorter period as the Committee shall determine and specify in the Award
Agreement.
(b) The date of the Participant's Termination of Employment for
any reason within six months of the Grant Date (i) except as provided in (g) and
(ii) in the case of death, unless the Committee determines in its sole
discretion to permit all or a part of the Option to remain outstanding after
such date for a period specified by the Committee.
(c) The date of the Participant's Termination of Employment for
any reason other than Early Retirement, Normal
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Retirement, Disability, death or involuntary termination without Cause six
months or more after the Grant Date, unless the Committee determines in its sole
discretion to permit the Option to remain outstanding after such date for a
period specified by the Committee.
(d) In the case of Termination of Employment by reason of death
or Disability six months or more after the Grant Date, the expiration of
the period in (a).
(e) In the case of Termination of Employment by reason of Early
Retirement, Normal Retirement or involuntary termination without Cause between
six months and three years from the Grant Date, the expiration of five years
from the date of the Participant's Termination of Employment. In the case of
Termination of Employment by reason of Early Retirement, Normal Retirement or
involuntary termination without Cause three years or more after the Grant Date,
the expiration of the period in (a).
(f) The date on which a Premium Price Option no longer may
become exercisable due to the failure of the Fair Market Value of the Common
Stock to reach the Exercise Price in accordance with Section 3.4.1(b), (c) or
(d), as applicable, the failure to satisfy Section 3.4.2 or the failure to meet
similar criteria established by the Committee in any future Award.
(g) If so specified in the Award Agreement as provided in
Section 3.4.7(c), in the case of Termination of Employment for any reason
following a Change in Control, the expiration of the period in (a).
3.5.2 Market Price Options.
(a) The expiration of 10 years from the Grant Date or such
shorter period as the Committee shall determine and specify in the Award
Agreement.
(b) The date of the Participant's Termination of Employment for
any reason within six months of the Grant Date (i) except as provided in
(e) and (ii) in the case of death, unless the Committee determines in
its sole discretion to permit all or a part of the Option to become
exercisable after such date for a period specified by the Committee.
(c) The date of the Participant's Termination of Employment for
any reason other than Early Retirement, Normal Retirement or death six
months or more after the Grant Date, unless the Committee determines in
its sole discretion to permit the Participant to exercise all or part of
the Option after such date for a period specified by the Committee,
without regard to whether the Option was fully exercisable upon such
Termination of Employment.
(d) The expiration of three years from the date of
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Participant's Termination of Employment for reasons of Early Retirement,
Normal Retirement or death six months or more after the Grant Date. In
the case of Early Retirement or death, only the portion of the option
which was fully exercisable upon such Termination of Employment shall
remain exercisable, unless the Committee determines in its sole
discretion to permit the Participant to exercise all or part of the
Option after such date. In the case of Normal Retirement, 100 percent of
the Option shall be exercisable.
(e) In the case of Termination of Employment for any reason
following a Change in Control, the expiration of three years from the
date of the Participant's Termination of Employment.
3.6 Manner of Paying Option Price. On exercise of each Option, the
Exercise Price shall be paid as follows: (a) in cash, (b) in already-owned
shares of Common Stock, or (c) in some combination of cash and shares, as
specified in the Award Agreement or as otherwise permitted by the Committee.
Already-owned shares of Common Stock must have been owned by the Participant at
the time of exercise for at least the period of time specified in the Award
Agreement, and shall be valued at their Fair Market Value on the date of
exercise.
3.7 Exercise of Option. The Committee shall establish, and shall set
forth in each Award Agreement, the procedures governing the exercise of an
Option. In general, subject to such specific provisions, an Option shall be
exercised as follows:
(a) The Participant shall deliver written notice that he or she
intends to exercise the Option to the Company department or officer
designated in the Award Agreement.
(b) The Participant shall pay the full Exercise Price at the
time of exercise.
(c) As soon as practicable after receipt of such notice and
payment, the Company shall direct BankAmerica's transfer agent to
register the shares of Common Stock in the name of the Participant.
In lieu of paying the full Exercise Price at the time of exercise, a Participant
may request that BankAmerica cause all or a portion of the shares subject to the
Option being exercised to be sold, with the portion of the sale proceeds
sufficient to cover the Exercise Price transferred to BankAmerica and the
remainder of the proceeds, less applicable withholding taxes and transaction
costs, paid to the Participant.
3.8 Deferral of Option Gain. The Committee may permit a Participant
to elect to defer the receipt of the shares of Common Stock upon exercise of an
Option under such rules as the Committee may determine in its sole discretion.
If such an election is made, upon exercise of the Option, the Company shall
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not direct BankAmerica's transfer agent to register the shares of Common Stock
in the name of the Participant until the date determined under the Committee's
rules and the Participant's election.
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ARTICLE IV
LIMITED SARS
4.1 Grant of Limited SARs. Limited SARs may be granted in conjunction
with all or any part of a Premium Price Option on or after the Grant Date of the
Premium Price Option as determined by the Committee in its sole discretion.
Limited SARs (or the applicable portion thereof) granted with respect to a
Premium Price Option shall terminate upon the termination or exercise of the
related Premium Price Option. Each Limited SAR shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the expiration date, the number
of shares of Common Stock to which the Limited SAR pertains, any conditions to
exercise, and other such terms and conditions as the Committee, in its sole
discretion, shall determine.
4.2 Exercise Price. The Exercise Price of each Limited SAR shall
equal the Fair Market Value of a share of Common Stock on the Grant Date of the
related Option.
4.3 Number of Limited SARs. The number of Limited SARs granted in
conjunction with each Premium Price Option shall not exceed the figure
determined by multiplying the ratio of (a) the Black-Scholes value on the Grant
Date of a Premium Price Option for one share of Common Stock to (b) the Black-
Scholes value of the related Market Price Option on the same Grant Date for one
share of Common Stock by (c) the number of shares represented by the Premium
Price Option. In determining the Black-Scholes values, identical assumptions
for the two Options shall be used for the term, risk-free rate, dividend yield,
and stock price volatility.
4.4 Exercisability. Each Limited SAR which has not otherwise expired
under Section 4.5 shall become exercisable immediately upon the occurrence of a
Change in Control to the extent determined by the Committee in its sole
discretion and specified in the Award Agreement.
4.5 Expiration of Limited SARs. The Committee, in its sole discretion,
shall determine and specify in the Award Agreement when each Limited SAR shall
expire, provided that:
(a) No Limited SAR may have a term longer than would be
permitted by applying the rules Section 3.5 regarding the expiration of
Options.
(b) Each Limited SAR shall terminate no later than the last day
of the period of 60 consecutive days which begins on the date of the
Change in Control.
4.6 Payment of Limited SARs. Upon exercise of a Limited SAR, the
Participant shall be entitled to receive payment from the Company equal to the
amount determined by multiplying (a) times (b):
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(a) The amount by which the Fair Market Value of a share of
Common Stock on the date of exercise exceeds the Exercise Price.
(b) The number of shares of Common Stock with respect to which
the Limited SAR is exercised.
Each Limited SAR shall be paid in cash, provided that if any such
payment would cause a Change in Control transaction to be ineligible for pooling
of interests accounting under APB No. 16, which transaction but for such payment
otherwise would have been eligible for such accounting treatment, any Limited
SAR shall be paid in shares of Common Stock having a Fair Market Value equal to
the cash amount foregone.
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ARTICLE V
SHARES SUBJECT TO THE PLAN
5.1 Number of Shares. Subject to adjustment as provided in Section
5.2, the aggregate number of Shares that may be issued under the Plan shall not
exceed 5,700,000 shares, provided that if an Award is canceled, terminates,
expires or lapses (except due to failure of an Option to become exercisable due
to the failure of the Common Stock to reach the Exercise Price in accordance
with Section 3.4.1(b), (c) or (d) as applicable, or to satisfy Section 3.4.2,
any such shares shall again be available for issuance under the Plan.
5.2 Source of Shares. Shares of Common Stock delivered under the Plan
may be original issue shares, shares purchased in the open market or otherwise,
or treasury stock as determined by the Chief Financial Officer of BankAmerica
from time to time.
5.3 Dilution and Other Adjustments. In the event that the Committee
shall determine that any dividend or other distribution (whether in the form of
cash, shares of Common Stock, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
shares of Common Stock or other securities of BankAmerica, issuance of warrants
or other rights to purchase shares of Common Stock or other securities of
BankAmerica, or other similar corporate transaction or event, affects the Common
Stock, such that an adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee shall,
in such manner as it shall deem equitable, adjust any or all of (i) the number
and type of shares of Common Stock which thereafter may be made the subject of
Awards, (ii) the number and type of shares of Common Stock (or other securities
or property) subject to outstanding Awards, (iii) the grant, purchase or
exercise price with respect to any Award, (iv) the period required to attain
such exercise prices, and (v) the performance requirements under Section 3.4.2.,
or, if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award. Provided, however, that the number of shares of Common Stock
subject to any Award denominated in shares of Common Stock shall always be a
whole number.
5.4 General Restriction. Each Award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine that (a)
the listing, registration or qualification of the shares of Common Stock subject
or related thereto upon any securities exchange or under any state or federal
law, (b) the consent or approval of any government regulatory body, or (c) an
agreement by the recipient of an Award with respect to the disposition of shares
of Common Stock, is necessary or desirable as a condition of, or in connection
with, the making of an Award or the issue, delivery or purchase of
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shares of Common Stock thereunder, then such Award shall not be consummated in
whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
5.5 Rights as Shareholder. No Participant shall have rights as a
shareholder with respect to any Award unless and until the shares of Common
Stock subject to such Award are registered in the name of the individual.
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ARTICLE VI
AMENDMENT AND ADMINISTRATION
6.1 Amendment or Discontinuance of the Plan. The Board, upon the
recommendation of the Committee, may amend, suspend or terminate the Plan at any
time. However, no amendment, suspension or termination of the Plan may, without
the consent of the Participant, adversely affect such Participant's rights under
the Plan with respect to any Award previously made in any material respect.
6.2 Plan Administration. The Plan shall be administered by the
Committee. The Committee shall have the power, authority, and sole discretion
to construe, interpret and administer the Plan. The Committee's decisions
construing, interpreting and administering the Plan shall be conclusive and
binding on all parties. Notwithstanding the foregoing, Award under the Plan to
the Chief Executive Officer of BankAmerica shall be subject to approval or
ratification by the Board.
6.2.1 Subject to the provisions of the Plan, the Committee shall
have sole, final, and conclusive authority to determine:
(a) The individuals to whom Awards are granted and the type and
size of Awards granted to each Participant.
(b) The Grant Dates for such Awards and the frequency of
Awards.
(c) The price to be paid for the shares upon the exercise of
each Option, which shall be not less than 100% of the Fair Market Value per
share, as determined by the Committee, provided that the Exercise Price(s) of
Premium Price Options shall represent an appropriate premium over the then Fair
Market Value of a share of Common Stock, at the time of granting the Option, and
the period within which each Option shall be exercised.
(d) Whether and to what extent a Participant may use
already-owned shares of Common Stock to exercise Options.
(e) The basis for any Termination of Employment, including
whether or not it was for Cause, Disability, Normal or Early Retirement or
otherwise.
(f) The calculation of Total Shareholder Return and the Total
Shareholder Return Performance Percentile.
(g) The terms and conditions of each Award Agreement, which,
however, shall be in accordance with the provisions of the Plan.
6.2.2 The Awards under the Plan are intended to qualify as
performance-based compensation within the meaning of
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Section 162(m) of the Internal Revenue Code, and the Plan provisions
shall be interpreted accordingly.
6.2.3 The act or determination of a majority of the Committee
shall be deemed to be the act or determination of the entire Committee. The
Committee may consult with counsel, who may be counsel to the Company, and such
other advisors as the Committee may deem necessary and/or desirable, and the
members of the Committee shall not incur any liability for any action taken in
good faith in reliance upon the advice of counsel or any other advisor.
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ARTICLE VII
OTHER PROVISIONS
7.1 Unsecured Status of Claim. Participants and their beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, interests
or claims in any specific property or assets of the Company. No assets of the
Company shall be held under any trust for the benefit of Participants, their
beneficiaries, heirs, successors or assigns, or held in any way as collateral
for the fulfillment of the Company's obligations under the Plan. Any and all of
the Company's assets shall be, and shall remain, the general unpledged and
unrestricted assets of the Company. BankAmerica's obligations under the Plan
shall be merely that of an unfunded and unsecured promise to pay benefits in the
future.
7.2 No Right to Employment. Nothing contained in the Plan nor any
document related to the Plan nor any action taken in the administration of the
Plan shall confer upon any Participant the right to continue in the employment
of the Company, nor affect any right which the Company may have to terminate the
employment of such person. All Participants who are at-will employees remain
at-will employees of the Company. If the Participant is not an employee or
officer of BankAmerica, participation in the Plan shall not cause the individual
to become an employee or officer of BankAmerica, but rather, the Participant
shall remain an employee of the subsidiary which employs the Participant.
7.3 Beneficiary Designations. If permitted by the Committee, a
Participant may name a beneficiary or beneficiaries to whom any vested but
unpaid Award or amount due under the Plan shall be transferred in the event of
the Participant's death. Each such designation shall revoke all prior
designations by the Participant and shall be effective only if given in a form
and manner acceptable to the Committee. This Section 7.3 shall not be effective
until specifically authorized by the Committee.
7.4 Domestic Relations Orders. If permitted by the Committee, and
under such procedures as the Committee may adopt from time to time, an Award may
be transferred to a Participant's spouse, former spouse or dependent pursuant to
a court-approved domestic relations order which relates to the provision of
child support, alimony payments or marital property rights. This Section 7.4
shall not be effective until specifically authorized by the Committee.
7.5 Bona Fide Gifts.
(a) A Participant who is designated by the Committee, in its sole
discretion, as being eligible for this option transfer provision shall have the
right, subject to the conditions specified in the following paragraph, to
irrevocably transfer to Immediate Family Members (as defined below) Options
granted at any time under the Plan to such Participant. For purposes of this
Section, the term Immediate Family Members means (i) the spouse and lineal
descendents of a Participant, (ii) a trust for the benefit of such family
members, or (iii) a partnership in which such family members are the only
partners.
(b) As conditions to such transferability of any Options, (i) the
Participant may not receive any consideration for the transfer; (ii) the
Participant and/or the transferee shall execute such documents and comply with
such rules as the Committee may specify from time to time, and (iii) the Options
so transferred must continue to be subject to the same terms and conditions that
were applicable to such Options prior to their transfer.
(c) The transferee of any Options transferred in accordance with
the terms and conditions of the Plan shall have the right to exercise such
Options and to have the shares of Common Stock covered by such Options
registered in the name of such transferee, as though such transferee were the
Participant.
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7.6 Nonassignability. No person shall have any right to sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or
convey in advance of actual receipt an Award, if any, granted or payable under
the Plan, or any part thereof, or any interest therein, other than by (a) will,
(b) the laws of descent and distribution, or (c) to the limited extent provided
for in Sections 7.3, 7.4 and 7.5. Except for the limited extent provided for in
Section 7.4, no portion of an Award nor the amounts payable shall, prior to
actual payment, be subject to seizure, attachment, lien or sequestration for the
satisfaction of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of law in the
event of the Participant's or any other person's bankruptcy or insolvency. Any
such transfer or attempted transfer in violation of the preceding provisions
shall be considered null and void.
Notwithstanding anything contained in this Section, BankAmerica
shall have the right to offset from any unpaid or deferred Award any amounts due
and owing from the Participant to the Company to the extent permitted by law;
provided, however, that with respect to any Options that are transferred in
- -------- -------
accordance with the terms and conditions of the Plan, such right shall cease
upon the transfer.
7.7 Separability, Validity. In the event that any provision of the
Plan or related Award Agreement is held to be invalid, void or unenforceable,
the same shall not affect, in any respect whatsoever, the validity of any other
provision of the Plan or any related Award Agreement.
7.8 Withholding Tax. The Company shall withhold from all benefits due
under the Plan an amount sufficient to satisfy any
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federal, state and local tax withholding requirements. The Committee may, in its
sole discretion and pursuant to such procedures as it may specify from time to
time, permit a Participant to satisfy such tax withholding obligation, in whole
or in part, by (a) electing to have the Company withhold otherwise deliverable
shares of Common Stock, or (b) delivering to the Company already-owned Shares of
the Common Stock having a Fair Market Value equal to the amount required to be
withheld.
7.9 Applicable Law. The Plan and any related Award Agreements shall
be governed in accordance with the laws of the State of Delaware without regard
to the application of the conflicts of law provisions thereof. The obligation
of BankAmerica with respect to the grant, exercise and payment of Awards shall
be subject to all applicable laws, rules and regulations and such approvals by
any governmental agencies as may be required, including, without limitation, the
effectiveness of any registration statement required under the Securities Act of
1933, as amended, and the rules and regulations of any securities exchange on
which the Common Stock may be listed.
7.10 Inurement of Rights and Obligations. The rights and obligations
under the Plan and any related Award Agreements shall inure to the benefit of,
and shall be binding upon, the Company and its successors and assigns, and the
Participants and their beneficiaries and assigns.
7.11 Notice. All notices and other communications required or
permitted to be given under the Plan shall be in writing and shall be deemed to
have been duly given if delivered personally or mailed first class, postage
prepaid, as follows: (a) if to BankAmerica, at its principal business address
to the attention of the Secretary; (b) if to any Participant, at the last
address of the Participant known to the sender at the time the notice or other
communication is sent.
7.12 Entire Plan. This document is a complete statement of the Plan.
As of its effective date this document supersedes all prior plans,
representations and proposals, written or oral, relating to its subject matter.
The Company shall not be bound by or liable to any person for any
representation, promise or inducement made by any employee or agent of the
Company which is not embodied in this document or in any authorized written
amendment to the Plan.
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Exhibit 10.f
SECURITY PACIFIC CORPORATION
STOCK OPTION PLAN
As amended
Last Amended November 3, 1997
<PAGE>
Board of Directors April 27, 1992
BankAmerica Corporation
RESOLUTION RE AMENDMENT OF STOCK AND STOCK-BASED AWARD PLANS
IN CONNECTION WITH THE MERGER OF
BANKAMERICA CORPORATION AND SECURITY PACIFIC CORPORATION
--------------------------------------------------------
The Board of Directors of BankAmerica Corporation ("BAC") authorizes
and determines:
1. As of April 22, 1992, the effective date of the merger of Security
Pacific Corporation ("SPC") into BAC (the "Merger"), SPC sponsored the following
plans (the "SPC Stock Plans") pursuant to which awards of stock and stock-based
incentives have been made:
Security Pacific Corporation Stock-Based Incentive Award Plan
Security Pacific Corporation Stock Option Plan
Management Incentive Stock Plan of Rainier Bancorporation
Security Pacific Corporation Performance Incentive Plan
2. Grants and awards have been made and are outstanding under the SPC
Stock Plans. BAC assumes the obligations of, and shall be successor to, SPC
under the SPC Stock Plans.
3. The SPC Stock Plans are amended as follows, effective April 22, 1992:
a. Except as provided in (b), below, and unless the context clearly
indicates otherwise, references to SPC shall become references to BAC and
references to Security Pacific National Bank shall become references to
Bank of America NT&SA.
b. The names of the SPC Stock Plans shall remain unchanged.
c. Unless the context clearly indicates otherwise, all references to
SPC Common Stock, par value $10.00, shall become references to BAC Common
Stock, par value $1.5625.
d. Only employees of SPC prior to the Merger are eligible to
participate in the SPC Stock Plans.
e. All references to the Executive Officers Compensation and
Development Committee of the Board of Directors of SPC and to the
"Committee" in the Rainier Bancorporation Management Incentive Stock Plan
shall become references to the Executive Personnel and Compensation
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Committee of the Board of Directors of BAC, which is and shall be
composed solely of disinterested directors.
4. BAC's Personnel Relations Officer is further authorized and directed to
take such action as she deems necessary and appropriate to implement the
provisions of the foregoing resolution.
CERTIFICATION
-------------
I, Christine Lundgren, an Assistant Secretary of BankAmerica
Corporation, a Delaware corporation having its principal place of business in
the City and County of San Francisco, State of California, certify that the
foregoing resolution is a true and correct copy of the resolution adopted by the
Board of Directors of BankAmerica Corporation, at a meeting held on April 27,
1992. This resolution is still in effect.
----------------------------------
Assistant Secretary
BANKAMERICA CORPORATION
Dated: May 7, 1992
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SECURITY PACIFIC CORPORATION
STOCK OPTION PLAN
1. PURPOSE.
The purpose of this Stock Option Plan ("Plan") is to strengthen Security
Pacific Corporation ("Corporation"), by providing an additional means of
retaining and attracting competent management personnel and by providing to
participating officers and other key employees of the Corporation and its
subsidiaries (as hereinafter defined) added incentive for high levels of
performance and for unusual efforts to increase the earnings of the
Corporation through the opportunity for stock ownership offered under this
Plan.
2. ADMINISTRATION.
The Plan shall be administered by the Executive Officers Compensation and
Development Committee ("Committee") of the Board of Directors ("Board") of the
Corporation. The Committee shall consist of three or more members of the Board
selected by, and serving at the pleasure of, the Board. There may be appointed
to the Committee only members of the Board who are disinterested, i.e., who
are not eligible to receive options or stock appreciation rights under the
Plan and who have not been eligible, at any time within one year prior to
appointment to the Committee, for selection as a person to whom stock may be
allocated or to whom options or stock appreciation rights may be granted
pursuant to the Plan or any other plan of the Corporation or any of its
subsidiaries entitling the participants therein to acquire stock, stock
appreciation rights or stock options of the Corporation or any of its
subsidiaries. Any action of the Committee with respect to the administration
of the Plan shall be taken pursuant to a majority vote, or to the written
consent of all of its members.
Subject to the express provisions of the Plan, the Committee shall have
the authority to construe and interpret the Plan, and to define the terms used
therein, to prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, to determine the duration and purposes of leaves
of absence which may be granted to participants without constituting a
termination of their employment for the purposes of the Plan, and to make all
other determinations necessary or advisable for the administration of the
Plan. The determinations of the Committee on the matters referred to in this
section shall be conclusive.
3. PARTICIPATION.
Officers and other key employees ("eligible employees") of the Corporation
or of any subsidiary corporation (as such term is
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defined in Section 425(f) of the Internal Revenue Code of 1986, as amended,
the "Code") shall be eligible for selection to participate in the Plan;
provided, however, that members of the Committee shall not, while serving as
members of such Committee, be eligible to receive a grant of options or stock
appreciation rights under the Plan. Directors who are not officers or
employees of the Corporation or any such subsidiary corporation are not
eligible to participate in the Plan. The Committee shall have the authority
and power to grant options and stock appreciation rights to any eligible
employee other than a member of the Office of the Chairman as such body shall
be constituted from time to time by the Board. With respect to the options and
stock appreciation rights which the Committee is authorized to grant, the
Committee may also determine the terms and provisions of the respective option
agreements (which need not be identical), the designation of an option as a
nonqualified option or incentive stock option, the times at which such options
and stock appreciation rights shall be granted, and the number of shares
subject to each option and, where applicable, companion stock appreciation
right. Any action of the Committee with respect to option grants shall be
taken pursuant to a majority vote of all the members of the Committee or the
written consent of all of its members.
The Board shall have the authority and power, after consideration of
the recommendations of the Committee, to grant options and stock appreciation
rights to any eligible employee including members of the Office of the Chairman.
With respect to the options and stock appreciation rights which the Board is
authorized to grant, the Board may also determine the terms and provisions of
the respective option agreements (which need not be identical), the designation
of an option as a nonqualified option or incentive stock option, the times at
which such options and stock appreciation rights shall be granted, and the
number of shares subject to each option and, where applicable, companion stock
appreciation right. Any action of the Board with respect to option grants shall
be taken pursuant to a vote of a disinterested majority of all the members of
the Board or the written consent of all of its members. A director eligible for
a grant of an option or stock appreciation right shall not participate in the
vote on any such grant nor in the determination as to whether an option or stock
appreciation right should be awarded to such director.
An individual who has been granted an option may, if otherwise eligible,
be granted an additional option or options and stock appreciation right or
rights, if the Board or the Committee, as the case may be, shall so determine.
4. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 9 hereof, the
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stock to be offered under the Plan shall be treasury shares or shares of the
Corporation's authorized but unissued Common Stock (hereinafter collectively
called "stock"). The aggregate amount of stock to be delivered upon the
exercise of all options granted under this Plan shall not exceed 4,500,000
shares, subject to adjustment as set forth in Section 9 hereof. If any option
granted hereunder and related stock appreciation right or rights, if any,
shall lapse or terminate without having been exercised in full, the
unpurchased shares subject thereto shall again be available for the purposes
of the Plan. For purposes of determining the number of shares to charge
against the 4,500,000 share limitation set forth above, the exercise of a
stock appreciation right or rights shall be treated as the exercise of the
portion of the option or options which are surrendered in connection with the
exercise of the stock appreciation right or rights.
5. OPTIONS.
One or more options may be granted to any eligible employee. Each option
so granted shall be designated by the Board or the Committee, as the case may
be, as either a nonqualified option or incentive stock option subject to the
following conditions:
(a) The option price per share of stock shall be set by the grant
but shall in no instance be less than fair market value on the date of
grant, based on the value of the stock on the date of grant of options as
determined by the mean of the bid and asked prices for the Common Stock
as supplied by the National Association of Securities Dealers, Inc.,
through NASDAQ and published in the Western Edition of The Wall Street
Journal, or the closing price of such stock as reported on the Composite
Tape and published in the Western Edition of The Wall Street Journal.
(b) The option shall become exercisable in such manner and within such
period or periods as shall be determined by the Board or the Committee, as
the case may be, (subject to the limitations set forth in this Section 5
and in Sections 6 and 10 hereof) upon payment in full solely in cash,
solely in shares of Common Stock or partly in such shares and partly in
cash. Any shares of Common Stock received as payment for an option
exercise shall be valued at the mean of the bid and asked prices for the
Common Stock as supplied by the National Association of Securities Dealers,
Inc., through NASDAQ and published in the Western Edition of The Wall
Street Journal, or the closing price of such stock as reported on the
Composite Tape and published in the Western Edition of The Wall Street
Journal on the date of exercise of the stock option. The option shall
lapse:
(1) If the grantee is then living, at the
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earliest of the following times:
(i) ten years after it is granted,
(ii) immediately upon termination of employment by reason
of a discharge for cause as that term may be determined by the
Committee in its sole discretion,
(iii) one year after termination of employment if termination
occurs after fifteen years of service to the Corporation and any
of its subsidiary corporations or by reason of retirement or
disability as those terms are determined by the Committee in its
sole discretion,
(iv) three months after termination of employment other
than as described in (ii) and (iii) above,
(v) any earlier time set by the grant; or
(2) If the grantee dies while employed by the Corporation or any
subsidiary corporation, or during the period referred to in Section
5(b)(1)(iii) or (iv) hereof, one year after the date of death subject
to earlier termination pursuant to Sections 5(b)(1)(i) or (v). During
the period after death, the option may, to the extent exercisable on
the date of death, be exercised by the person or persons to whom the
grantee's rights under the option shall pass by will or by the
applicable laws of descent and distribution; and
(3) Notwithstanding (1) and (2) above, on the date of
termination of employment whether for death or any other cause to
the extent of any portion of the option not exercisable on such date
of termination.
(4) Notwithstanding (1) above, effective on the date of the
merger of Security Pacific Corporation and BankAmerica Corporation
(the "Merger Date") the period of exercise of all outstanding
options shall be extended from three months to one year after
termination of employment, in the case of all terminations other
than terminations by reason of death or discharge for cause;
provided, however, that no such extension shall apply to any
nonqualified option unless the grantee consents to such extension;
and provided further, that such extension shall not be available under
any incentive stock option unless, upon the written request of the
grantee, the Committee shall, in its sole discretion, determine to
grant such extension. Prior to the Merger Date the Committee may, in
its sole
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discretion, extend the period of exercise of any outstanding options
to one year after termination of employment subject to the receipt of
the grantee's consent in the case of nonqualified options and subject
to a grantee's request in the case of incentive stock options as
provided in the preceding sentence.
(5) The Committee may permit an employee to elect to defer the
receipt of the shares of Common Stock upon exercise of an option
under such rules as the Committee may determine in its sole
discretion. If such an election is made, upon exercise of the
option, the Company shall not direct the Corporation's transfer
agent to register the shares of Common Stock in the name of the
employee until the date determined under the Committee's rules and
the employee's election.
(c) Incentive stock options shall be so designated at the time of
grant except that options granted on or before December 31, 1980, may be
designated as incentive stock options on or before August 1, 1982, and
options granted from January 1, 1981 through April 20, 1982, may be
designated as incentive stock options on or before April 20, 1982.
Incentive stock options shall be subject to the conditions specified in
Section 5(a) and 5(b) and subject to the additional following conditions:
(1) An incentive stock option granted prior to January 1, 1987,
shall not be exercisable while there is outstanding, within the
meaning of Section 422A of the Code, any other incentive stock
option which was earlier granted to the employee.
(2) The aggregate fair market value of the shares (determined
as of the date the incentive stock option is granted) for which any
employee may be granted incentive stock options in any calendar year
prior to January 1, 1987, shall not exceed $100,000 plus any unused
limit carried forward to such year. The unused limit carried forward
available in any such year to any employee shall be determined in
accordance with Section 422A of the Code.
(3) For incentive stock options granted after December 31,
1986, the aggregate fair market value of the shares (determined as
of the date the incentive stock option is granted) with respect to
which such incentive stock options are exercisable for the first
time (other than as a result of acceleration pursuant to Section 10)
by an employee during any calendar year (under the Plan or any other
incentive stock option plan of the Corporation or of any subsidiary
corporation) shall not exceed $100,000.
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(4) There shall be imposed any other conditions required in
order that the option be an "incentive stock option" as that term is
defined in Section 422A of the Code.
6. CONTINUATION OF EMPLOYMENT; EXERCISE.
Each person to whom an option is granted must agree that he or she will, at
the request of the Corporation, remain in the continuous employ of the
Corporation or a subsidiary corporation for a period of not less than one year
following the date of the granting of the option. Nothing contained in the Plan
(or in any option or stock appreciation right granted pursuant to the Plan)
shall confer upon any employee any right to continue in the employ of the
Corporation or of any subsidiary corporation or to interfere in any way with the
right of the Corporation or any subsidiary corporation to reduce his or her
compensation from the rate in existence at the time of the granting of an option
or stock appreciation right, but nothing contained herein or in an option
agreement shall affect any contractual rights of an employee.
Options shall be nonexercisable during the first year after the date of
grant. If the holder of an option shall not purchase all of the shares which he
or she is entitled to purchase in any given installment period, the right to
purchase shares not purchased in such installment period shall continue until
the lapse or termination of such option. No option or installment thereof shall
be exercisable except in respect of whole shares, and fractional share interests
shall be disregarded except that they may be accumulated in accordance with the
next preceding sentences. Not less than 10 shares may be purchased at one time
unless the number purchased is the total number at the time available for
purchase under the option.
7. STOCK APPRECIATION RIGHTS.
A stock appreciation right may be granted, in the discretion of the Board
or the Committee, as the case may be, concurrently with the grant of any option
granted under the Plan ("companion grant") subject to Section 11 of the Plan. A
stock appreciation right shall extend to all or a portion of the shares covered
by the companion grant. If a stock appreciation right extends to less than all
the shares covered by the companion grant and if a portion of the option
contained in the companion grant is thereafter exercised, the number of shares
subject to the unexercised stock appreciation right shall be reduced only if and
to the extent that the remaining portion of the option contained in the
companion grant covers fewer shares than the unexercised stock appreciation
right would otherwise cover. A stock appreciation right shall entitle the
holder (subject to the
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conditions and limitations set forth below), upon surrender of a then
exercisable portion of the option contained in the companion grant (subject to
the maximum number of shares to which the stock appreciation right extends),
to receive payment of an amount determined pursuant to subparagraph (b) of the
following paragraph.
Stock appreciation rights shall be subject to the following terms and
conditions and to such other terms and conditions not inconsistent with the Plan
as the Board may determine:
(a) A stock appreciation right shall be exercisable by the holder
(or such other person entitled under Section 5 of the Plan to exercise
the option contained in the companion grant) only at such time or times,
and to the extent, that the option contained in the companion grant could
have been exercised and only when the fair market value of the stock
subject to the option contained in the companion grant exceeds the
exercise price of such option.
(b) Upon exercise of the stock appreciation right and surrender of an
exercisable portion of the option contained in the companion grant, the
holder shall be entitled to receive payment of an amount (subject to
Section 7(d) below) determined by multiplying
(1) the difference obtained by subtracting the option exercise
price per share of Common Stock subject to the companion grant from
the fair market value of a share of Common Stock on the date of
exercise of the stock appreciation right as determined by the mean
of the bid and asked prices for the Common Stock as supplied by the
National Association of Securities Dealers, Inc., through NASDAQ and
published in the Western Edition of The Wall Street Journal, or the
closing price of such stock as reported on the Composite Tape and
published in the Western Edition of The Wall Street Journal, by
(2) the number of shares with respect to which the stock
appreciation right is exercised.
(c) The Committee, in its sole discretion, may settle the amount
determined under subparagraph (b) above solely in cash, solely in shares
of Common Stock (valued at the mean of the bid and asked prices for the
Common Stock as supplied by the National Association of Securities
Dealers, Inc., through NASDAQ and published in the Western Edition of The
Wall Street Journal, or the closing price of such stock as reported on
the Composite Tape and published in the Western Edition of The Wall
Street Journal on the date of exercise of the stock appreciation right),
or partly in such shares and partly in cash, provided however, that in
any event cash
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shall be paid in lieu of fractional shares.
(d) The maximum amount per share which will be payable upon exercise
of a stock appreciation right shall be the option exercise price of the
option contained in the companion grant.
(e) Notwithstanding any other provision of the Plan, the Committee
may impose such conditions on exercise of a stock appreciation right
(including, without limitation, the right of the Committee to limit the
time of exercise to specified periods) as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule), promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934.
8. NON-TRANSFERABILITY OF OPTIONS.
An option or stock appreciation right granted under this Plan is
non-transferable by the option holder other than by will or the laws of descent
and distribution, and shall be exercisable during his or her lifetime only by
such option holder.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If the outstanding shares of the Common Stock of the Corporation are
changed into, or exchanged for a different number or kind of shares or
securities of the Corporation through a reorganization or merger in which the
Corporation is the surviving entity, or through a combination, recapitalization,
reclassification, or otherwise, or if the number of outstanding shares is
changed through a stock split, stock dividend, stock consolidation or otherwise,
an appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted. A corresponding adjustment changing the number or
kind of shares and the exercise price per share allocated to unexercised options
or portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in an outstanding option, however,
shall be made without change in the total price applicable to the unexercised
portion of the option but with a corresponding adjustment in the price for each
share covered by the option. Corresponding adjustments shall be made with
respect to stock appreciation rights based upon the adjustments made to the
option contained in the companion grant.
Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger, or consolidation of the Corporation with one or more
corporations as a result of which the Corporation is not the surviving
corporation, or upon a sale of substantially all the property of the Corporation
to another corporation, this Plan shall terminate, and any option
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theretofore granted hereunder shall terminate, unless provision be made in
connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of new options covering the
stock of a successor employer corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to number and kind of shares and prices.
In so adjusting Common Stock to reflect such changes, or in determining
that no such adjustment is necessary, the Board may rely upon the advice of
independent counsel and accountants of the Corporation, and the determination of
the Board shall be conclusive. No fractional shares of stock shall be issued
under the Plan on account of any such adjustment.
10. CORPORATE CHANGES.
Unless, prior to an Event (as defined below), the Board determines that,
upon its occurrence, there shall be no acceleration of options or related stock
appreciation rights or determines those options and related stock appreciation
rights which shall be accelerated and the extent to which they shall be
accelerated, each option and each related stock appreciation right shall become
immediately exercisable to the full extent theretofore not exercisable
notwithstanding any provision of this Plan (or of an option holder's option
agreement); provided, however, that no option or stock appreciation right shall,
in any event, be so accelerated to a date less than one year after the date of
grant. Any of the following shall constitute an Event:
(i) Approval by the stockholders of the Corporation of the
dissolution or liquidation of the Corporation;
(ii) Approval by the stockholders of the Corporation of any
agreement to merge or consolidate, or otherwise reorganize, with or into
one or more entities which are not subsidiaries of the Corporation, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity are, or are to be, owned by former
stockholders of the Corporation (excluding from the term "former
stockholders" a stockholder who is, or as a result of the transaction in
question becomes, an "affiliate", as that term is used in the Securities
Exchange Act of 1934 and the Rules promulgated thereunder, of any party
to such merger, consolidation or reorganization);
(iii) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person
or entity which is not a subsidiary of the Corporation; or
(iv) A Change in Control, as from time to time defined in the
By-Laws of the Corporation.
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Acceleration of options and related stock appreciation rights shall comply with
applicable regulatory requirements, including, without limitation, Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 and Section 422A of the Code. For purposes of this Section
10 only, Board shall mean the Board as constituted immediately prior to the
Event.
11. TERMINATION, SUSPENSION AND AMENDMENT.
The Board may at any time suspend, amend or terminate this Plan and may,
with the consent of an option holder, make such modifications of the terms and
conditions of his or her option and, where applicable, any related stock
appreciation right, as it shall deem advisable; provided that, except as
permitted under the provisions of Section 9 hereof, no amendment or modification
may be adopted without approval by the vote of the holders of a majority of the
Corporation's outstanding stock entitled to vote thereon which would:
(a) increase the aggregate number of shares which may be obtained
pursuant to options granted under the Plan;
(b) change the minimum option price;
(c) increase the maximum term of options or stock appreciation rights
provided for herein; or
(d) permit the granting of options or stock appreciation rights to
anyone other than an officer or other key employee of the Corporation or
a subsidiary corporation.
Notwithstanding the above, the Board or the Committee, as the case may be,
may grant to an option holder, if he or she is otherwise eligible, additional
options (with or without stock appreciation rights) or the Board, with the
consent of the option holder, may grant a new option (with or without a stock
appreciation right) in lieu of an outstanding option (with or without a stock
appreciation right) for a number of shares, at an option price and for a term
which in any respect is greater or less than that of the earlier option, subject
to the general limitations of Section 5 hereof.
No option or stock appreciation right may be granted during any suspension
of the Plan or after its termination. Except as provided in Section 9 hereof,
the amendment, suspension or termination of the Plan shall not, without the
consent of the option holder, alter or impair any rights or obligations under
any option or stock appreciation right theretofore granted under the Plan prior
to such amendment, suspension or termination, including any right to
acceleration under Section 10.
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12. DATE OF GRANT OF OPTIONS.
The grant of an option or stock appreciation right pursuant to the Plan
shall take place on the date of the action described in Section 3 hereof, or at
such later date as shall be prescribed by the Board or the Committee, as the
case may be. In the event such action is taken by written consent, the action
shall be deemed to be at the date the last member of the Board or the Committee,
as the case may be, signs the consent.
13. PRIVILEGES OF STOCK OWNERSHIP; PURCHASE FOR INVESTMENT.
The holder of an option or stock appreciation right shall not be entitled
to the privilege of stock ownership as to any shares of stock not actually
issued and delivered to such option holder. Upon the exercise of an option (or
a stock appreciation right where stock is issued) at a time when there is not in
effect a registration statement under the Securities Act of 1933 relating to the
stock issuable upon exercise hereof and available for delivery a prospectus
meeting the requirements of Section 10(a)(3) of said Act, the stock may be
issued only if the option holder represents and warrants in writing to the
Corporation that the shares purchased are being acquired for investment and not
with a view to the distribution thereof. No shares shall be purchased upon the
exercise of any option or stock appreciation right unless and until any then
applicable requirements of the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies having
jurisdiction and of any exchanges upon which stock of the Company may be listed
shall have been fully complied with.
14. TAX WITHHOLDING.
The Corporation and any subsidiary corporation shall have the right to
deduct from any payment hereunder any amounts that Federal, state, local or
foreign tax law requires to be withheld with respect to such payment. In the
alternative, pursuant to such rules as the Committee may establish, the option
holder or other person exercising any option or stock appreciation right may pay
such amounts to the Corporation or any subsidiary corporation in cash or in
shares of the Corporation's Common Stock. Without limiting the generality of
the foregoing, in any case where it determines that a tax is required to be
withheld in connection with the issuance or transfer of shares of Common Stock
under this Plan, the Corporation or any subsidiary corporation may, pursuant to
such rules as the Committee may establish, reduce the number of shares so issued
or transferred by such number of shares as the Corporation or any subsidiary
corporation may deem appropriate in its sole discretion to accomplish such
withholding. Any shares of Common Stock used to pay such withholding shall be
valued on the date as of which the
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amount of the tax to be withheld is determined at the closing price of such
stock as reported on the Composite Tape and published in the Western Edition
of The Wall Street Journal. There is no obligation under this Plan that any
option holder be advised of the existence of any tax or any amount required to
be withheld.
Notwithstanding any other provision of this Plan, the Committee may impose
such conditions on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements, including, without limitation,
Rule 16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
15. TERM OF THE PLAN.
This Plan shall be effective upon approval thereof by the vote of the
holders of a majority of the Corporation's outstanding Common Stock entitled to
vote thereon. Unless previously terminated by the Board, this Plan shall
terminate at the close of business on December 31, 1989, and no options or stock
appreciation rights shall be granted under it thereafter, but such termination
shall not affect any option or stock appreciation right theretofore granted.
16. GOVERNING LAW.
This Plan and option agreements issued hereunder shall be governed by, and
construed in accordance with, the laws of the State of California.
The following provision was added to the plan by the BAC Board of Directors
on August 7, 1995. For purposes of this provision, "BankAmerica" means
BankAmerica Corporation and "Company" means BankAmerica and its subsidiaries
collectively.
Notwithstanding any other provision in the Plan, the following shall apply
in the event of a Change in Control, as defined below, in BankAmerica:
Change in Control means that one of the following events has occurred:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of BankAmerica (the
"Outstanding BankAmerica Common Stock") or (ii) the combined voting power of the
then outstanding voting
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securities of BankAmerica entitled to vote generally in the election of
directors (the "Outstanding BankAmerica Voting Securities"); provided, however,
that for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from BankAmerica
(ii) any acquisition by BankAmerica, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) below.
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
BankAmerica's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
BankAmerica or its principal subsidiary (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns BankAmerica or all or substantially all of BankAmerica's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities, as the case may be, (provided, however, that, for the purposes of
this clause (A), any shares of common stock or voting securities of such
resulting corporation received by such beneficial owners in such Business
Combination other than as the result of such beneficial owners' ownership of
Outstanding BankAmerica Common Stock or Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination shall
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<PAGE>
not be considered to be owned by such beneficial owners for the purposes of
calculating their percentage of ownership of the outstanding common stock and
voting power of the resulting corporation), (B) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation unless such Person owned
20% or more of the Outstanding BankAmerica Common Stock or Outstanding
BankAmerica Voting Securities immediately prior to the Business Combination and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board (or, in the case of BankAmerica's principal subsidiary, the
corresponding board of directors) at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
(iv) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
(a) All outstanding stock options and stock appreciation rights under the
Plan shall be immediately exercisable in full if BankAmerica undergoes a Change
in Control.
(b) [intentionally left blank]
(c) [intentionally left blank]
(d) The Company shall have the right to deduct from any settlement of any
stock option or stock appreciation right an amount sufficient to cover
withholding required by law for any federal, state or local taxes, of to take
such other action as may be necessary to satisfy any such withholding
obligation.
The resolution adding the above provision provided that no modification,
suspension, amendment or termination of the Plan may be made which would
adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option or stock appreciation right granted
under the Plan prior to the date of such modification, suspension, amendment or
termination.
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Exhibit 10.g
SECURITY PACIFIC CORPORATION
STOCKBASED INCENTIVE AWARD PLAN
As Amended
Last Amended November 3, 1997
<PAGE>
Board of Directors April 27, 1992
BankAmerica Corporation
RESOLUTION RE AMENDMENT OF STOCK AND STOCK-BASED AWARD PLANS
IN CONNECTION WITH THE MERGER OF
BANKAMERICA CORPORATION AND SECURITY PACIFIC CORPORATION
--------------------------------------------------------
The Board of Directors of BankAmerica Corporation ("BAC") authorizes and
determines:
1. As of April 22, 1992, the effective date of the merger of Security
Pacific Corporation ("SPC") into BAC (the "Merger"), SPC sponsored the following
plans (the "SPC Stock Plans") pursuant to which awards of stock and stock-based
incentives have been made:
Security Pacific Corporation Stock-Based Incentive Award Plan
Security Pacific Corporation Stock Option Plan
Management Incentive Stock Plan of Rainier Bancorporation
Security Pacific Corporation Performance Incentive Plan
2. Grants and awards have been made and are outstanding under the SPC
Stock Plans. BAC assumes the obligations of, and shall be successor to, SPC
under the SPC Stock Plans.
3. The SPC Stock Plans are amended as follows, effective April 22, 1992:
a. Except as provided in (b), below, and unless the context clearly
indicates otherwise, references to SPC shall become references to BAC and
references to Security Pacific National Bank shall become references to
Bank of America NT&SA.
b. The names of the SPC Stock Plans shall remain unchanged.
c. Unless the context clearly indicates otherwise, all references to
SPC Common Stock, par value $10.00, shall become references to BAC Common
Stock, par value $1.5625.
d. Only employees of SPC prior to the Merger are eligible to
participate in the SPC Stock Plans.
e. All references to the Executive Officers Compensation and
Development Committee of the Board of Directors of SPC and to the
"Committee" in the Rainier Bancorporation Management Incentive Stock Plan
shall become references to the Executive Personnel and Compensation
Committee of the Board of Directors of BAC, which is and
<PAGE>
shall be composed solely of disinterested directors.
4. BAC's Personnel Relations Officer is further authorized and directed
to take such action as she deems necessary and appropriate to implement the
provisions of the foregoing resolution.
CERTIFICATION
-------------
I, Christine Lundgren, an Assistant Secretary of BankAmerica Corporation,
a Delaware corporation having its principal place of business in the City and
County of San Francisco, State of California, certify that the foregoing
resolution is a true and correct copy of the resolution adopted by the Board
of Directors of BankAmerica Corporation, at a meeting held on April 27, 1992.
This resolution is still in effect.
--------------------------
Assistant Secretary
BANKAMERICA CORPORATION
Dated: May 7, 1992
-----------------
<PAGE>
SECURITY PACIFIC CORPORATION
STOCK-BASED INCENTIVE AWARD PLAN
I. DEFINITIONS.
1.1 Definitions.
(a) "Act" shall mean the Securities Exchange Act of 1934.
(b) "Award" shall mean an Option, which may be designated as a Nonqualified
or Incentive Stock Option, a Stock Appreciation Right, a Restricted Stock Award
or a Performance Share Award, in each case granted under this Plan.
(c) "Award Agreement" shall mean a written agreement setting forth the terms
of an Award.
(d) "Award Date" shall mean the date upon which the Grantor took the action
granting an Award or such later date as is prescribed by the Grantor.
(e) "Award Period" shall mean the period beginning on an Award Date and
ending on the expiration date of such Award.
(f) "Beneficiary" shall mean the person, persons, trust or trusts entitled
by will or the laws of descent and distribution to receive the benefits
specified under this Plan in the event of the Participant's death.
(g) "Board of Directors" shall mean the Board of Directors of the
Corporation, a majority of whom shall be Disinterested when taking action with
respect to this Plan.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(i) "Committee" shall mean the Executive Officers Compensation and
Development Committee of the Board of Directors as from time to time constituted
and any successor committee of the Board of Directors with similar functions and
shall consist of three or more members each of whom shall be Disinterested.
(j) "Common Stock" shall mean the Common Stock of the Corporation ($10.00
par value), subject to adjustment pursuant to Section 7.2.
(k) "Company" shall mean, collectively, the Corporation and its
Subsidiaries.
(l) "Corporation" shall mean Security Pacific Corporation and its
successors.
(m) "Disinterested" shall mean disinterested within the meaning of
applicable regulatory requirements, including those promulgated under Section 16
of the Act.
(n) "Eligible Employee" shall mean an officer or key employee of the
Company.
(o) "Event" shall mean any of the following:
(i) Approval by the stockholders of the Corporation of the dissolution
or liquidation of the Corporation;
(ii) Approval by the stockholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities which are not Subsidiaries, as a result of which less
1
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than 50% of the outstanding voting securities of the surviving or
resulting entity are, or are to be, owned by former stockholders of the
Corporation (excluding from the term "former stockholders" a stockholder
who is, or as a result of the transaction in question becomes, an
"affiliate", as that term is used in the Act and the Rules promulgated
thereunder, of any party to such merger, consolidation or reorganization):
(iii) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person or
entity which is not a Subsidiary; or
(iv) A Change in Control, as from time to time defined in the
Corporation's By-Laws.
(p) "Fair Market Value" shall mean the closing price of the Common Stock on
the New York Stock Exchange as reported on the Composite Tape and published in
the Western Edition of The Wall Street Journal, or, if there is no trading of
the Common Stock on the date in question, then the closing price of the Common
Stock, as so reported and published, on the next preceding date on which there
was trading in the Common Stock.
(q) "Grantor" shall mean the Board of Directors and the Committee, each in
its capacity as grantor of Awards.
(r) "Incentive Stock Option" shall mean an incentive stock option within the
meaning of Section 422A of the Code, the award of which contains such provisions
as are necessary to comply with that section.
(s) "Nonqualified Stock Option" shall mean an option granted pursuant to
this Plan which does not qualify as an Incentive Stock Option.
(t) "Option" shall mean an option to purchase Common Stock under this Plan.
An option shall be designated by the Grantor as a Nonqualified Stock Option or
an Incentive Stock Option.
(u) "Participant" shall mean an Eligible Employee who has been awarded an
Award.
(v) "Performance Share Award" shall mean an award of shares of Common Stock
issuance of which is contingent upon attainment of performance objectives
specified by the Grantor.
(w) "Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of a Participant, shall have acquired on behalf of
the Participant by legal proceeding or otherwise the right to receive the
benefits specified in this Plan.
(x) "Plan" means this Security Pacific Corporation Stock-Based Incentive
Award Plan.
(y) "Restricted Stock" shall mean those shares of Common Stock issued
pursuant to a Restricted Stock Award which are not free of the restrictions set
forth in the related Award Agreement.
(z) "Restricted Stock Award" shall mean an award of a fixed number of shares
of Common Stock to the Participant subject, however, to payment of such
consideration, if any, and such forfeiture provisions, as are set forth in the
Award Agreement.
(aa) "Retirement" shall mean retirement of an individual as an employee of
the Company at any time described in Sections 4.1 and 4.3 of the Security
Pacific Trusteed Retirement Income Plan or in any successor Section or plan, in
each case, as from time to time in effect.
(bb) "Stock Appreciation Right" shall mean a right to receive a number of
shares of Common Stock or an amount of cash, or a combination of shares and
cash, determined as provided in Section 4.3(a).
(cc) "Subsidiary" shall mean any corporation or other entity a majority or
more of whose outstanding
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<PAGE>
voting stock or voting power is beneficially owned directly or indirectly by
the Corporation.
(dd) "Total Disability" shall mean total disability as defined in Article I
of the Security Pacific Trusteed Retirement Income Plan or in any successor
provision or plan, as from time to time in effect.
II. THE PLAN.
2.1 Purpose.
The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract and retain key personnel through added
long term incentive for high levels of performance and for significant efforts
to improve the financial performance of the Company by granting Awards.
2.2 Administration.
This Plan shall be administered by the Committee. Action of the Committee
with respect to the administration of this Plan shall be taken pursuant to a
majority vote or the written consent of all of its members. In the event action
by the Committee is taken by written consent of all of its members, the action
by the Committee shall be deemed to have been taken at the time specified in the
consent or, if none is specified, at the time of the last signature. The
Committee may delegate administrative functions to individuals who are officers
or employees of the Company.
Subject to the express provisions of this Plan, the Committee shall have the
authority to construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Participants under this Plan, to
further define the terms used in this Plan, to prescribe, amend and rescind
rules and regulations relating to the administration of this Plan, to
determine the duration and purposes of leaves of absence which may be granted
to Participants without constituting a termination of their employment for
purposes of this Plan and to make all other determinations necessary or
advisable for the administration of this Plan. The determinations of the
Committee on the foregoing matters shall be conclusive.
Any action taken by, or inaction of, the Corporation, any Subsidiary, the
Board of Directors or the Committee relating to this Plan shall be within the
absolute discretion of that entity or body and shall be conclusive and binding
upon all persons. No member of the Board of Directors or Committee, or officer
of the Corporation or Subsidiary, shall be liable for any such action or
inaction of the entity or body, of another person or, except in circumstances
involving bad faith, of himself or herself. Subject only to compliance with the
express provisions hereof, the Board of Directors and the Committee may act in
their absolute discretion in matters related to this Plan.
2.3 Participation.
Awards may be granted only to Eligible Employees. An Eligible Employee who
has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Grantor shall so determine. Members of the Board of Directors who
are not officers or employees of the Company and members of the Committee shall
not be eligible to receive Awards.
2.4 Stock Subject to this Plan.
Subject to Section 7.2, the stock to be offered under this Plan shall be
treasury shares or shares of the Corporation's authorized but unissued Common
Stock. The aggregate amount of Common Stock that may be issued or transferred
pursuant to Awards granted under this Plan shall not exceed 4,500,000 shares,
subject to adjustment as set forth in Section 7.2. If any Option and any
related Stock Appreciation Right shall lapse or terminate without having been
exercised in full, or any Common Stock subject to a Restricted Stock Award shall
3
<PAGE>
not vest or any Common Stock subject to a Performance Share Award shall not have
been transferred, the unpurchased, unvested or untransferred shares subject
thereto shall again be available for purposes of this Plan. No more than 10% of
the aggregate amount of Common Stock available under this Plan may be granted as
Restricted Stock Awards.
2.5 Grants of Awards.
Either the Board of Directors or the Committee may grant Awards in
accordance with the provisions of this Plan. A majority of the members of the
Board of Directors acting hereunder shall be Disinterested. The grant of an
Award is made on the Award Date.
III.OPTIONS.
3.1 Grants.
One or more Options may be granted to any Eligible Employee. Each Option so
granted shall be designated by the Grantor as either a Nonqualified Stock Option
or Incentive Stock Option.
3.2 Option Price.
The purchase price per share of the Common Stock covered by each Option
shall be determined by the Grantor but shall not be less than the Fair Market
Value of such Common Stock on the Award Date. The purchase price of any shares
purchased shall be paid in full at the time of each purchase in cash, or,
provided that the Grantor permits such exercise, in shares of Common Stock which
shall be valued at their Fair Market Value on the date of exercise of the
Option, or partly in such shares and partly in cash, or in such other form or
such other manner as the Board of Directors may determine.
3.3 Option Period.
Each Option and all rights or obligations thereunder shall expire on such
date as shall be determined by the Grantor, but not later than ten years and one
day after the Award Date, and shall be subject to earlier termination as
hereinafter provided.
3.4 Exercise of Options.
Except as otherwise provided in Section 7.4 and subject to Section 7.5, an
Option may become exercisable, in whole or in part, subsequent to the date or
dates specified in the Award Agreement and until the expiration or earlier
termination of the Participant's Option. The Grantor may, at any time after
grant of the Option and from time to time, increase the number of shares
purchasable at any time so long as the total number of shares subject to the
Option is not increased. No Option shall be exercisable except in respect of
whole shares, and fractional share interests shall be disregarded. Not fewer
than 10 shares may be purchased at one time unless the number purchased is the
total number at the time available for purchase under the Option.
3.5 Limitations on Grant of Incentive Stock Options.
(a) The aggregate Fair Market Value (determined as of the Award Date)
of the Common Stock for which Incentive Stock Options may be first exercisable
by any Participant during any calendar year under this Plan, together with that
of common stock subject to incentive stock options first exercisable (other than
as a result of acceleration pursuant to Section 7.4) by such Participant under
any other plan of the Corporation or any Subsidiary, shall not exceed $100,000.
(b) There shall be imposed in the Award Agreement relating to
Incentive Stock Options such terms and
4
<PAGE>
conditions as are required in order that the Option be an "incentive stock
option" as that term is defined in Section 422A of the Code.
3.6 Deferral of Option Gain.
The Committee may permit a Participant to elect to defer the receipt of the
shares of Common Stock upon exercise of an Option under such rules as the
Committee may determine in its sole discretion. If such an election is made,
upon exercise of the Option, the Company shall not direct the Corporation's
transfer agent to register the shares of Common Stock in the name of the
Participant until the date determined under the Committee's rules and the
Participant's election.
IV. STOCK APPRECIATION RIGHTS.
4.1 Grants.
In its discretion, the Grantor may grant Stock Appreciation Rights
concurrently with the grant of Options. A Stock Appreciation Right shall extend
to all or a portion of the shares covered by the related Option. If a Stock
Appreciation Right extends to less than all the shares covered by the related
Option and if a portion of the related Option is thereafter exercised, the
number of shares subject to the unexercised Stock Appreciation Right shall be
reduced only if and to the extent that the remaining number of shares covered by
such related Option is less than the remaining number of shares subject to such
Stock Appreciation Right. A Stock Appreciation Right shall entitle the
Participant who holds the related Option, upon exercise of the Stock
Appreciation Right and surrender of the related Option, or portion thereof, to
the extent the Stock Appreciation Right and related Option each were previously
unexercised, to receive payment of an amount determined pursuant to Section 4.3.
Any Stock Appreciation Right granted in connection with an Incentive Stock
Option shall contain such terms as may be required to comply with the provisions
of Section 422A of the Code and the regulations promulgated thereunder.
4.2 Exercise of Stock Appreciation Rights.
(a) A Stock Appreciation Right shall be exercisable only at such time
or times, and to the extent, that the related Option shall be exercisable and
only when the Fair Market Value of the stock subject to the related Option
exceeds the exercise price of the related Option.
(b) Notwithstanding any other provision of this Plan, the Committee may
impose, by rule and in Award Agreements, such conditions upon a Stock
Appreciation Right and the related Option and upon their exercises (including,
without limitation, conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements,
including, without limitation, Rule 16b-3 (or any successor rule) promulgated by
the Securities and Exchange Commission pursuant to the Act.
(c) In the event that a Stock Appreciation Right is exercised, the
number of shares of Common Stock subject to the related Option shall be charged
against the maximum amount of Common Stock that may be issued or transferred
pursuant to Awards under this Plan. The number of shares subject to the Stock
Appreciation Right and related Option shall be reduced by such number of shares.
4.3 Payment.
(a) Upon exercise of a Stock Appreciation Right and surrender of an
exercisable portion of the related Option, the Participant shall be entitled to
receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the exercise price per
share of Common Stock under the related Option from the Fair Market Value
of a share of Common Stock on the date of exercise of the
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<PAGE>
Stock Appreciation Right, by
(ii) the number of shares with respect to which the Stock Appre-
ciation Right shall have been exercised.
(b) The Committee or the Board of Directors, in its sole discretion,
may settle the amount determined under paragraph (a) above solely in cash,
solely in shares of Common Stock (valued at Fair Market Value on the date of
exercise of the Stock Appreciation Right), or partly in such shares and partly
in cash provided that the Committee or the Board of Directors shall have
determined that such exercise and payment are consistent with applicable law. In
any event, cash shall be paid in lieu of fractional shares. Absent a
determination to the contrary, all Stock Appreciation Rights shall be settled in
cash as soon as practicable after exercise.
(c) The maximum amount per share which shall be payable upon exercise
of a Stock Appreciation Right shall be 200% of the exercise price of the
related Option.
V. RESTRICTED STOCK AWARDS.
5.1 Grants.
Subject to Section 2.4, the Grantor may, in its discretion, grant one or
more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock
Award Agreement shall specify the number of shares of Common Stock to be
issued to the Participant, the date of such issuance, the price, if any, to be
paid for such shares by the Participant and the restrictions imposed on such
shares, which restrictions shall not terminate earlier than one year after the
Award Date. Shares of Restricted Stock shall be evidenced by a stock
certificate registered only in the name of the Participant, which stock
certificate shall be held by the Corporation until the restrictions on such
shares shall have lapsed and those shares shall have thereby vested.
5.2 Restrictions.
(a) Shares of Common Stock included in Restricted Stock Awards may not
be sold, assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until such shares have vested.
(b) Participants receiving Restricted Stock shall be entitled to
dividend and voting rights for the shares issued even though they are not
vested, provided that such rights shall terminate immediately as to any
forfeited Restricted Stock.
(c) In the event that the Participant shall have paid cash in
connection with the Restricted Stock Award, the Award Agreement shall specify
whether and to what extent such cash shall be returned upon a forfeiture (with
or without an earnings factor).
VI. PERFORMANCE SHARE AWARDS.
6.1 Grants.
The Grantor may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Grantor shall determine. A
Performance Share Award Agreement shall specify the number of shares of Common
Stock subject to the Performance Share Award, the price, if any, to be paid
for such shares by the Participant and the conditions upon which issuance to
the Participant shall be based, which issuance shall not be earlier than one
year after the Award Date.
6
<PAGE>
VII. OTHER PROVISIONS.
7.1 Rights of Eligible Employees, Participants and Beneficiaries.
(a) Status as an Eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) Nothing contained in this Plan (or in Award Agreements or in any
other documents related to this Plan or to Awards) shall confer upon an Eligible
Employee or Participant any right to continue in the employ of the Company or
constitute any contract or agreement of employment, or interfere in any way with
the right of the Company to reduce such person's compensation or to terminate
the employment of such Eligible Employee or Participant, with or without cause,
but nothing contained in this Plan or any document related thereto shall affect
any other contractual right of any Eligible Employee or Participant.
(c) Amounts payable pursuant to an Award shall be paid only to the
Participant or, in the event of the Participant's death, to the Participant's
Beneficiary or, in the event of the Participant's Total Disability, to the
Participant's Personal Representative or, if there is none, to the Participant.
Other than by will or the laws of descent and distribution, no benefit payable
under, or interest in, this Plan or in any Award shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge and any such attempted action shall be void and no such benefit or
interest shall be, in any manner, liable for, or subject to, debts, contracts,
liabilities, engagements or torts of any Eligible Employee, Participant or
Beneficiary. The Committee shall disregard any attempt at transfer, assignment
or other alienation prohibited by the preceding sentence and shall pay or
deliver such cash or shares of Common Stock in accordance with the provisions of
this Plan.
(d) No Participant, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset (including shares of
Common Stock) of the Company by reason of any Award granted hereunder. There
shall be no funding of any benefits which may become payable hereunder. Neither
the provisions of this Plan (or of any documents related hereto), nor the
creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive an Award hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Company.
Awards payable under this Plan shall be paid from the general assets of the
Corporation, and no special or separate fund or deposit shall be established and
no segregation of assets shall be made to assure payment of such Awards. Nothing
in this Plan shall be deemed to give any Eligible Employee or Participant any
right to participate in this Plan except in accordance herewith.
7.2 Adjustments upon Changes in Capitalization.
If the outstanding shares of Common Stock are increased, decreased or
changed into, or exchanged for, a different number or kind of shares or
securities of the Corporation through a reorganization or merger in which the
Corporation is the surviving entity, or through a combination,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation or otherwise, an appropriate adjustment shall be made in the
number and kind of shares that may be issued pursuant to Awards. A
corresponding adjustment to the consideration payable with respect to Awards
granted prior to any such change and to the price, if any, paid in connection
with Restricted Stock Awards shall also be made. Any such adjustment, however,
shall be made without change in the total payment, if any, applicable to the
portion of the Award not exercised, vested or issued but with a corresponding
adjustment in the price for each share. Corresponding adjustments shall be
made with respect to Stock Appreciation Rights based upon the adjustments made
to the Options to which they are related.
Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger, or consolidation of the Corporation with one or more
corporations as a result of which the Corporation is not the surviving
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<PAGE>
Corporation, or upon a sale of substantially all the property of the
Corporation to another corporation, this Plan shall terminate, and any
outstanding Options, Stock Appreciation Rights and Performance Share Awards
shall terminate and any Restricted Stock shall be forfeited, unless provision
be made in connection with such transaction for the assumption of Awards
theretofore granted, or the substitution for such Awards of new incentive
awards covering the stock of a successor employer corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to number and kind of
shares and prices.
In so adjusting Common Stock to reflect such changes, or in determining
that no such adjustment is necessary, the Board of Directors may rely upon the
advice of independent counsel and accountants of the Corporation, and the
determination of the Board of Directors shall be conclusive. No fractional
shares of stock shall be issued under this Plan on account of any such
adjustment.
7.3 Termination of Employment.
(a) Upon the date a Participant is no longer employed by the Company
for any reason other than Retirement, death or Total Disability, (i) the
Participant shall have one year from that date to exercise his or her Options to
the extent they shall have become exercisable on that date and any Options not
exercisable on that date shall terminate; (ii) shares of Common Stock subject to
the Participant's Restricted Stock Award shall be forfeited in accordance with
the provisions of the related Award Agreement to the extent such shares have not
become vested on that date; and (iii) shares of Common Stock subject to the
Participant's Performance Share Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have not
been issued or become issuable on that date.
(b) Upon the date a Participant is no longer employed by the Company
as a result of Retirement, death or Total Disability, (i) the Participant, his
or her Beneficiary, or Personal Representative, as the case may be, shall have
three years from that date to exercise the Participant's Options to the extent
they shall have become exercisable by that date and any Options not exercisable
on that date shall terminate; (ii) shares of Common Stock subject to the
Participant's Restricted Stock Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have not
become vested on that date; and (iii) shares of Common Stock subject to the
Participant's Performance Share Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have not
been issued or become issuable on that date. In the event of termination of
employment as a result of Retirement, death or Total Disability, the Grantor
may, in its discretion, increase the portion of the Participant's Award
available to the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, upon such terms as the Grantor shall
determine.
(c) Each Stock Appreciation Right shall have the same termination
provisions and exercisability periods as the Option to which it relates. The
exercisability period of a Stock Appreciation Right or of an Option shall not
exceed that provided in Section 3.3 or in the related Award Agreement. Each
Option and Stock Appreciation Right shall expire at the end of that
exercisability period.
(d) If an entity ceases to be a Subsidiary, such action shall be
deemed for purposes of this Section 7.3 to be a termination of employment
of each employee of that entity.
(e) Upon forfeiture of a Restricted Stock Award pursuant to this
Section 7.3, the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, shall transfer to the Corporation the
portion of the Restricted Stock Award not vested at the date of termination of
employment, without payment of any consideration by the Company for such
transfer unless the Participant paid a purchase price in which case repayment,
if any, of that price shall be governed by the Award Agreement. Notwithstanding
any such transfer to the Corporation, or failure, refusal or neglect to
transfer, by the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, such nonvested portion of any Restricted
Stock Award shall be deemed transferred automatically to the Corporation on the
date of termination of employment. The Participant's original acceptance of the
Restricted Stock Award shall constitute his or her appointment of the
Corporation and each of its authorized representatives as attorney(s)-in-fact to
effect such transfer and to execute such documents as the
8
<PAGE>
Corporation or such representatives deem necessary or advisable in connection
with such transfer.
7.4 Acceleration of Awards.
Unless, prior to an Event, the Board of Directors determines that, upon its
occurrence, there shall be no acceleration of Awards or determines those Awards
which shall be accelerated and the extent to which they shall be accelerated,
(i) each Option and each related Stock Appreciation Right shall become
immediately exercisable to the full extent theretofore not exercisable, (ii)
Restricted Stock shall immediately vest free of restrictions and (iii) the
number of shares covered by each Performance Share Award shall be issued to the
Participant; provided, however, that Awards shall not, in any event, be so
accelerated to a date less than one year after the Award Date. Acceleration of
Awards shall comply with applicable regulatory requirements, including, without
limitation, Rule 16b-3 promulgated by the Securities and Exchange Commission
pursuant to the Act and Section 422A of the Code. For purposes of this Section
7.4 only, Board of Directors shall mean the Board of Directors as constituted
immediately prior to the Event.
7.5 Continuation of Employment.
Each person to whom an Award is granted must agree that he or she will,
at the request of the Company, remain in the continuous employment of the
Company for a period of not less than one year following the Award Date. No
Option or Stock Appreciation Right shall be exercisable, no Restricted Stock
shall vest and no Performance Share Award shall be paid unless the Participant
has remained in the continuous employment of the Company for at least one year
from the Award Date.
7.6 Government Regulations.
This Plan, the granting of Awards under this Plan and the issuance or
transfer of shares of Common Stock (and/or the payment of money) pursuant
thereto are subject to all applicable Federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency
(including without limitation "no action" positions of the Securities and
Exchange Commission) which may, in the opinion of counsel for the Corporation,
be necessary or advisable in connection therewith. Without limiting the
generality of the foregoing, no Awards may be granted under this Plan, and no
shares shall be issued by the Corporation, nor cash payments made by the
Corporation, pursuant to or in connection with any such Award, unless and
until, in each such case, all legal requirements applicable to the issuance or
payment have, in the opinion of counsel to the Corporation, been complied
with. In connection with any stock issuance or transfer, the person acquiring
the shares shall, if requested by the Corporation, give assurances
satisfactory to counsel to the Corporation in respect of such matters as the
Corporation may deem desirable to assure compliance with all applicable legal
requirements.
7.7 Tax Withholding.
The Company shall have the right to deduct from any payment hereunder any
amounts that Federal, state, local or foreign tax law requires to be withheld
with respect to such payment but, in the alternative, the Participant may, prior
to the payment of any Award, pay such amounts to the Company in cash or in
shares of Common Stock (which shall be valued at their Fair Market Value on the
date of payment). There is no obligation under this Plan that any Participant
be advised of the existence of the tax or the amount required to be withheld.
Without limiting the generality of the foregoing, in any case where it
determines that a tax is required to be withheld in connection with the issuance
or transfer of shares of Common Stock under this Plan, the Company may, pursuant
to such rules as the Committee may establish, reduce the number of such shares
so issued or transferred by such number of shares as the Company may deem
appropriate in its sole discretion to accomplish such withholding.
Notwithstanding any other provision of this Plan, the Committee may
impose such conditions on the payment of any withholding obligation as may be
required to satisfy applicable regulatory requirements, including, without
limitation, Rule 16b-3 promulgated by the Securities and Exchange Commission
pursuant to the Act.
9
<PAGE>
7.8 Amendment, Termination and Suspension.
(a) The Board of Directors may, at any time, terminate or, from time
to time, amend, modify or suspend this Plan (or any part thereof). In
addition, the Committee may, from time to time, amend or modify any
provision of this Plan except Sections 7.4 and 7.8(b). The Grantor, with
the consent of the Participant, may make such modifications of the terms
and conditions of such Participant's Award as it shall deem advisable. No
Awards may be granted during any suspension of this Plan or after its
termination. The amendment, suspension or termination of this Plan shall
not, without the consent of the Participant, alter or impair any rights
or obligations pertaining to any Awards granted under this Plan prior to
such amendment, suspension or termination, including any right to
acceleration under Section 7.4. The Grantor shall have the power and may,
with the consent of the Participant, cancel any existing Awards and
reissue Awards to the Participant, having a new and lower Fair Market
Value, but otherwise bearing substantially similar terms to the cancelled
Awards.
(b) If an amendment would (i) materially increase the benefits
accruing to Participants within the meaning of Rule 16b-3(a) under the
Act or any successor thereto, (ii) increase the aggregate number of
shares which may be issued under this Plan, or (iii) modify the
requirements of eligibility for participation in this Plan, the amendment
shall be approved by the Board of Directors and by the stockholders. For
purposes of this Section 7.8(b) any cancellation and reissuance of Awards
at a new or lower Fair Market Value pursuant to Section 7.8(a) shall not
constitute an amendment of this Plan.
7.9 Privileges of Stock Ownership; Nondistributive Intent.
A Participant shall not be entitled to the privilege of stock ownership
as to any shares of Common Stock not actually issued to him. Upon the issuance
and transfer of shares to the Participant, unless a registration statement is
in effect under the Securities Act of 1933, as amended, relating to such
issued and transferred Common Stock and there is available for delivery a
prospectus meeting the requirements of Section 10 of such Act, the Common
Stock may be issued and transferred to the Participant only if he represents
and warrants in writing to the Corporation that the shares are being acquired
for investment and not with a view to the resale or distribution thereof. No
shares shall be issued and transferred unless and until there shall have been
full compliance with any then applicable regulatory requirements (including
those of any exchanges upon which any Common Stock of the Corporation may be
listed).
7.10 Effective Date of this Plan.
This Plan shall be effective upon its approval by the stockholders of the
Corporation.
7.11 Term of this Plan.
Unless previously terminated by the Board of Directors or the Committee,
this Plan shall terminate at the close of business on April 19, 1998, and no
Awards shall be granted under it thereafter, but such termination shall not
affect any Award theretofore granted.
7.12 Governing Law.
This Plan and the documents evidencing Awards and all other related
documents shall be governed by, and construed in accordance with, the laws of
the State of California. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue to be fully effective.
The following provision was added to the plan by the BAC Board of
Directors on August 7, 1995. For purposes of this provision, "BankAmerica"
means BankAmerica Corporation and "Company" means BankAmerica and its
subsidiaries collectively.
10
<PAGE>
Notwithstanding any other provision in the Plan, the following shall
apply in the event of a Change in Control, as defined below, in BankAmerica:
Change in Control means that one of the following events has occurred:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of BankAmerica (the
"Outstanding BankAmerica Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of BankAmerica entitled to vote generally in
the election of directors (the "Outstanding BankAmerica Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from BankAmerica (ii) any acquisition by BankAmerica, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or (iv) any acquisition by any corporation pursuant to
a transaction which complies with clauses (A), (B) and (C) of subsection (iii)
below.
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by BankAmerica's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
BankAmerica or its principal Subsidiary (a "Business Combination"), in each
case, unless, following such Business Combination, (A) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns BankAmerica or all or substantially all of BankAmerica's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting
Securities, as the case may be, (provided, however, that, for the purposes of
this clause (A), any shares of common stock or voting securities of such
resulting corporation received by such beneficial owners in such Business
Combination other than as the result of such beneficial owners' ownership of
Outstanding BankAmerica Common Stock or Outstanding BankAmerica Voting
Securities immediately prior to such Business Combination shall not be
considered to be owned by such beneficial owners for the purposes of calculating
their percentage of ownership of the outstanding common stock and voting power
of the resulting corporation), (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation unless such Person owned
20% or more of the Outstanding BankAmerica Common Stock or Outstanding
BankAmerica Voting Securities immediately prior to the Business Combination and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board (or, in the case of BankAmerica's principal Subsidiary, the
corresponding board of directors) at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination.
11
<PAGE>
(iv) Approval by the shareholders of BankAmerica of a complete
liquidation or dissolution of BankAmerica.
(a) All outstanding stock options and stock appreciation rights under the
Plan shall be immediately exercisable in full if BankAmerica undergoes a
Change in Control.
(b) Except as provided in the following sentence and in (c) below, if
applicable to the Plan, in the event an employee terminates employment with the
Company following a Change in Control, his or her stock options and stock
appreciation rights granted under the Plan shall remain exercisable for a period
of three years following termination of employment, not to exceed the original
term of the stock option or stock appreciation right. The preceding sentence
shall not apply to an incentive stock option unless the option agreement gives
the Plan committee discretion to permit the incentive stock option to remain
exercisable following termination of the optionholder's employment, in which
case the incentive stock option shall be exercisable for three months following
termination of employment without further committee action.
(c) Subsection (b) shall not apply to stock options and stock appreciation
rights granted under the Plan to a person who, at the time of such termination
of employment, is an officer or director of BankAmerica, as such terms are
defined in Section 16 of the Securities Exchange Act of 1934 and the rules of
the Securities and Exchange Commission thereunder.
(d) The Company shall have the right to deduct from any settlement of any
stock option or stock appreciation right an amount sufficient to cover
withholding required by law for any federal, state or local taxes, of to take
such other action as may be necessary to satisfy any such withholding
obligation.
The resolution adding the above provision provided that no modification,
suspension, amendment or termination of the Plan may be made which would
adversely affect the rights of any employee or former employee under the
amendment with respect to any stock option or stock appreciation right granted
under the Plan prior to the date of such modification, suspension, amendment or
termination.
12
<PAGE>
Exhibit 10.h
[Adopted March 8, 1993]
[Amended December 1, 1997]
FORM OF
AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
FOR DIRECTORS FOR BANKAMERICA CORPORATION AND
BANK OF AMERICA TRUST AND SAVINGS ASSOCIATION
l. Purpose of Plan
---------------
The purpose of the BankAmerica Corporation Deferred Compensation Plan for
Directors (the "Plan") is to provide those directors and advisory directors of
BankAmerica Corporation ("BAC" or "Company") who are not employees of the
Company, or of any of its subsidiaries ("Eligible Directors") with a plan in
compliance with applicable federal tax rules whereby one or more Eligible
Directors may elect to defer receipt of such compensation, in an unfunded
account in the form of cash or of restricted stock units, for such period of
years, not exceeding fifteen years, with distributions commencing after the
Eligible Director ceases being a director or retires from his or her principal
occupation, as the Eligible Director may elect.
2. Election to Participate in Plan
-------------------------------
(a) On or before April 1, 1993, with respect to initial elections under the
Plan, or prior to the beginning of any calendar year, or, in the case of newly
elected Directors, within 90 days of such election, each Eligible Director may
elect to participate in the Plan by directing that all or any part of the
compensation which would otherwise have been payable currently for services as a
Director (including fees payable for services as a member of a committee of the
Board) during such calendar year, or, in the case of initial elections or for
newly elected Directors, during the remainder of such calendar year, shall be
credited to a deferred compensation account subject to the terms of the Plan;
provided, however, that no election shall apply to any compensation earned on or
- -------- -------
before the date on which the election becomes irrevocable, as provided in
Section 2(b).
(b) Such an election to participate in the Plan shall be in the form of a
document, substantially in the form of Attachment A, executed by the Eligible
Director and filed with the Secretary of the Company. An election related to
fees otherwise payable currently in any calendar year shall become irrevocable
on the last day prior to the beginning of such calendar year, or, in the case of
initial elections under the Plan, on April 1, 1993, or in the case of new
Directors, on the 90th day after becoming a Director. An election shall
continue until an Eligible Director ceases to be a Director or until he or she
terminates or modifies such election by written notice; provided, however, that
-------- -------
only one such termination or modification shall be permitted during any calendar
year. Any such termination or modification shall become effective as of the end
of the calendar year in which such notice is given with respect to all fees
otherwise payable in subsequent calendar years. An Eligible Director who has
filed a termination of election with respect to any calendar year may thereafter
again file an election to participate for any calendar year or years subsequent
to such calendar year.
Page 1
<PAGE>
(c) An Eligible Director's deferred compensation account automatically
shall be credited with that part of the Eligible Director's compensation for any
calendar year (including fees for services as a member of the Board), which the
Board has directed to be credited under this Plan. Such compensation shall be
credited at the time that the related compensation is or would otherwise have
been paid currently.
3. Deferred Compensation Accounts
------------------------------
(a) General. At the time of election to participate in the Plan under
-------
Section 2(a) above, an Eligible Director shall also designate the percentage of
such deferred amounts to be credited to the portion of the Eligible Director's
deferred account which is maintained in the form of restricted stock units ("BAC
Shares Account") and the percentage to be credited to the portion of such
Eligible Director's deferred account which is maintained in the form of cash
("Cash Account"). All deferred amounts credited under Section 2(c) above shall
be credited to the Eligible Director's BAC Shares Account.
(b) BAC Shares Account. Deferred amounts credited to the Eligible
------------------
Director's BAC Shares Account on the date the related compensation is or would
be otherwise be paid shall be converted to a number of restricted stock units,
determined by dividing the amount of such compensation by the Fair Market Value
(as defined below) of BAC Common Stock. The Eligible Director's BAC Shares
Account shall also be credited on each dividend payment date for BAC Common
Stock with an amount equivalent to the dividend payment on the number of shares
of BAC Common Stock equal to the number of restricted stock units in the
Eligible Director's BAC Shares Account on the record date for such dividend.
Such amount shall then be converted to a number of additional restricted stock
units determined by dividing such amount by the Fair Market Value of BAC Common
Stock. The Fair Market Value of BAC Common Stock related to any compensation or
dividend payment date shall mean the average of the high and low sales prices of
a share of BAC Common Stock as reflected in the report of consolidated trading
of New York Stock Exchange listed securities for that day (or, if no shares were
publicly traded on that day, the immediately preceding day that shares were so
traded) published in The Wall Street Journal or in any other publication
selected by the Executive Personnel and Compensation Committee of the BAC Board
of Directors ("Committee"); provided, however, that if shares of BAC Common
Stock shall not have been publicly traded for more than ten days immediately
preceding such date, then the fair market value of a share of BAC Common Stock
shall be determined by the Committee in such manner as it may deem appropriate.
In the event of any change in outstanding shares of BAC Common Stock
by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares or other similar corporate
change, the Committee shall make such adjustments, if any, that it deems
appropriate in the number of restricted stock units then credited to Eligible
Directors' BAC Shares Accounts. Any and all such adjustments shall be
conclusive and binding upon all parties concerned.
The maximum number of restricted stock units that may be maintained in
the BAC Shares Accounts of all Eligible Directors may not exceed two million.
This number is subject to adjustment to take into consideration such changes in
the number of outstanding shares of BAC Common Stock as are described in the
immediately preceding paragraph.
Page 2
<PAGE>
(c) Cash Account. Deferred amounts credited to the Eligible Director's
------------
Cash Account shall bear interest from the date the related compensation is or
would otherwise be paid. The interest credited to the Cash Account will be
compounded quarterly at the end of each calendar quarter. For all amounts
whenever credited, the rate of interest credited thereon shall be equal to the
rate determined from time to time by the Committee.
4. Distribution
------------
(a) (i) At the time of election to participate in the Plan, an Eligible
Director shall also make an election with respect to the distribution
(during the Eligible Director's lifetime or in the event of the Eligible
Director's death) of amounts deferred under the Plan plus accumulated
earnings. Such an election shall be contained in the document referred to
in Section 2(b), executed by the Eligible Director and filed with the
Secretary of the Company. Such an election related to fees for any
calendar year shall become effective as of the beginning of such calendar
year, or with respect to newly elected Directors, on the 90/th/ day after
becoming a Director.
(ii) An Eligible Director may elect to have all amounts accumulated
under the Plan be subject to a single distribution election. Such an
election shall be made on the form designated for that purpose by the
Secretary of the Company, executed by the Eligible Director and filed with
the Secretary of the Company. The distribution election shall become
effective on the one year anniversary of the date the distribution form is
filed with the Secretary of the Company, provided the Eligible Director has
remained a Director of the Company continuously until that date. No
distribution election submitted under this paragraph may shorten the period
of time during which payments would have been made or accelerate the date
upon which payment would have commencement in the absence of such election.
(b) An Eligible Director may elect to receive amounts credited to his or
her account in one payment or in some other number of approximately equal annual
installments (not exceeding fifteen). The election shall direct that the first
installment (or the single payment if the Eligible Director has so elected) be
paid on the first day of the calendar year immediately following either (1) the
year in which the Eligible Director ceases to be a Director of the Company, or
(2) the later of the year in which the Eligible Director ceases to be a Director
of the Company or the year in which the Eligible Director has retired from his
or her principal occupation. BAC may rely upon the certification of an Eligible
Director that such Eligible Director has retired from his or her principal
occupation, but reserves the right, but not the obligation, to postpone the
commencement of payment of deferred amounts in such cases upon the advice of its
tax counsel that such retirement has not effectively occurred. Each distribution
shall be made pro-rata from amounts credited to the Eligible Director's Cash
Account and amounts credited to the Eligible Director's BAC Shares Account on
the applicable payment date.
(c) All distributions shall be in cash. For this purpose, the value of
restricted stock units distributed on any payment date shall be determined by
multiplying the number of such restricted stock units by the Fair Market Value
of BAC Common Stock as of the business day immediately preceding the payment
date.
Page 3
<PAGE>
(d) An Eligible Director may elect that, in the event the Eligible Director
should die before full payment of the amounts credited to the Eligible
Director's deferred account, the balance of the deferred account shall be
distributed in one payment or in some other number of approximately equal
installments (not exceeding ten) to the beneficiary or beneficiaries designated
by the Eligible Director in the form of a document substantially in the form of
Attachment B, executed by the Eligible Director and filed with the Secretary of
the Company, or if no such designation has been made, to the estate of the
Eligible Director. The first such installment (or the single payment, if the
Eligible Director has so elected) shall be paid on the first business day of the
calendar year following the year of death.
(e) Installments subsequent to the first installment to the Eligible
Director, or to a beneficiary of the Eligible Director's estate, shall be paid
on the first business day of each succeeding calendar year until the entire
amount credited to the Eligible Director's deferred account shall have been
paid. Deferred amounts held pending distribution shall continue to be credited
with earnings determined in accordance with Section 3.
5. Miscellaneous
--------------
(a) The right of an Eligible Director to any deferred fees and/or earnings
thereon shall not be subject to assignment by the Eligible Director.
(b) All deferred amounts shall be held in the general funds of the Company.
The Company shall not be required to reserve, or otherwise set aside, funds for
payment of its obligations hereunder. The Plan shall not be construed to give
any Eligible Director or beneficiary or any other person a security interest in
deferred amounts held by the Company hereunder, nor shall the Plan be construed
to create any trust or fiduciary arrangement with respect to such deferred
amounts.
(c) The Plan amends, restates and supersedes the BankAmerica Corporation
Deferred Compensation Plan for Directors, as amended through March 2, 1992. The
Plan may be amended from time to time by resolution of the Board of Directors of
BAC, but no such amendment shall (1) permit amounts previously accumulated under
the Plan by an Eligible Director to be paid earlier or within a shorter period
of time than the payments would have been made otherwise or (2) permit any
amounts to be paid otherwise than in cash.
(d) The Plan will continue in effect until terminated by resolution of the
Board of Directors of BAC, but in the event of such termination, the amounts
accumulated pursuant to the Plan prior to termination will continue to be
subject to the provisions of the Plan as if the Plan had not been terminated.
Page 4
<PAGE>
ATTACHMENT A
DEFERRAL ELECTION LETTER
------------------------
To: BankAmerica Corporation
San Francisco, California
I elect to participate in the BankAmerica Corporation Deferred Compensation Plan
for Directors (the "Plan"), the terms and conditions of which are attached to
this letter, and I agree to be bound by the terms and conditions of the Plan.
I elect to DEFER receipt of: [check one or more; fill in percentage(s) for
each category checked]
<TABLE>
<S> <C> <C> <C>
______ Board Retainer Fees _________ % Cash _______ % Restricted Stock Units
______ Committee Retainer Fees _________ % Cash _______ % Restricted Stock Units
______ Board Meeting Fees _________ % Cash ________ % Restricted Stock Units
______ Committee Meeting Fees _________ % Cash ________ % Restricted Stock Units
</TABLE>
to which I otherwise may be entitled for the balance of the calendar year
commencing _______________, and for any succeeding taxable years until I
terminate or amend my participation in the Plan. I acknowledge that this
election shall not apply to any compensation earned on or before the date on
which this election becomes irrevocable, as provided in Section 2(b) of the
Plan.
I direct that such fees be paid as follows: [check one]
___________ Single payment, or
___________ Annual installments for ______________ years. [enter number of
years; maximum of fifteen]
Commencing with: [check one]
____________ the lst business day of the calendar year after I cease being a
director of BankAmerica Corporation.
____________ the lst business day of the calendar year immediately following
the year in which I cease being a director of BankAmerica
Corporation or the lst day of the calendar year following the
calendar year in which I retire from my principal occupation,
whichever shall last occur.
I understand that the Plan is unfunded.
Dated: _______________________________
______________________________________ _______________________________
(Director Printed Name) (Director Signature)
Receipt Acknowledged
BankAmerica Corporation
By: ___________________________________ Date:________________________
Secretary
<PAGE>
ATTACHMENT B
DESIGNATION OF BENEFICIARY
TO: BankAmerica Corporation
San Francisco, California
Pursuant to Section 4(d) of the BankAmerica Corporation Deferred Compensation
Plan for Directors (the "Plan"), I hereby designate the following person(s) as
Beneficiary(ies) to receive my balance in the Plan in the event of my death:
<TABLE>
<CAPTION>
<S> <C>
1. Name: __________________________________ __________ % of balance
Address: _____________________________________________________________________________________________________
Street City State Zip Code
2. Name: __________________________________ __________ % of balance
Address: _____________________________________________________________________________________________________
Street City State Zip Code
3. Name: __________________________________ __________ % of balance
Address: _____________________________________________________________________________________________________
Street City State Zip Code
4. Name: __________________________________ __________ % of balance
Address: _____________________________________________________________________________________________________
Street City State Zip Code
</TABLE>
Upon my death, my balance in the Plan shall be distributed to the beneficiary or
beneficiaries designated above as follows: [check one]
___________ Single payment, or
___________ Annual installments for ______________ years [enter number of
years; maximum of ten]
commencing on the first business day of the calendar year following the year of
my death.
I reserve the right to revoke or change this Beneficiary Designation. I
understand that such change or revocation must be tendered in writing on a
Designation of Beneficiary form for this Plan. All prior designations, if any,
of Beneficiaries with respect to this Plan are hereby revoked.
Dated: ________________________
_________________________________________ ______________________________
(Director Printed Name) (Director Signature)
Receipt Acknowledged
BankAmerica Corporation
By: ___________________________________ Date:________________________
Secretary
<PAGE>
Exhibit. 10.i
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Ladder Merger Corporation, a Delaware
corporation (the "Company") and Sanford R. Robertson (the "Executive"), dated as
of the 8th day of June, 1997.
1. Employment Period. Subject to the consummation of the transactions
-----------------
contemplated by the Agreement and Plan of Merger dated as of June 8, 1997 among
BankAmerica Corporation ("Ladder"), the Company, Robertson, Stephens & Company
Group, L.L.C. ("Hook"), and Robertson, Stephens & Company, Inc. (the "Merger
Agreement"), the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement and the terms of the Special Bonus Award
Agreement (the "Special Bonus Award Agreement") to be entered into between
Ladder and the Executive prior to the Commencement Date (as defined below), for
the period commencing on the closing date of the transactions contemplated by
the Merger Agreement (the "Commencement Date") and ending on the Executive's
seventieth birthday (the "Employment Period").
2. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, the Executive shall serve
as Chairman of the Company, reporting to the Chief Executive Officer of Ladder
and focusing on business development. In addition, the Executive shall serve on
the Board of Directors of Ladder.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full attention and time during normal business hours to the
business and affairs of the Company and to use the Executive's reasonable best
efforts to perform such responsibilities in a professional manner. It shall not
be a violation of this Agreement for the executive to (A) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the Executive prior
to the Commencement Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Commencement Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive
-----------
shall receive an annual base salary ("Annual Base Salary") of $175,000 payable
in cash. The Annual Base Salary shall be paid no less frequently than in equal
monthly installments.
(ii) Annual Bonus. In addition to Annual Base Salary the
------------
Executive will be awarded an annual cash bonus (the "Annual Bonus") for each of
calendar years 1997 and 1998 of $4,825,000.
(iii) Funds and Partnerships. Subject to applicable regulatory
----------------------
requirements (A) the Executive will be offered the opportunity to invest in
private funds and partnerships which have been established by Hook prior to the
Commencement Date and receive a portion of the incentive fees relating thereto
in accordance with Hook's past practice and (B) the Executive will be offered
the opportunity to invest in private funds and partnerships established after
the Commencement Date by the businesses which are the Hook businesses as of the
Commencement Date (the "Hook Businesses") or by one or more entities acquired or
developed after the Commencement Date by Ladder or any of its affiliates which
are engaged in businesses which are similar to the Hook Businesses, and with
respect to any such private fund or partnership in which the Executive has a
management role, receive a portion of the incentive fees relating thereto, in
each case in accordance with then prevailing standards in Hook's industry.
(iv) Savings and Retirement Plans. During the Employment
----------------------------
Period, the Executive shall be eligible to participate in existing Hook savings
and retirement plans, practices, policies and programs if such plans, practices,
policies, and programs are continued, or, if not, in all savings and retirement
plans, practices, policies and programs to the extent applicable to other peer
executives of Ladder and its affiliates. For purposes of all such plans, the
Company shall credit the Executive with full credit for all service credited
under comparable Hook plans (including service with Hook prior to the
Commencement Date) for purposes of eligibility to participate and receive
benefits and vesting but not for benefit accruals in any Company retirement
plan.
(v) Welfare and Other Benefit Plans. During the Employment
-------------------------------
Period, to the extent that Hook plans are not continued, the Executive and/or
the Executive's family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare, fringe, change of control
protection, vacation and other similar benefit plans, practices, policies and
programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable to other peer executives of the Company and its
affiliated companies. For purposes of all such plans, the Company shall credit
the Executive with full credit for all service credited under the corresponding
Hook benefit plans for purposes of eligibility to participate and receive
benefits and vesting but not for purposes of benefit accruals. With respect to
the Company's welfare
1
<PAGE>
benefit plans, the Company shall cause any such plan to waive any preexisting
condition exclusions and actively-at-work requirements thereunder with respect
to the Executive and the Executive's eligible dependents and shall ensure that
any covered expenses incurred on or before the Commencement Date shall be taken
into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Commencement Date to the extent that
such expenses are taken into account for the benefit of peer executives of the
Company.
(vi) Expenses. During the Employment Period, the Executive
--------
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive, in accordance with the policies of the
Company.
(vii) Indemnity. The Executive shall be indemnified by the
---------
Company against claims arising in connection with the Executive's status as an
employee, officer, director or agent of the Company in accordance with the
Company's indemnity policies for its senior executives, subject to applicable
law. The Company shall purchase insurance for the Executive against such claims
to the extent that such insurance is purchased for similarly situated executives
of Ladder affiliates.
(viii) Vacation. During the Employment Period, the Executive
--------
shall be entitled to no less than four weeks of paid vacation per year. Any
vacation accrued by the Executive in accordance with Hook's policies prior to
the Commencement Date shall be assumed by the Company and provided by the
Company to the Executive following the Commencement Date in accordance with
Hook's policies.
(ix) Perquisites. The Executive will receive perquisites no less
-----------
favorable than those received by the executives of similar status from the
Company and Ladder.
(c) Employment Location. The Executive's principal place of employment
-------------------
shall be located no more than 50 miles from the Executive's principal place of
employment at the Commencement Date.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 9(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For
2
<PAGE>
purposes of this Agreement, "Disability" shall have the meaning set forth in the
Long-Term Disability Plan applicable to the Executive.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) gross misconduct by the Executive in the execution of the
Executive's professional duties which is materially injurious to the Company or
Ladder, or
(ii) a material breach of a material obligation of the Executive
under this Agreement, which is not remedied within 30 days after receipt of
written notice from the Board of Directors of the Company (the "Board")
delivered to the Executive within 90 days of such claimed act or breach
specifically delineating each such claimed act or breach and setting forth the
Company's intentions to terminate the employment of the Executive if such breach
is not remedied (the "Board Notice"); provided, that if the specified breach
--------
cannot reasonably be remedied within such 30-day period and Executive commences
reasonable steps within such 30-day period to remedy such breach and diligently
continues such steps thereafter until a remedy is effected, such breach shall
not constitute "Cause", provided that such breach is remedied within 60 days
after receipt of written notice from the Board. If the breach is not remedied
within the cure period, notwithstanding Section 3(e), the Date of Termination
shall be the date on which the Executive received the Board Notice. Further, no
breach, act or failure to act on the Executive's part shall constitute "Cause"
if such breach, act or failure to act resulted from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated breach, act
or failure to act resulting from a resignation by the Executive for Good Reason,
or
(iii) conviction of a felony which is materially injurious to the
Company or Ladder.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by a majority of the entire
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board), finding
that in the good faith opinion of the Board, the Executive was guilty of the
conduct set forth in clause (i), (ii) or (iii) of this section and specifying
the particulars thereof.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean a material breach by the Company of a material obligation of the Company
under this Agreement after the Executive has given the Company notice of the
breach within 90 days of the breach and the Company has not remedied the breach
in accordance with the next sentence. A breach described in this clause to
include, without limitation, (A) a detrimental alteration to the terms of the
Executive's employment as described in Section 2 hereof, (B) any reduction in
the
3
<PAGE>
Executive's Annual Base Salary, Annual Bonus or other awards under plans or
programs described herein or the failure of the Company to pay when due to the
Executive any Annual Base Salary, Annual Bonus or other earned bonus or awards
referred to in this Agreement, (C) the relocation of the Executive's principal
place of employment to any location more than 50 miles from the Executive's
principal place of employment on the Commencement Date, (D) the failure of the
Company to obtain an agreement reasonably satisfactory to the Executive from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 8 hereof or, if the business for which the Executive's services are
principally performed is sold or transferred, the failure of the Company to
obtain such an agreement from the purchaser or transferee of such business or
(E) any termination of the Executive's employment which is not effected pursuant
to the terms of this Agreement which is not remedied within 30 days after
receipt of written notice from the Executive specifically delineating each such
claimed breach and setting forth the Executive's intention to terminate
employment if such breach is not remedied; provided, that if the specified
--------
breach cannot reasonably be remedied within such 30-day period and the Company
commences reasonable steps within such 30-day period to remedy such breach and
diligently continues such steps thereafter until a remedy is effected, such
breach shall not constitute "Good Reason" provided that such breach is remedied
within 60 days after receipt of written notice. It is understood that the mere
listing of certain of the Company's obligations under the Agreement herein does
not imply that a breach of such obligation is a material breach.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 9(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date (which date, in the case of a termination for Good Reason, shall be not
more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date that is one day after the last day of the
cure period, (ii) if the Executive's employment is terminated by the Company
other than for Cause or Disability, or the Executive resigns without Good
Reason, the Date of Termination shall be the date on which the Company or the
Executive notifies the Executive or the Company, respectively, of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
4
<PAGE>
4. Obligations of the Company upon Termination. The Executive agrees
-------------------------------------------
that the amounts payable under this Section 4 are in lieu of any other claims
the Executive may have with regard to the separation of employment and shall be
the Executive's sole and exclusive remedy for or associated with a separation of
employment. The Executive agrees to execute a general release of claims upon the
receipt of the amounts payable under this Section 4.
(a) Good Reason; Other Than for Cause; Death; Disability. If, during
----------------------------------------------------
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause, including by reason of the Executive's death or
Disability, or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the amounts set
forth in clauses A and B below:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the product of
(x) the Annual Bonus and (y) a fraction (the "Proration Fraction"), the
numerator of which is the number of days in the current calendar year
through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the greater of (1) any unpaid Annual Base
Salary and Annual Bonus payable through December 31, 1998, which amount
shall be discounted to present value at the applicable federal rate, as
defined in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended, and (2) the product of (x) 1.5 and (y) the sum of the Annual Base
Salary and the Annual Bonus; and
(ii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is entitled to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies, excluding any severance plan or policy
(such other amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
(iii) to the extent not theretofore paid, the Company shall vest
and pay to the Executive all amounts under the Special Bonus Award Agreement, in
accordance with the terms of such Agreement.
(iv) for eighteen months after the Date of Termination, the
Executive and the Executive's dependents shall continue to be eligible to
participate in the medical,
5
<PAGE>
dental, health, life and other fringe benefit plans and arrangements applicable
to the Executive immediately prior to the Date of Termination on the same terms
and conditions in effect for the Executive and the Executive's dependents
immediately prior to the Date of Termination.
(b) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause or the Executive terminates employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) Accrued Obligations less the amount determined under Section
4(a)(i)A(2) hereof, and (y) Other Benefits, in each case to the extent
theretofore unpaid.
5. Binding Arbitration. Any controversy or claim arising out of or
-------------------
relating to this Agreement (including any claims relating to employment or the
termination of employment, whether arising under federal, state or local law and
whether in contract or in tort and including any discrimination or common law
claims, but excluding workers compensation and unemployment insurance) shall at
the request of either party be determined by arbitration. The arbitration shall
be conducted in accordance with the United States Arbitration Act (Title 9,
United States Code), notwithstanding any choice of law provision in this
Agreement, and under the rules of the American Arbitration Association. The
dispute shall be submitted to a single arbitrator to be mutually agreed upon by
the parties. If the parties cannot agree on a single arbitrator, each party
shall appoint one arbitrator who shall then jointly appoint a single arbitrator.
The arbitrator shall give effect to applicable statutes of limitations. Any
controversy concerning whether an issue is arbitrable shall be determined by the
arbitrator. Judgment upon the arbitration award may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief. The Company agrees to pay the costs of arbitration and to
reimburse the Executive for reasonable expenses incurred as a result of such
arbitration, provided the Executive prevails on at least one material issue in
the arbitration
6. Confidential Information/Noncompetition.
---------------------------------------
(a) The Executive acknowledges that the Executive will have knowledge
of certain trade secrets of the Company, including information concerning
customer lists. The Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process (provided the Company has been given notice
of and opportunity to challenge or limit the scope of disclosure
6
<PAGE>
purportedly so required), communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it or to an
attorney retained by the Executive to provide legal advice with respect to this
Section 6 and who has agreed to keep such information confidential.
(b) While employed by the Company, the Executive shall comply with the
rules and policies of the Company, including without limitation the Company's
Code of Conduct and Conditions of Employment and compliance policies; it being
understood that a breach of such rules and policies shall not constitute "Cause"
if such breach does not constitute a material breach of another material
obligation of the Executive hereunder or as described in Section 3(b)(i) or
3(b)(iii). After termination of the Executive's employment with the Company, the
Executive shall comply with those aspects of such rules and policies which apply
to conduct after termination of employment.
(c) The Executive acknowledges that if the Executive were to become
employed by a competing organization, the Executive's new job duties and the
products, services and technology of the competing organization would be so
similar or related to those contemplated by this Agreement that it would be very
difficult for the Executive not to rely on or use the Company's trade secrets.
The Executive further acknowledges that the Executive, and any new employer,
cannot avoid using the trade secret information, due to the fact that even in
the best good faith, the Executive cannot as a practical matter avoid using the
knowledge of the Company's confidential methods and trade secrets in the
Executive's work with a new employer. Accordingly, until December 31, 2000, the
Executive will not, without the written consent of the Company, directly or
indirectly, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director or otherwise with, or have any financial interest in, any
business which engages in any business within a 50-mile radius of any
metropolitan area in which the Executive conducted significant business on
behalf of the Company during the 12-month period immediately preceding the
Termination Date (i) that competes with any business actively conducted in such
area, at the time such engagement is commenced, by the Company and (ii) that is
of the type of business activity in which the Executive was engaged on behalf of
the Company during such 12-month period. Ownership, for personal investment
purposes only, of less than 5% of the voting stock of any publicly held
corporation shall not constitute a violation hereof.
(d) While employed by the Company or any of its affiliates or Hook and
for one year after the Executive's termination of employment, the Executive will
not, directly or indirectly, on behalf of the Executive or any other person,
solicit for employment by other than the Company any person employed by the
Company or its affiliates or Hook at the effective time of the Merger (as
defined in the Merger Agreement) (the "Merger"), nor will the Executive,
directly or indirectly, on behalf of the Executive or any other person, solicit
for employment by other than the Company any person known by the Executive to be
employed at the time by Hook or the Company or its affiliates.
7
<PAGE>
(e) The provisions of Section 6(c) and (d) shall remain in full force
and effect until the expiration of the period specified herein notwithstanding
the earlier termination of the Executive's employment hereunder.
7. Specific Performance. The Executive acknowledges that a violation
--------------------
on the Executive's part of any of the covenants contained in Section 6 hereof
would cause immeasurable and irreparable damage to the Company. Accordingly, the
Executive agrees that the Company shall be entitled to injunctive relief in any
court of competent jurisdiction for any actual or threatened violation of any
such covenant in addition to any other remedies it may have. The Executive
agrees that in the event that any arbitrator or court of competent jurisdiction
shall finally hold that any provision of Section 6 hereof is void or constitutes
an unreasonable restriction against the Executive, the provisions of such
Section 6 shall not be rendered void but shall apply to such extent as such
arbitrator or court may determine constitutes a reasonable restriction under the
circumstances.
8. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, or any business
of the Company for which the Executive's services are principally performed, to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwlse .
9. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and
8
<PAGE>
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
c/o Robertson, Stephens &
Company Group, L.L.C.
555 California Street
San Francisco, CA 94104
If to the Company:
-----------------
555 California Street
San Francisco, CA 94104
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The parties agree to treat all amounts paid to the Executive
hereunder as compensation for services. Accordingly, the Company may withhold
from any amounts payable under this Agreement such Federal, state, local or
foreign taxes as shall be required to be withheld pursuant to any applicable law
or regulation.
(f) On and after the Commencement Date, this Agreement shall supersede
any other agreement (other than the Special Bonus Agreement between the Company
and the Executive dated the date hereof and the Merger Agreement), written or
oral, pertaining to the subject matter of this Agreement, including without
limitation all previous compensation guarantees and all agreements with respect
to payments to be made as a result of the transactions contemplated by the
Merger Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
LADDER MERGER SUB
By: /s/ DOYLE ARNOLD
Name: Doyle Arnold
EXECUTIVE
By: /s/ SANFORD R. ROBERTSON
Name: Sanford R. Robertson
10
<PAGE>
- ----------
ROBERTSON
STEPHENS &
COMPANY
- ----------
Sanford R. Robertson
EMPLOYMENT COMPENSATION AND RETENTION INFORMATION
Summary:
Purchase Value/Deferred Compensation 59,460,855
RS&CO. Inc. Value/Deferred Compensation 1,407,000
1997 Annualized Guarantee 5,000,000
1998 Annualized Guarantee 5,000,000
<TABLE>
<CAPTION>
Cash Flow: 1997 1998 1999 2000
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Guaranteed Salary 175,000 175,000 0 0
Tax Advance, if any * 225,000 0 0 0
Minimum June Bonus 1,187,500 0 0 0
Purchase Value/Deferred Comp 30,934,859 9,508,666 9,508,666 9,508,666
RS&Co. Inc. Value/Deferred Comp 732,000 225,000 225,000 225,000
Minimum December Bonus 3,412,500 4,825,000 0 0
Total Guaranteed Cash Flow 36,666,859 14,733,666 9,733,666 9,733,666
========== ========== ========= =========
</TABLE>
* If additional tax advances are paid after the date of this agreement, the
amounts will be subtracted from the appropriate bonus totals.
11
<PAGE>
BankAmerica Corporation
Sanford R. Robertson
c/o Robertson, Stephens
& Company Group, L.L.C.
555 California Street
San Francisco, CA 94104
Dear Mr. Robertson:
We are pleased to inform you that, subject to the consummation of the
transactions contemplated by the Agreement and Plan of Merger dated as of June
8, 1997 among BankAmerica Corporation ("BAC"), Ladder Merger Corporation (the
"Company"), Robertson, Stephens & Company Group, L.L.C., a Delaware limited
liability company ("Hook") and Robertson, Stephens & Company, Inc. (the "Merger
Agreement"), in consideration of your remaining in the employ of the Company
after the closing date of the transactions contemplated by the Merger Agreement
(the "Commencement Date"), the Company hereby agrees to pay you a cash retention
bonus (the "Special Retention Bonus"), subject to the terms and conditions set
forth in this letter. Terms herein which are capitalized and not defined herein
shall have the meanings ascribed thereto in the form of employment agreement
that shall be offered to you prior to the Commencement Date pursuant to the
Merger Agreement (the "Employment Agreement") or in the Merger Agreement.
The Special Retention Bonus will total the amount set forth on
Schedule A hereto, vesting ratably on the first, second and third anniversaries
of the Commencement Date. The vested but unpaid portion of the Special Retention
Bonus will be paid out when vested. The unpaid portion of the Special Retention
Bonus shall bear interest at 2% per annum, which shall be payable quarterly on
the date BAC pays dividends on its Common Stock. The Company may reduce the
first payment of the Special Retention Bonus by your liability, if any, pursuant
to Sections 8.2(e) and 10.2 of the Merger Agreement.
If the Company terminates your employment for Disability, the Company
terminates your employment other than for Cause, you terminate your employment
for Good Reason, you terminate employment after you attain age 60 or your
employment terminates by reason of death, the unvested and unpaid portion of
your Special Retention Bonus will be deemed to have vested in full immediately
prior to such termination and such amount shall be paid to you in cash in a lump
sum within 10 days after your termination of employment. If your employment
terminates as the case may be, for any taxable year is examined or challenged,
(ii) in the event of such examination or challenge, BAC shall have the right to
participate, at BAC's expense, in any issue raised therein relating to the
classification of the Companies or any of their Subsidiaries as a partnership or
S corporation, as the case may be, for any taxable year, and (iii) you shall not
settle such issue without the consent of BAC.
12
<PAGE>
Without limitation to any other covenant or agreement which by its terms
survives the Closing or which contemplates the possibility of action or inaction
following the Closing, this covenant shall survive the Closing.
C. Owner Representative. You agree that (i) all determinations
--------------------
made, or actions taken, by the Owner Representative who shall be Michael G.
McCaffery (or, if Michael G. McCaffery is unable or unwilling to serve in that
capacity, George R. Hecht) shall be conclusive and binding on you, (ii) the
conclusive and binding nature of any determination made, or action taken, by an
Owner Representative will not be affected by any determination made, or action
taken, by any subsequent Owner Representative and (iii) there may be only one
Owner Representative at any given time. You agree to pay a pro rata share
(based upon your membership interest in Hook) of any expenses incurred by the
Owner Representative.
Please indicate your agreement with the foregoing by signing and
returning the enclosed copy of this letter.
Very truly yours,
BANKAMERICA CORPORATION
By: /s/ DOYLE L. ARNOLD
Name: Doyle L. Arnold
ACCEPTED AND AGREED.
/s/ SANFORD R. ROBERTSON
Name: Sanford R. Robertson
13
<PAGE>
SCHEDULE A
SPECIAL RETENTION BONUS AGREEMENT
Special Retention
Name Bonus Amount
- ---- ----------------
Sanford R. Robertson $29,200,997
14
<PAGE>
Exhibit 10.j
[BANKAMERICA CORPORATION LETTERHEAD]
PRIVATE AND CONFIDENTIAL DAVID A. COULTER
- ----------------------- Chairman and
March 4, 1997 Chief Executive officer
Mr. H. Eugene Lockhart
32 Pecksland Road
Greenwich, Connecticut 06831
Dear Gene:
I am writing to confirm our offer for you to join BankAmerica as President of
the global Retail Bank. Please know that I am very pleased that our
conversations these past weeks have led to your decision to join us as we
prepare this company for the next century. We are targeting March 10, 1997 to
make the announcement, with a May 1, 1997 start date.
To summarize the agreement we have reached, your starting annual base salary
will be $850,000. Your 1997 cash bonus will be a guaranteed minimum of
$1,500,000. Your 1997 long-term incentive value will be a guaranteed minimum of
$2,085,000 (annualized value of a 3-year frontloaded premium price option grant
translated to 505,946 premium option shares.)
1. With respect to replacing the value embedded in your participation in
MasterCard International compensation programs, we offer the following:
A. Rabbi Trust
-----------
We have agreed to replace value calculated at $362,000 through the
grant of 3,198 shares of BAC restricted stock, to vest 50% on 3/23/98
and 50% on 3/23/99.
B. Long-Term Incentive Program (LTIP)
----------------------------------
We have agreed to replace value calculated at $766,200 through the
grant of 6,768 shares of BAC restricted stock, to vest 66 2/3% on
2/28/98 and 33 1/3% on 2/28/99.
<PAGE>
Mr. H. Eugene Lockhart
March 4, 1997
Page 2
C. Value Appreciation Program (VAP)
--------------------------------
We have agreed to replace value calculated at $5,868,000, through the
grant of 181,677 market price BAC options, to vest in accordance with
the following schedule.
39,214 shares on 12/31/97
40,722 shares on 12/31/98
42,231 shares on 12/31/99
36,066 shares on 12/31/00
23,444 shares on 12/31/01
The above stock grants are subject to approval by the committee of
outside BAC directors which administers BAC's stock plans. Should any
of the terms of the grants offered here not be approved by the
committee or be precluded by the provisions of the plan, BAC will
provide you with the financial equivalent to this benefit.
2. Relocation and Other Benefits
-----------------------------
Your relocation and other employee benefits will be based on the standard
BAC package applicable to Managing Committee members.
3. Termination of Employment
-------------------------
As is BAC's standard practice, your employment may be terminated at any
time and for any reason by either you or the Bank. Upon commencing
employment, you will be required to sign the company's standard Employment
Agreement for Salaried Employees. Notwithstanding these terms, we have
agreed to the following:
A. There will be in effect the standard BAC Change-in-Control Agreement
applicable to Managing Committee members.
B. Further, if within two years of hire any of the following events
occurs:
(i) The CEO changes and you are involuntarily terminated without
cause;
(ii) Your responsibilities are reduced (and you voluntarily terminate
employment within 1 year of that responsibility reduction); or
(iii) Your reporting relationship is no longer to the CEO (and you
voluntarily terminate employment within 1 year of this change in
reporting relationship);
<PAGE>
Mr. H. Eugene Lockhart
March 4, 1997
Page 3
then you would be eligible for (a) termination pay equal to 200%
of (2x) your then base salary plus your most recent annual bonus
(in no event will this total be less than $5,000,000), and (b)
full vesting of the restricted stock and options granted as
replacement value for current MasterCard International programs,
described in paragraph 1, above, provided you sign a general
release agreement prepared by BAC.
For purposes of this agreement, "cause" shall mean
(i) any act or action by you determined by the company to be a
violation of the standards of conduct applicable to
employees generally, gross negligence, or a material
performance deficiency; or
(ii) any disability which renders you unable, either on a
permanent basis or for a period of more than six months, to
continue performing your duties even with reasonable
accommodation.
Gene, please give me a call should there be any questions regarding this letter
or any other matter that has passed through our conversations.
Sincerely,
/s/ DAVID A. COULTER
- --------------------
David A. Coulter
Chairman and Chief Executive Officer
BankAmerica Corporation
Read and Accepted:
/s/ H. EUGENE LOCKHART March 9, 1997
- ---------------------- --------------
H. Eugene Lockhart Date
<PAGE>
Executive Personnel and October 6, 1997
Compensation Committee
BankAmerica Corporation
RESOLUTION RE REPLACEMENT OF RESTRICTED STOCK
WITH RESTRICTED STOCK UNITS FOR EUGENE LOCKHART
-----------------------------------------------
The Executive Personnel and Compensation Committee of BankAmerica
Corporation ("BAC") authorizes and determines:
1. At its meeting on April 29, 1997, the Committee approved the terms of a
new hire agreement between BAC and H. Eugene Lockhart which in part provided for
the grant of shares of BAC restricted stock to replace the value under certain
compensation programs of Mr. Lockhart's former employer, Mastercard
International.
2. By action taken by written consent without a meeting, the Committee
granted the shares of BAC restricted stock to Mr. Lockhart under the BAC 1992
Management Stock Plan (the "1992 MSP") effective as of May 5, 1997, Mr.
Lockhart's first day of employment with BAC.
3. The Committee has been advised that it would be in the best interest of
BAC to restructure Mr. Lockhart's grant by replacing the restricted stock with
restricted stock units subject to the same vesting schedule, but which would not
be delivered to Mr. Lockhart until after his employment ends. As a result of
such restructuring, the value of the shares of BAC common stock delivered to Mr.
Lockhart in payment of such restricted stock units should be fully deductible to
BAC because Mr. Lockhart would at that time not be subject to Section 162(m) of
the Internal Revenue Code regarding compensation paid to executives in excess of
one million dollars.
4. Mr. Lockhart has filed a copy of his consent to this action with the
Committee.
5. Accordingly, the Committee hereby cancels the shares of BAC restricted
stock granted to Mr. Lockhart on May 5, 1997 and grants to him in their place a
like number of restricted stock units under the 1992 MSP. The restricted stock
units shall be subject to the same vesting schedule as the cancelled shares of
restricted stock. Upon the vesting of the restricted stock units, delivery of
shares of BAC common stock in payment of the restricted stock units shall be
deferred until Mr. Lockhart's death, retirement or other termination of service
with the company. During the entire period the restricted stock units are
outstanding, each restricted stock unit shall be credited with a dollar amount
equal to the dividends payable on a share of BAC common stock from time to time
("dividend equivalent"). Prior to
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<PAGE>
January 1, 1998, each dividend equivalent shall be paid in cash to Mr. Lockhart.
Beginning January 1, 1998, each dividend equivalent shall be converted into
additional vested restricted stock units, using the closing price of BAC common
stock on each dividend payment date, which shall be subject to the same
provisions (other than vesting) as the initial grant of restricted stock units
to Mr. Lockhart.
-2-
<PAGE>
CONSENT TO REPLACEMENT OF RESTRICTED STOCK
WITH RESTRICTED STOCK UNITS
---------------------------
I hereby consent to the cancellation of the grant of restricted shares of
BankAmerica Corporation ("BAC") common stock made to me on May 5, 1997 under the
BAC 1992 Management Stock Plan (the "1992 MSP") and its replacement with a grant
of a like number of restricted stock units under the 1992 MSP. The restricted
stock units would be subject to the same vesting schedule as the cancelled
shares of restricted stock. Upon the vesting of the restricted stock units,
delivery of shares of BAC common stock in payment of the restricted stock units
shall be deferred until my death, retirement or other termination of service
with the company.
During the entire period the restricted stock units are outstanding, each
restricted stock unit would be credited with a dollar amount equal to the
dividends payable on a share of BAC common stock from time to time ("dividend
equivalent"). Prior to January 1, 1998, each dividend equivalent would be paid
to me in cash. Beginning January 1, 1998, each dividend equivalent would be
converted into additional restricted stock units, using the closing price of BAC
common stock on each dividend payment date, which would be subject to the same
provisions as the initial grant of restricted stock units to me.
/s/ H. EUGENE LOCKHART
------------------------
H. Eugene Lockhart
Dated: Sept. 30, 1997
---------------
-3-
<PAGE>
Exhibit 10.k
[LOGO OF BANKAMERICA(R)]
BANKAMERICA DEFERRED COMPENSATION PLAN
(As amended and restated effective January 1, 1997)
As amended through November 19, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I .............................................................................................................. 1
1.1 Name........................................................................................................... 1
1.2 Purpose........................................................................................................ 1
1.3 Status Under ERISA............................................................................................. 1
ARTICLE II................................................................................................................. 2
2.1 Annual Incentive Award......................................................................................... 2
2.2 Annual Incentive Plan.......................................................................................... 2
2.3 Compensation................................................................................................... 2
2.4 Deferred Compensation Account or Account....................................................................... 2
2.5 Eligible Employee.............................................................................................. 2
2.6 Employee....................................................................................................... 3
2.7 Employer....................................................................................................... 3
2.8 Employment..................................................................................................... 3
2.9 Enrollment Period.............................................................................................. 3
2.10 Executive Officer.............................................................................................. 3
2.11 401(k) Investment Plan......................................................................................... 3
2.12 Internal Revenue Code.......................................................................................... 3
2.13 Participant.................................................................................................... 3
2.14 Participating Employer......................................................................................... 3
2.15 Plan or Deferred Compensation Plan............................................................................. 3
2.16 Plan Administrator............................................................................................. 4
2.17 Plan Year...................................................................................................... 4
2.18 Prior Plan..................................................................................................... 4
2.19 Salary......................................................................................................... 4
2.20 Service Center................................................................................................. 4
2.21 United States.................................................................................................. 4
ARTICLE III................................................................................................................ 5
3.1 Submission of Deferral Election................................................................................ 5
3.2 Amount of Compensation Which May be Deferred................................................................... 5
3.3 Deferral of Compensation....................................................................................... 6
3.4 Vesting........................................................................................................ 6
ARTICLE IV................................................................................................................. 7
4.1 Deferred Compensation Account.................................................................................. 7
4.2 Special Definitions............................................................................................ 7
4.3 Allocation of Existing Account Balances on 12/31/96 Among Mirror Investment Options............................ 8
4.4 Allocation of New Deferrals Among Mirror Investment Options and Transfers Among Mirror Investment Options...... 8
4.5 Procedures and Deadlines for Transactions...................................................................... 8
4.6 Payments Deducted on a Pro Rata Basis from each Mirror Investment Option....................................... 9
4.7 Other Deferred Compensation Plans.............................................................................. 9
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE V..................................................................................................................11
5.1 Form of Payment............................................................................................... 11
5.2 Balance less than $10,000..................................................................................... 11
5.3 Balance of $10,000 or More.................................................................................... 11
5.4 Payment Election for Termination of Employment................................................................ 11
5.5 In-Service Payment Election................................................................................... 12
5.6 Payments due to Hardship...................................................................................... 13
5.7 Immediate Payment with 10 Percent Forfeiture.................................................................. 13
5.8 Reemployed Employees.......................................................................................... 13
5.9 Payments Upon Death of Participant............................................................................ 13
5.10 Withholding Taxes............................................................................................. 14
5.11 Temporary Postponement of Payment to Executive Officers....................................................... 14
5.12 Transition Provisions......................................................................................... 15
5.13 Distribution income........................................................................................... 15
5.14 Participants Returning from non-U.S. Locations................................................................ 15
ARTICLE VI................................................................................................................ 16
6.1 Amendment and Termination..................................................................................... 16
6.2 Plan Administrator............................................................................................ 16
6.3 Powers and Duties of Plan Administrator....................................................................... 16
6.4 Reliance Upon Information..................................................................................... 17
6.5 Alternative Plans or other Arrangements for U.S. IAs.......................................................... 17
ARTICLE VII............................................................................................................... 18
7.1 Claims Procedure.............................................................................................. 18
7.2 Appeal and Review Procedure................................................................................... 18
7.3 Exhaustion of Remedies........................................................................................ 19
ARTICLE VIII.............................................................................................................. 20
8.1 Source of Payments............................................................................................ 20
8.2 Prohibition on Alienation..................................................................................... 20
8.3 Not a Contract of Employment.................................................................................. 20
8.4 Headings Not to Control....................................................................................... 20
8.5 Separability of Plan Provisions............................................................................... 20
8.6 Applicable Law................................................................................................ 20
8.7 Entire Plan................................................................................................... 20
</TABLE>
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<PAGE>
ARTICLE I
---------
NAME AND PURPOSE
----------------
1.1 Name. This document shall be known as the BankAmerica Deferred
----
Compensation Plan (the "Deferred Compensation Plan" or "Plan"). Effective
January 1, 1997, this document constitutes an amendment to and restatement of
the BankAmerica Corporation Deferred Compensation Plan which was adopted on
November 7, 1977 and was amended from time to time thereafter.
1.2 Purpose. The purpose of the Deferred Compensation Plan is to
-------
provide Eligible Employees with an opportunity to defer the receipt of cash
compensation which would have otherwise been received as Salary or as an Annual
Incentive Award, as such terms are defined in Article II, and to credit the
deferred compensation with a rate of return which mirrors the rates of return
available under the BankAmerica 401(k) Investment Plan.
1.3 Status Under ERISA. The Deferred Compensation Plan is unfunded
------------------
and is maintained for the purpose of providing deferred compensation for a
select group of management or highly compensated employees.
-1-
<PAGE>
ARTICLE II
----------
DEFINITIONS
-----------
The following terms when used herein shall have the meaning set forth
below, if capitalized. Unless the context clearly indicates otherwise, words in
the masculine, feminine or neuter gender include the other genders and the
singular includes the plural and vice versa.
2.1 "Annual Incentive Award" means a discretionary cash incentive
----------------------
award under an Annual Incentive Plan which is determined and payable during the
Plan Year.
2.2 "Annual Incentive Plan" means the BankAmerica Corporation Senior
---------------------
Management Incentive Plan, the BankAmerica Corporation Annual Management
Incentive Plan and any other written plan of the Participating Employers which
(a) provides for cash incentive awards determined on a discretionary basis and
(b) is designated by the Plan Administrator as being eligible for deferral into
this Deferred Compensation Plan.
2.3 "Compensation" means Salary and an Annual Incentive Award.
------------
2.4 "Deferred Compensation Account" or "Account" means the account
------------------------------------------
described in Section 4.1.
2.5 "Eligible Employee" means an Employee of a Participating Employer
-----------------
who satisfies (a), (b) or (c):
(a) As of the September 30 preceding the applicable Plan Year,
the Employee is based within the United States and satisfies (i), (ii), or
(iii):
(i) The Employee is an Executive Officer.
(ii) The Employee is classified within Impact Level 1, 2 or
3 under the personnel policy of the Participating Employer.
(iii) The Employee has an annual Salary of $100,000 or more.
(b) As of the September 30 preceding the applicable Plan Year,
the Employee is based outside the United States and is classified as an
International Assignee whose home country is the United States under the
personnel policy of the Participating Employer and qualifies under (ii) or (iii)
of section (a) above, provided that either the Plan Administrator specifically
determines that such eligibility is feasible under applicable non-U.S. law
without adverse tax or other consequences or an alternative plan or other
arrangement has been adopted under Section 6.5.
-2-
<PAGE>
(c) The Employee has been designated as an Eligible Employee for
the Plan Year by the Personnel Relations Officer of BankAmerica Corporation.
2.6 "Employee" means a common law employee of an Employer who is
--------
identified as an employee of the Employer in the personnel records of the
Employer. For example, individuals who are leased from a third party or who are
treated as independent contractors by the Employer are not Employees.
2.7 "Employer" means BankAmerica Corporation or any other corporation
--------
which is a member of the controlled group of corporations (within the meaning of
Section 1563(a) of the Internal Revenue Code without regard to Section
1563(a)(4) and 1563(e)(3)(C)) of which BankAmerica Corporation is a member, but
only after the date such corporation becomes a member of the BankAmerica
Corporation controlled group of corporations. Employer shall also include any
other subsidiary or affiliate of BankAmerica Corporation designated as a
Participating Employer by BankAmerica Corporation.
2.8 "Employment" means employment with an Employer.
----------
2.9 "Enrollment Period" means the period in each calendar year
-----------------
designated by the Plan Administrator during which Eligible Employees make
elections to defer Compensation otherwise payable during the following Plan
Year.
2.10 "Executive Officer" means an officer of BankAmerica Corporation
-----------------
designated by the Board of Directors of BankAmerica Corporation as an Executive
Officer for purposes of the Securities and Exchange Commission reporting and
proxy regulations.
2.11 "401(k) Investment Plan" means the BankAmerica 401(k) Investment
----------------------
Plan, as amended from time to time.
2.12 "Internal Revenue Code" means the Internal Revenue Code of 1986,
---------------------
as amended from time to time.
2.13 "Participant" means an Employee or former Employee who has an
-----------
amount credited to a Deferred Compensation Account under the Plan.
2.14 "Participating Employer" means BankAmerica Corporation and each
----------------------
subsidiary or affiliated corporation of BankAmerica Corporation which
participates in the Plan with the approval of BankAmerica Corporation.
2.15 "Plan" or "Deferred Compensation Plan" means the BankAmerica
---- --------------------------
Deferred Compensation Plan as set forth in this document and as amended from
time to time.
-3-
<PAGE>
2.16 "Plan Administrator" means the person or persons designated by
------------------
the Personnel Relations Officer of BankAmerica Corporation as the Plan
Administrator.
2.17 "Plan Year" means the calendar year. The first Plan Year is
---------
1997.
2.18 "Prior Plan" means each of the following:
----------
(a) BankAmerica Corporation Deferred Compensation Plan as in
effect on December 31, 1996.
(b) Continental Deferred Incentive Plan, as amended and restated
effective January 1, 1992, as further amended October 17, 1994 and as in effect
on December 31, 1996.
(c) Seafirst Deferred Compensation Plan, as adopted effective
January 1, 1990 and as in effect on December 31, 1996.
(d) Seafirst Bank Management Incentive Plan, as adopted effective
January 1, 1995 and as in effect on December 31, 1996.
2.19 "Salary" means the base salary of an Employee. Salary includes
------
amounts paid as sickness benefits which are designed to replace 100 percent of
the Employee's salary when the Employee is absent from work due to illness or
injury.
2.20 "Service Center" means the BankAmerica Retirement Plans Service
--------------
Center, which is the department of Bank of America NT&SA or third party
designated by the Plan Administrator to provide day-to-day administrative
services under the Plan.
2.21 "United States" means the 50 states, Guam, Puerto Rico and the
-------------
Virgin Islands.
-4-
<PAGE>
ARTICLE III
ELECTION TO DEFER COMPENSATION
------------------------------
3.1 Submission of Deferral Election. Each Eligible Employee who
-------------------------------
desires to defer the receipt of Compensation otherwise payable during a Plan
Year may do so by filing a deferral election with the Service Center during the
Enrollment Period for that Plan Year. The deferral election shall be made on
the form specified by the Plan Administrator. To be effective, the form must be
received by the Service Center during the annual Enrollment Period. A deferral
election for a Plan Year may not be changed after the end of the Enrollment
Period for that Plan Year.
(a) Notwithstanding the foregoing, the Personnel Relations
Officer of BankAmerica Corporation may, in his or her sole discretion, permit an
Eligible Employee who commences work, or first qualifies as an Eligible
Employee, after the September 30 preceding a Plan Year to submit a deferral
election after the end of the Enrollment Period, provided such deferral election
form is received by the Service Center prior to the beginning of such Plan Year.
In addition, the Personnel Relations Officer of BankAmerica Corporation may, in
his or her sole discretion, permit an Eligible Employee who commences work
during a Plan Year to submit a deferral election for Salary payable during such
Plan Year, provided such deferral election is submitted no later than 30 days
after Employment commences and applies only to Salary earned after the date such
form is received by the Service Center.
(b) Except as provided in the following sentence, an Eligible
Employee must file a separate deferral election for each Plan Year. The Plan
Administrator may adopt procedures permitting an Eligible Employee to specify on
the deferral election form that the election shall remain in effect for future
Plan Years unless and until the election is revoked by the Eligible Employee
during the Election Period for a Plan Year.
(c) Each Eligible Employee who elects to defer Compensation under
the Plan must also consent to the purchase of corporate owned life insurance on
his or her life by Bank of America NT&SA. Bank of America NT&SA shall pay all
premiums and shall be the sole owner and beneficiary of any such policies. Bank
of America NT&SA may use the proceeds from such policies to meet its general
corporate and employee benefit obligations, including, without limitation, to
help defray the cost of offering the Deferred Compensation Plan to its Eligible
Employees.
3.2 Amount of Compensation Which May be Deferred.
--------------------------------------------
(a) Each Eligible Employee may defer a specified percentage (or
specified dollar amount) of Salary payable during the Plan Year. The deferral
percentage must be in whole
-5-
<PAGE>
percentages and must be not less than 5 nor more than 50 percent of such Salary.
A dollar deferral must be in an amount not less than 5 nor more than 50 percent
of the Employee's annual Salary rate as of the September 30 preceding the Plan
Year.
(b) Each Eligible Employee may defer a specified percentage of an
Annual Incentive Award payable during the Plan Year. The deferral percentage
must be in whole percentages and must be not less than 5 nor more than 90
percent of the Annual Incentive Award.
3.3 Deferral of Compensation. The Employee's Employer shall withhold
------------------------
payment of the applicable portion of each Salary payment and each Annual
Incentive Award elected by the Participant to be deferred for the Plan Year.
The deferred Compensation shall be credited to the Participant's Deferred
Compensation Account described in Section 4.1.
3.4 Vesting. All amounts deferred under the Plan, and any earnings
-------
thereon, shall be fully vested at all times.
-6-
<PAGE>
ARTICLE IV
----------
401(k) "MIRROR" RATE OF RETURN
------------------------------
4.1 Deferred Compensation Account. An unfunded bookkeeping account
-----------------------------
known as the Deferred Compensation Account shall be established for each
Participant who is in Employment on or after January 1, 1997. The Deferred
Compensation Account shall be credited with all amounts credited under a Prior
Plan as of December 31, 1996 and all Compensation deferred under Article III of
the Plan on and after January 1, 1997. The amounts credited to a Participant's
Deferred Compensation Account shall be adjusted each month to reflect gain or
loss from the Mirror Investment Options as provided in this Article.
4.2 Special Definitions. The following definitions shall apply for
-------------------
purposes of this Article:
(a) "Mirror Investment Option" means an unfunded bookkeeping
------------------------
account under the Plan which is credited monthly with the same monthly rate of
return as its corresponding 401(k) Investment Plan Fund.
(b) "401(k) Investment Plan Fund" means each of the following 8
---------------------------
investment funds in the 401(k) Investment Plan:
(1) BankAmerica Corporation Common Stock Fund. Effective
January 1, 1998, the rate of return for this fund shall be determined as if all
amounts deferred and dividends were used to purchase shares of BankAmerica
Corporation common stock at the closing price for a share of stock, as reflected
in the report of consolidated trading of New York Stock Exchange listed
securities on the last business day of each month published in the Wall Street
Journal or in any other publication selected by the Plan Administrator.
(2) International Stock Index Fund
(3) Mid Cap Stock Index Fund
(4) Large Cap Stock Index Fund
(5) Balanced Fund
(6) Treasury Bond Index Fund
(7) Income Accumulation Fund
(8) Money Market Fund
(c) "Pre-tax Contributions" means an Employee's Pre-tax
---------------------
Contributions in the 401(k) Investment Plan.
4.3 Allocation of Existing Account Balances on
------------------------------------------
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<PAGE>
12/31/96 Among Mirror Investment Options. The amount credited to a Participant
- ----------------------------------------
under a Prior Plan as of December 31, 1996 shall be allocated among the Mirror
Investment Options as of January 1, 1997 in the same proportion that the balance
in his or her Pre-tax Contributions account in the 401(k) Investment Plan as of
December 31, 1996 is allocated among the corresponding 401(k) Investment Plan
Funds. If (a) a Participant does not have a balance in a Pre-tax Contributions
account in the 401(k) Investment Plan as of December 31, 1996 or (b) the Plan
Administrator, in his sole discretion, so permits upon a Participant's request,
the Participant's entire Deferred Compensation Account as of January 1, 1997
shall be allocated to the Balanced Fund Mirror Investment Option. A special rule
applies under Section 4.7(a) for the Continental Deferred Incentive Plan.
4.4 Allocation of New Deferrals Among Mirror Investment Options and
---------------------------------------------------------------
Transfers Among Mirror Investment Options.
- ------------------------------------------
(a) Unless the Participant elects otherwise, new amounts credited
to the Deferred Compensation Account on and after January 1, 1997 shall be (i)
allocated to the Mirror Investment Options in the same proportion as the
Participant's most recent Pre-tax Contributions investment election in effect
for the corresponding 401(k) Investment Plan Funds as of January 1, 1997, or
(ii) if the Participant has no Pre-tax Contributions investment election in
effect for the 401(k) Investment Plan as of January 1, 1997, allocated to the
Balanced Fund Mirror Investment Option.
(b) Each Participant may change the manner in which new deferrals
credited to the Participant's Deferred Compensation Account are allocated among
the Mirror Investment Options beginning February 1, 1997. However, no more than
50 percent of new deferrals may be allocated to the BankAmerica Corporation
Common Stock Fund Mirror Investment Option.
(c) Each Participant may transfer his or her Deferred
Compensation Account among the Mirror Investment Options each month beginning
January 31, 1997. However, no transfer may be made to the extent that such
transfer would cause more than 50 percent of the Participant's Deferred
Compensation Account to be invested in the BankAmerica Corporation Common Stock
Fund Mirror Investment Option. In addition, transfers to or from the Income
Accumulation Fund Mirror Investment Option may only be effective during the
months of April and October and such transfers may not be made with the Money
Market and Treasury Bond Index Fund Mirror Investment Options.
4.5 Procedures and Deadlines for Transactions. Participants shall
-----------------------------------------
request the transactions described in Section 4.4(b) and (c) through the
telephonic interactive voice response system maintained by the Service Center
for the Plan. The procedures and deadlines for such transactions shall be the
same
-8-
<PAGE>
as for similar transactions in the 401(k) Investment Plan.
4.6 Payments Deducted on a Pro Rata Basis from each Mirror Investment
-----------------------------------------------------------------
Option. Installment payments, payments under Section 5.5, 5.6 and 5.7 or any
- ------
other partial payments from the Deferred Compensation Account shall be deducted
from the balance in each Mirror Investment Option on a pro rata basis in
proportion to the balance in each Option.
4.7 Other Deferred Compensation Plans.
---------------------------------
(a) The Continental Deferred Compensation Plan shall be replaced
by this Plan as of January 1, 1997 with respect to each Participant who is in
Employment on or after January 1, 1997. Amounts credited under the Continental
Deferred Compensation Plan as of December 31, 1996 shall be credited to the
Participant's Deferred Compensation Account as of January 1, 1997.
The dollar value of the Participant's Stock Unit Subaccount under
the Continental Deferred Incentive Plan as of December 31, 1996 shall be
allocated to the BankAmerica Corporation Common Stock Fund Mirror Investment
Option as of January 1, 1997. The amount credited to a Participant's Interest
Subaccount under the Continental Deferred Incentive Plan as of December 31, 1996
shall be allocated among the Mirror Investment Options as of January 1, 1997 in
the same proportion that his or her Pre-tax Contributions account is allocated
among the corresponding 401(k) Investment Plan Funds as of December 31, 1996. If
(i) a Participant does not have a balance in a Pre-tax Contributions account in
the 401(k) Investment Plan as of December 31, 1996 or (ii) the Plan
Administrator, in his sole discretion, so permits upon a Participant's request,
the Participant's entire Interest Subaccount as of December 31, 1996 shall be
allocated to the Balanced Fund Mirror Investment Option.
(b) The Seafirst Deferred Compensation Plan shall be replaced by
this Plan as of January 1, 1997 with respect to each Participant who is in
Employment on or after January 1, 1997. Amounts credited under the Seafirst
Deferred Compensation Plan as of December 31, 1996 shall be credited to the
Participant's Deferred Compensation Account as of January 1, 1997.
(c) Deferred amounts under Seafirst Bank Management Incentive
Plan shall be replaced by this Plan as of January 1, 1997 with respect to each
Participant who is in Employment on or after January 1, 1997. Amounts credited
under the Seafirst Bank Management Incentive Plan as of December 31, 1996 shall
be credited to the Participant's Deferred Compensation Account as of January 1,
1997.
(d) The Security Pacific Deferred Compensation Plan (as adopted
effective January 1, 1986 and as in effect on
-9-
<PAGE>
December 31, 1996) shall not be replaced by this Plan as of January 1, 1997.
Amounts credited under the Security Pacific Deferred Compensation Plan as of
December 31, 1996 shall remain subject to the terms of such plan as in effect
from time to time and no Deferred Compensation Account shall be established for
such amounts. Notwithstanding the foregoing, interest shall be credited to
deferred amounts under such plan at a rate equal to the rate of return on the
Income Accumulation Fund Mirror Investment Option commencing as of January 1,
1997.
(e) The Security Pacific Deferral Plan (as adopted October 20,
1987 and as in effect on December 31, 1996) shall not be replaced by this Plan
as of January 1, 1997. Amounts credited under the Security Pacific Deferral Plan
as of December 31, 1996 shall remain subject to the terms of such plan as in
effect from time to time and no Deferred Compensation Account shall be
established for such amounts. Notwithstanding the foregoing, interest shall be
credited to deferred amounts under such plan at a rate equal to the rate of
return on the Income Accumulation Fund Mirror Investment Option commencing as of
January 1, 1997.
(f) Deferred amounts under the Capital Markets Group incentive
plans shall be replaced by this Plan as of April 1, 1997 with respect to each
Individual who is an Eligible Employee on such date. Amounts deferred under the
Capital Markets Group incentive plans as of March 31, 1997 shall be credited to
the Participant's Deferred Compensation Account as of April 1, 1997. In the case
of Employees who are not Eligible Employees as of April 1, 1997, amounts
credited under the Capital Market Group incentive plans as of March 31, 1997
shall remain subject to the terms of the applicable plan as in effect from time
to time and no Deferred Compensation Account shall be established for such
amounts. Notwithstanding the foregoing, interest shall be credited to deferred
amounts under the Capital Markets Group incentive plans at a rate equal to the
rate of return on the Income Accumulation Fund Mirror Investment Option
commencing as of April 1, 1997.
-10-
<PAGE>
ARTICLE V
---------
PAYMENT OF DEFERRED COMPENSATION ACCOUNT
----------------------------------------
5.1 Form of Payment. The amounts credited to a Participant's
---------------
Deferred Compensation Account shall be paid in cash as provided in this Article.
5.2 Balance less than $10,000. If the amount credited to a
-------------------------
Participant's Deferred Compensation Account is less than $10,000 when the
Participant's Employment ends, the Account shall be paid to the Participant in a
single payment within 60 days of the date the Participant's Employment ends.
5.3 Balance of $10,000 or More. If the amount credited to a
--------------------------
Participant's Deferred Compensation Account is $10,000 or more when the
Participant's Employment ends, the Account shall be paid to the Participant as
provided in (a) or (b) below:
(a) If the Participant's Employment ends during 1997:
(1) The amount credited to the Participant's Deferred
Compensation Account as of December 31, 1996, and any investment gain or loss
attributable thereto, shall be paid pursuant to the payment provisions of the
applicable Prior Plan.
(2) Any amounts deferred under the Plan during 1997, and any
investment gain or loss attributable thereto, shall be paid (i) pursuant to the
Participant's payment election form if one was filed under this Plan prior to
January 1, 1997, or (ii) in a single payment within 60 days of the date
Employment ends if no payment election form was filed under this Plan prior to
January 1, 1997.
(b) If the Participant's Employment ends on or after January 1,
1998:
(1) If the Participant has a payment election in effect, as
provided in Section 5.4(b), when Employment ends, the Participant's Account
shall be paid in accordance with such payment election.
(2) If the Participant does not have a payment election in
effect, as provided in Section 5.4(b), when Employment ends, all amounts
credited to the Participant's Account balance shall be paid in a single payment
within 60 days of the date the Participant's Employment ends.
5.4 Payment Election for Termination of Employment. Each Participant
----------------------------------------------
may submit a payment election form specifying how the Participant's Deferred
Compensation Account (as reduced by any amounts previously paid under Sections
5.5, 5.6 or 5.7)
-11-
<PAGE>
shall be paid upon the Participant's termination of Employment for any reason
other than death.
(a) The payment election form shall specify which of the
following forms of payment shall apply:
(1) A single payment made within 60 days of the date
Employment ends.
(2) A single payment made within the first 60 days of the
first, second or third calendar year immediately following the calendar year in
which Employment ends.
(3) Fifteen or fewer annual installment payments commencing
in the first, second or third calendar year immediately following the calendar
year in which the Participant's Employment ends. Each payment shall be made
within the first 60 days of the calendar year. Each payment shall be equal to
(i) the Participant's Account balance as of December 31 of the immediately
preceding calendar year, multiplied by (ii) a fraction, the numerator of which
is one and the denominator is the number of installments remaining, including
the current year's payment.
(b) If the Participant does not have an existing Deferred
Compensation Account balance at the time a payment election form is submitted,
the payment election form shall become effective on the date of receipt by the
Service Center with respect to amounts deferred in subsequent Plan Years. Except
as provided in section 5.3(a)(2), if the Participant has a Deferred Compensation
Account balance at the time a payment election form is submitted, the payment
election shall become effective on the one year anniversary of the date the
election form is received by the Service Center, provided the Participant has
remained continuously employed by an Employer until that date. If the
Participant has previously submitted a payment election form, the Participant
may not submit a new payment election form until his or her prior election has
become effective. In addition, no new payment election form may be submitted
which would shorten the period during which payments are made after Employment
ends or accelerate the date upon which payment commences after Employment ends.
5.5 In-Service Payment Election. Each Participant may submit an in-
---------------------------
service payment election form during an Enrollment Period directing that a
specified dollar amount of his or her Deferred Compensation Account shall be
paid in a single payment in a specified calendar year, provided the Participant
remains continuously employed by an Employer until that calendar year.
(a) The in-service payment shall be made in a single payment
within the first 60 days of the calendar year specified by the Participant. Each
Participant may have up to 4 in-service elections in effect at one time, not
including any
-12-
<PAGE>
payment elections under Section 5.12. The payment shall be deducted on a
prorated basis from the Participant's balance in each mirror investment option.
(b) Each in-service payment election shall become effective upon
receipt by the Service Center. An in-service payment election may only apply to
Compensation which will be deferred in Plan Years after the form is received by
the Service Center, but shall not include amounts deferred in the Plan Year
preceding the calendar year specified for payment. A Participant may not change
an in-service payment election.
5.6 Payments due to Hardship. In the event a Participant has an
------------------------
unforeseeable emergency, the Plan Administrator in his or her sole discretion
may, upon the Participant's written request and submission of such information
as the Plan Administrator may request, authorize a payment to the Participant
from his or her Account in an amount no greater than necessary to meet such
emergency. For purposes of this section, an unforeseeable emergency means an
unanticipated emergency that is caused by any event beyond the control of the
Participant and that would result in severe financial hardship to the individual
if the withdrawal were not permitted.
5.7 Immediate Payment with 10 Percent Forfeiture. A Participant may
--------------------------------------------
at any time submit a written request to the Service Center for immediate payment
of $10,000 or more from the Participant's Deferred Compensation Account. After
an individual has been a Participant for one year, the Participant may submit a
written request to the Service Center for immediate payment of the entire
balance of his or her Deferred Compensation Account, even if the balance is then
less than $10,000. In such event, 10 percent of the amount requested shall be
forfeited and the remaining 90 percent payable to the Participant in a single
payment within 60 days of the request. If a Participant elects an immediate
payment under this section, all deferrals for the current Plan Year shall cease
and the Participant shall be ineligible to request another immediate payment
under this section, or defer Compensation, during the 3 Plan Years following the
Plan Year in which the request is submitted.
5.8 Reemployed Employees. If a former Employee is reemployed by an
--------------------
Employer, any payments then being made under the Deferred Compensation Plan
shall continue.
5.9 Payments Upon Death of Participant.
----------------------------------
(a) A Participant may designate any person or persons (not
exceeding 10), including a trust, as his or her primary beneficiary or
contingent beneficiary to receive his or her Deferred Compensation Account in
the event of the Participant's death. Any such designation shall be made by
filing the Plan form designated for that purpose with the Service Center. The
Participant may change or cancel his or her
-13-
<PAGE>
beneficiary designation at any time prior to death without the consent of any
designated beneficiary. If no beneficiary has been designated by the
Participant, or if no beneficiary is alive at the date of the Participant's
death, payment shall be made to the Participant's estate.
(b) The Participant may elect on the death benefit payment election
form that his or her Deferred Compensation Account shall be paid, except as
provided in (d) below, upon the Participant's death in accordance with one of
the following options:
(1) In a single payment within 90 days of the date of death.
(2) In a single payment within the first 60 days of the calendar
year immediately following the calendar year in which the death occurs.
(3) In three approximately equal payments, each made within the
first 60 days of the three calendar years immediately following the calendar
year in which the death occurs.
If no death benefit payment election is in effect at the date of the
Participant's death and if a single payment or installment payments under
Sections 5.2, 5.3, or 5.4, as applicable, have not been made, payment shall be
made in a single payment within 60 days of the date of death.
(c) If the Participant's death occurs after installment payments have
commenced, payments shall continue in installments to the Participant's then
living beneficiaries. Upon the death of the last surviving beneficiary, payment
shall be made in a single payment to the Participant's estate within 60 days of
such death. If no beneficiary is living at the Participant's death, payment
shall be made in a single payment to the Participant's estate within 60 days of
the date of death.
5.10 Withholding Taxes. The Participating Employers shall have the
-----------------
right to deduct from payments under the Plan any and all taxes required to be
collected under federal, state or local law.
5.11 Temporary Postponement of Payment to Executive Officers.
-------------------------------------------------------
BankAmerica Corporation reserves the right to temporarily postpone payment of
the Deferred Compensation Account of any Participant who is an Executive Officer
at the time such payment would have occurred, or was an Executive Officer in the
period immediately preceding such date, if BankAmerica Corporation determines in
good faith that such delay is necessary to avoid adverse tax consequences to the
Employers under Internal Revenue Code Section 162(m), or other tax provision.
-14-
<PAGE>
5.12 Transition Provisions.
---------------------
(a) If a Participant had elected to defer amounts under a Prior
Plan until a specified year, the current value of the deferral, including
interest, shall be determined as of December 31, 1996. The amount so determined
shall be converted into an in-service payment election under Section 5.5 by
projecting the amount forward at a 6 percent interest rate, compounded
quarterly, to December 31 of the year immediately preceding the year specified
in the original election.
(b) If an Employee who ceased Employment prior to January 1, 1997
had amounts deferred under a Prior Plan, the provisions of the Prior Plan as in
effect on December 31, 1996 shall continue to apply to such amounts. No Deferred
Compensation Account shall be established for such former Employee.
Notwithstanding the foregoing, interest shall be credited to such former
Employees' deferred amounts at a rate equal to the rate of return on the Income
Accumulation Fund Mirror Investment Option.
5.13 Distribution income. Two weeks interest shall be added to all
-------------------
payments from the Plan. The rate of interest shall be based on the rate of
return of the Money Market Fund Mirror Investment Option.
5.14 Participants Returning from non-U.S. Locations. If an Eligible
----------------------------------------------
Employee has amounts credited under an alternative version, subplan, supplement
or appendix to the Plan or other arrangement described in Section 6.5, the Plan
Administrator in his or her sole discretion may permit such deferred amount to
be transferred to a Deferred Compensation Account under this Plan upon the
Participant's return to the United States. Unless the Participant has
previously submitted a payment election or beneficiary designation to the
Service Center, the Deferred Compensation Account shall be treated as if the
Participant does not have a payment election or beneficiary designation in
effect on the effective date of transfer. In addition, if the Participant has a
deferral election in effect for the current Plan Year under such alternative
version, subplan, supplement or appendix to the Plan or other arrangement, upon
the Participant's return to the United States, the Participant may submit a
deferral election under this Plan for the remainder of the Plan Year, provided
such deferral election is submitted no later than 30 days after the return date
and applies only to Salary earned after the date such form is received by the
Service Center.
-15-
<PAGE>
ARTICLE VI
----------
PLAN AMENDMENT, TERMINATION AND ADMINISTRATION
----------------------------------------------
6.1 Amendment and Termination. BankAmerica Corporation is the "plan
-------------------------
sponsor" of the Deferred Compensation Plan as that term is defined in ERISA.
BankAmerica Corporation may amend or modify the Plan in whole or in part at any
time by a written instrument executed by either the Chief Executive Officer or
Personnel Relations Officer of BankAmerica Corporation, except that any action
which would materially alter the manner in which the investment return on
Participants' Accounts is determined shall be approved by the Executive
Personnel and Compensation Committee of the Board of Directors of BankAmerica
Corporation. BankAmerica Corporation may terminate the Plan in whole or part by
action of its Board of Directors. No such amendment, modification or
termination shall reduce the amount credited to a Participants' Accounts as of
the date of such action. Upon Plan termination, all amounts credited to
Participants' Accounts shall be paid to Participants in a single payment within
120 days.
6.2 Plan Administrator. The Plan Administrator is the named
------------------
fiduciary, as that term is defined in ERISA, of the Deferred Compensation Plan
having discretionary authority to control and manage the operation and
administration of the Deferred Compensation Plan.
6.3 Powers and Duties of Plan Administrator.
---------------------------------------
(a) The Plan Administrator shall have discretionary authority
to determine eligibility for benefits and to construe the terms of the Deferred
Compensation Plan. The Plan Administrator shall have such other discretionary
authority as may be necessary to enable it to discharge its responsibilities
under the Deferred Compensation Plan as administrator and named fiduciary,
including, but not limited to, the power:
(1) To review appeals by Participants under Article
VIII.
(2) To appoint or employ one or more persons to assist
in the administration of the Deferred Compensation Plan.
(3) To adopt such rules as it deems appropriate for the
administration of the Deferred Compensation Plan.
(4) To prescribe procedures to be followed by
Participants.
(5) To prepare and distribute information relating to
the Deferred Compensation Plan.
-16-
<PAGE>
(6) To request from Participating Employers and
Participants such information as shall be necessary for proper administration of
the Deferred Compensation Plan.
(b) The decision of the Plan Administrator upon any matter
within its authority shall be final and binding on all parties, including
BankAmerica Corporation, the Participating Employers and Participants and their
beneficiaries.
6.4 Reliance Upon Information. In making decisions under the
-------------------------
Deferred Compensation Plan, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant, beneficiary or Participating
Employer.
6.5 Alternative Plans or other Arrangements for U.S. IAs. In order
-----------------------------------------------------
to facilitate making the Plan available to Eligible Employees classified as
International Assignees whose home country is the United States, the Personnel
Relations Officer of BAC may adopt alternative versions, subplans, supplements
or appendices to the Plan or make such other arrangements as he or she may
consider necessary or appropriate to accommodate differences in local law,
policy or custom or to facilitate administration of the Plan outside of the
United States. The implementation of any such alternative version, subplan,
supplement, appendix or other arrangements shall not affect the terms of the
Plan as in effect for any other purpose. No alternative version, subplan,
supplement, appendix or other arrangements shall include any provisions that
provide greater rights and benefits than available under the Plan as then in
effect.
-17-
<PAGE>
ARTICLE VII
-----------
CLAIMS FOR BENEFITS
-------------------
7.1 Claims Procedure.
----------------
(a) Claims Must be Filed. An Employee, Participant,
--------------------
beneficiary or estate of a deceased Participant (the "claimant") who has a claim
for benefits or concerning any other matter under the Plan must give written
notice of such claim or other matter to the Service Center.
(b) Review of Claim. After the Service Center has reviewed
---------------
the claim and obtained any other information it deems necessary to render a
decision on the claim, the Service Center shall notify the claimant within 90
days after receipt of the claim of the acceptance or denial of the claim, unless
special circumstances require an extension of time for processing the claim.
Such an extension of time may not exceed 90 additional days and notice of the
extension shall be provided to the claimant prior to the termination of the
initial 90 day period indicating the special circumstances requiring the
extension and the date by which a final decision on the claim is expected.
(c) Denied Claims. In the event any application for benefits
-------------
is denied, in whole or in part, the Service Center shall notify the claimant of
such denial in writing and shall advise the claimant of the right to appeal the
denial and to request a review thereof. Such notice shall be written in a manner
calculated to be understood by the claimant and shall contain:
(1) Specific reason for such denial.
(2) Specific reference to the Plan provisions on which such
denial is based.
(3) A description of any information or material necessary
for the Employee to perfect the claim.
(4) An explanation of why such material is necessary.
(5) An explanation of the Plan's appeal and review
procedure.
7.2 Appeal and Review Procedure.
---------------------------
(a) Appeal to Plan Administrator. If the claimant's claim for
----------------------------
benefits is denied in whole or in part, the claimant, or the claimant's duly
authorized representative, may appeal the denial by submitting to the Plan
Administrator a written request for review of the application within 60 days
-18-
<PAGE>
after receiving written notice of such denial. The Plan Administrator shall
give the applicant (upon request) an opportunity to review pertinent Plan
documents (other than legally privileged documents) in preparing such request
for review.
(b) Contents of Appeal. The request for review must be in
------------------
writing and shall be addressed to the Deferred Compensation Plan Administrator,
c/o Executive Resources at the address stated in the current BankAmerica
Corporation and subsidiaries corporate directory. The request for review shall
set forth all of the grounds upon which it is based, all facts in support
thereof and any other matters which the claimant deems pertinent. The Plan
Administrator may require the claimant to submit (at the claimant's expense)
such additional facts, documents or other material as the Plan Administrator
deems necessary or advisable in making its review.
(c) Review of Appeal. The Plan Administrator shall act upon
----------------
each request for review within 60 days after its receipt thereof unless special
circumstances require further time for processing. Written notice of an
extension of time beyond 60 days shall be furnished to the claimant prior to the
commencement of the extension. In no event shall the decision on review be
rendered more than 120 days after the Plan Administrator receives the request
for review.
(d) Denied Appeals. In the event the Plan Administrator
--------------
confirms the denial of the claim for benefits in whole or in part, it shall give
written notice of its decision to the claimant. Such notices shall be written in
a manner calculated to be understood by the claimant and shall contain the
specific reasons for the denial.
7.3 Exhaustion of Remedies. No legal action for benefits under the
----------------------
Plan shall be brought unless and until the following steps have occurred:
(a) The claimant has submitted a written application for benefits
in accordance with Section 7.1.
(b) The claimant has been notified that the claim has been
denied.
(c) The claimant has filed a written request appealing the denial
in accordance with Section 7.2.
(d) The claimant has been notified in writing that the Plan
Administrator has denied the claimant appeal or has failed to take any action on
the appeal within the time prescribed by Section 7.2.
-19-
<PAGE>
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
8.1 Source of Payments. The Deferred Compensation Accounts
------------------
established under the Plan are unfunded bookkeeping accounts and are payable
from the general assets of the Participating Employers as determined by
BankAmerica Corporation. The Participating Employers are not required to
physically segregate any cash or securities or establish any separate funds to
pay any benefits under the Plan.
8.2 Prohibition on Alienation. No amount payable under the Plan
-------------------------
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, hypothecation, charge, attachment, garnishment, execution,
or levy of any kind or any other process of law, voluntary or involuntary. Any
attempt to dispose of any rights to benefits payable under the Plan shall be
void. Notwithstanding the preceding sentence, the Participating Employers shall
have the right to offset from a Participant's unpaid amounts under the Plan any
amounts due and owing from the Participant to the extent permitted by law.
8.3 Not a Contract of Employment. Participation in this Plan by an
----------------------------
Employee shall not give such Employee any right to be retained in the employ of
any Participating Employer and the ability of each Participating Employer to
dismiss or discharge an Employee is specifically reserved.
8.4 Headings Not to Control. Headings and titles within the Plan are
-----------------------
for convenience only and are not to be read as part of the text of the Plan.
8.5 Separability of Plan Provisions. If any provisions of the Plan
-------------------------------
are for any reason declared invalid or not enforceable, such provisions will not
affect the remaining terms and conditions, but the Plan will be construed and
enforced thereafter as if such provisions had not been inserted.
8.6 Applicable Law. The validity and effect of the Plan and the
--------------
rights and obligations of all persons affected thereby, are to be construed and
determined in accordance with applicable federal law, and to the extent that
federal law is inapplicable, under the laws of the State of California.
8.7 Entire Plan. This document is a complete statement of the
-----------
Deferred Compensation Plan and as of January 1, 1997 supersedes all
representations, prior plans, promises and inducements, proposals, written or
oral, relating to its subject matter. The Participating Employers shall not be
bound by or liable to any person for any representation, promise or inducement
made by any person which is not embodied in this document or in any authorized
written amendment to the Plan.
-20-
<PAGE>
IN WITNESS WHEREOF, BankAmerica Corporation, has caused this instrument to
be executed by its duly authorized officer, this 6/th/ day of December, 1996, to
be effective January 1, 1997.
BANKAMERICA CORPORATION
By /s/ Kathleen J. Burke
--------------------------------
Kathleen J. Burke
Vice Chairman and
Personnel Relations Officer
-21-
<PAGE>
Exhibit 10.l
[LOGO OF BANKAMERICA CORPORATION]
BANKAMERICA CORPORATION
MANAGEMENT STOCK PLAN
OPTION GAIN DEFERRAL PROGRAM
(effective March 1, 1998)
As adopted February 9, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
1.1 Name...................................................... 1
1.2 Purpose................................................... 1
1.3 Status Under ERISA........................................ 1
ARTICLE II
2.1 BankAmerica............................................... 2
2.2 Change in Control......................................... 2
2.3 Common Stock.............................................. 2
2.4 Company................................................... 2
2.5 Deferred Shares Account or Account........................ 2
2.6 Dividend Equivalent Shares................................ 2
2.7 Eligible Employee......................................... 2
2.8 Employment................................................ 3
2.9 Executive Officer......................................... 3
2.10 Fair Market Value......................................... 3
2.11 Internal Revenue Code..................................... 3
2.12 Management Stock Plan or Plans............................ 3
2.13 Option.................................................... 3
2.14 Participant............................................... 4
2.15 Plan Administrator........................................ 4
2.16 Profit Shares............................................. 4
2.17 Program................................................... 4
2.18 Service Center............................................ 4
2.19 United States............................................. 4
ARTICLE III
3.1 Submission of Deferral Election........................... 5
3.2 Non-Exercise Period....................................... 5
3.3 Date Election Becomes Effective and Duration.............. 5
3.4 Exercise of Option........................................ 5
3.5 Deferral of Profit Shares................................. 6
3.6 Vesting................................................... 6
ARTICLE IV
4.1 Deferred Shares Account................................... 7
4.2 Dividend Equivalent Shares................................ 7
ARTICLE V
5.1 Form of Payment........................................... 8
5.2 Payment When Employment Ends.............................. 8
5.3 Payment Election for Termination of Employment............ 8
5.4 In-Service Payment Election............................... 9
5.5 Payments due to Hardship.................................. 9
5.6 Reemployed Employees...................................... 10
5.7 Payments Upon Death of Participant........................ 10
5.8 Withholding Taxes......................................... 10
5.9 Temporary Postponement of Payment to Executive
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Officers.................................................. 11
ARTICLE VI
6.1 Source of Shares.......................................... 12
6.2 Rights as Shareholder..................................... 12
ARTICLE VII
7.1 Amendment and Termination................................. 13
7.2 Plan Administrator........................................ 13
7.3 Powers and Duties of Plan Administrator................... 13
7.4 Reliance Upon Information................................. 14
ARTICLE VIII
8.1 Claims Procedure.......................................... 15
8.2 Appeal and Review Procedure............................... 15
8.3 Exhaustion of Remedies.................................... 16
ARTICLE IX
9.1 Source of Payments........................................ 17
9.2 Prohibition on Alienation................................. 17
9.3 Not a Contract of Employment.............................. 17
9.4 Headings Not to Control................................... 17
9.5 Separability of Program Provisions........................ 17
9.6 Applicable Law............................................ 17
9.7 Entire Plan............................................... 17
</TABLE>
-ii-
<PAGE>
ARTICLE I
NAME AND PURPOSE
----------------
1.1 Name. This document shall be known as the BankAmerica
----
Corporation Management Stock Plan Option Gain Deferral Program (the "Program").
The Program shall be effective as of March 1, 1998.
1.2 Purpose. The purpose of the Program is to provide Eligible
-------
Employees with an opportunity to defer the receipt of shares of BankAmerica
Common Stock upon exercise of an Option, as such terms are defined in Article
II.
1.3 Status Under ERISA. The Program is unfunded and is maintained
------------------
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees.
-1-
<PAGE>
ARTICLE II
DEFINITIONS
-----------
The following terms when used herein shall have the meaning set forth
below, if capitalized. Unless the context clearly indicates otherwise, words in
the masculine, feminine or neuter gender include the other genders and the
singular includes the plural and vice versa.
2.1 "BankAmerica" means BankAmerica Corporation.
-----------
2.2 "Change in Control" means a "Change in Control" as defined under
-----------------
the BankAmerica Corporation 1992 Management Stock Plan.
2.3 "Common Stock" means shares of BankAmerica's common stock,
------------
$1.5625 par value per share
2.4 "Company" means BankAmerica and its subsidiaries, collectively.
-------
For purposes of this definition, a subsidiary is any corporation of which
BankAmerica owns, directly or indirectly, 20 percent or more of the voting
stock.
2.5 "Deferred Shares Account" or "Account" means the account
------------------------------------
described in Section 4.1.
2.6 "Dividend Equivalent Shares" means the phantom shares of Common
--------------------------
Stock credited to a Participant's Deferred Shares Account under Section 4.2.
2.7 "Eligible Employee" means an employee of the Company who
-----------------
satisfies (a), (b) or (c):
(a) The employee is based within the United States and satisfies
(i), (ii), or (iii):
(i) The employee is an Executive Officer.
(ii) The employee is classified within Impact Level 1, 2 or
3 under the personnel policy of the Company.
(iii) The employee has an annual Salary of $100,000 or more.
(b) The employee is based outside the United States and is classified
as an International Assignee whose home country is the United States under the
personnel policy of the Company and qualifies under (ii) or (iii) of section (a)
above, provided that the Plan Administrator specifically determines that such
eligibility is feasible under applicable non-U.S. law without adverse tax or
other consequences.
-2-
<PAGE>
(c) The employee has been designated as an Eligible Employee for
the Program by the Personnel Relations Officer of BankAmerica.
2.8 "Employment" means employment (including an authorized leave of
----------
absence) with the Company.
2.9 "Executive Officer" means an officer of BankAmerica Corporation
-----------------
designated by the Board of Directors of BankAmerica as an Executive Officer for
purposes of the Securities and Exchange Commission reporting and proxy
regulations.
2.10 "Fair Market Value" of a share of Common Stock on any date means
-----------------
the average of the high and low sales prices of a share as reflected in the
report of consolidated trading of New York Stock Exchange listed securities for
that day (or, if no shares were publicly traded on that day, the immediately
preceding day that shares were so traded) published in The Wall Street Journal
or in any other publication selected by the Plan Administrator, provided,
however, that if share prices are misquoted or omitted by the selected
publication(s), the Plan Administrator shall directly solicit this information
from officials of the stock exchanges or from other informed independent market
sources. If shares of Common Stock shall not have been publicly traded for more
than ten days immediately proceeding such date, then the fair market value of a
share shall be determined by the Executive Personnel and Compensation Committee
of the Board of Directors of BankAmerica in such manner as it may deem
appropriate.
2.11 "Internal Revenue Code" means the Internal Revenue Code of 1986,
---------------------
as amended from time to time.
2.12 "Management Stock Plan or Plans" means each of the following:
------------------------------
BankAmerica Corporation Performance Equity Program
BankAmerica Corporation 1992 Management Stock Plan
BankAmerica Corporation 1987 Management Stock Plan
Security Pacific Corporation Stock-Based Incentive Award Plan
Security Pacific Corporation Stock Option Plan
Continental Bank Corporation 1991 Equity Performance Incentive Plan
Continental Bank Corporation 1982 Performance, Restricted Stock and Stock
Option Plan
2.13 "Option" means an option to purchase shares of Common Stock
------
granted under a Management Stock Plan, other than an option intended to be an
incentive stock option under Section 422 of the Internal Revenue Code.
-3-
<PAGE>
2.14 "Participant" means an employee or former employee who has
-----------
elected to defer the receipt of Profit Shares under the Program.
2.15 "Plan Administrator" means the person or entity designated by the
------------------
Personnel Relations Officer of BankAmerica to administer the Program.
2.16 "Profit Shares" means the shares of Common Stock deliverable upon
-------------
exercise of an Option which are in excess of the number of shares used to pay
the exercise price of the Option.
2.17 "Program" means the BankAmerica Corporation Management Stock Plan
-------
Option Gain Deferral Program, as set forth in this document and as amended from
time to time.
2.18 "Service Center" means the department of Bank of America NT&SA or
--------------
third party designated by the Plan Administrator to provide day-to-day
administrative services under the Program.
2.19 "United States" means the 50 states, Guam, Puerto Rico and the
-------------
Virgin Islands.
-4-
<PAGE>
ARTICLE III
ELECTION TO DEFER
-----------------
3.1 Submission of Deferral Election. Each Eligible Employee who
-------------------------------
desires to defer the receipt of Profit Shares may do so by filing a Option
deferral election with the Service Center as provided below.
(a) The Option deferral election shall be made on the form
specified by the Plan Administrator and shall specify the Option to which the
deferral election applies by grant date and, if applicable, Option number.
(b) The Option must be fully vested and must have a period of
at least 6 months remaining before expiration.
(c) The Option deferral election shall apply to all unexercised
shares of Common Stock remaining under the Option.
(d) The Option deferral election is irrevocable and may not be
withdrawn or changed by the Eligible Employee after its receipt by the Service
Center.
3.2 Non-Exercise Period. After the Option deferral election has been
-------------------
received by the Service Center, the Eligible Employee may not exercise the
Option for 180 days, including the day the form is received by the Service
Center, unless (a) the employee's Employment ends (provided the Option may be
exercised after Employment ends) or (b) BankAmerica undergoes a Change in
Control.
3.3 Date Election Becomes Effective and Duration. The Option deferral
--------------------------------------------
election shall become effective on the day after the Employee completes 180 days
of continuous Employment, including the day the Option deferral election is
received by the Service Center. Once effective, the Option deferral election
shall remain in effect until (a) the Employee's Employment ends or (b)
BankAmerica undergoes a Change in Control. The election is irrevocable.
3.4 Exercise of Option. When an Option deferral election becomes
------------------
effective under Section 3.3, the Participant may exercise the Option at any time
thereafter until the Option ceases to be exercisable pursuant to provisions of
the Option agreement and the Management Stock Plan under which the Option was
granted. The procedures governing exercise shall be established by the Plan
Administrator. The Participant may exercise all or a portion of the shares
subject to the Option.
(a) The Participant shall pay the full exercise price in shares
of Common Stock which, in the case of shares
-5-
<PAGE>
acquired directly from the company, have been owned by the Participant for at
least 6 months prior to the date of exercise. The shares shall be valued at the
Fair Market Value of a share of Common Stock on the date of exercise.
(b) The Participant may pay the exercise price by submitting a
copy of a "Direct Registration Transaction Advice" or a photocopy of stock
certificates and a statement which identifies the shares being used to pay the
exercise price.
3.5 Deferral of Profit Shares. Upon exercise of the Option under
-------------------------
Section 3.4, the company shall withhold delivery of the Profit Shares until the
date specified by the Participant in the Option deferral election or as
otherwise provided in Article V.
3.6 Vesting. All Profit Shares deferred under the Program, and any
-------
Dividend Equivalent Shares, shall be fully vested at all times.
-6-
<PAGE>
ARTICLE IV
DIVIDEND EQUIVALENT SHARES
--------------------------
4.1 Deferred Shares Account. An unfunded bookkeeping account shall
-----------------------
be established for each Participant. The account shall be credited with the
number of Profit Shares and Dividend Equivalent Shares to be paid to the
Participant under Article IV.
4.2 Dividend Equivalent Shares. Each Participant's Deferred Shares
--------------------------
Account shall be credited with Dividend Equivalent Shares on any date
BankAmerica pays dividends on the Common Stock. The amount of Dividend
Equivalent Shares credited shall be equal to:
(a) The total number of Profit Shares and Dividend Equivalent
Shares credited to the Account on the date the dividend is paid.
multiplied by
(b) The dollar amount of the dividend paid on that date on each
share of Common Stock.
divided by
(c) The Fair Market Value of a share of Common Stock on the date
the dividend is paid.
-7-
<PAGE>
ARTICLE V
PAYMENT OF PROFIT SHARES AND DIVIDEND EQUIVALENT SHARES
-------------------------------------------------------
5.1 Form of Payment. All whole shares credited to a Participant's
---------------
Deferred Shares Account shall be paid in shares of Common Stock. A fractional
share credited to a Participant's Deferred Shares Account shall be paid in cash,
based on the Fair Market Value of a share of Common Stock on the payment date.
As soon as practicable after the payment date determined under this article, the
Company shall direct BankAmerica's transfer agent to register the whole shares
of Common Stock in the name of the Participant and issue a check to the
Participant for any fractional share.
5.2 Payment When Employment Ends. The shares credited to the
----------------------------
Participant's Deferred Shares Account shall be paid to the Participant upon
termination of Employment as provided in (a) or (b) below:
(a) If the Participant has a payment election in effect, as
provided in Section 5.3(b), when Employment ends, the Participant's Deferred
Shares Account shall be paid in accordance with such payment election.
(b) If the Participant does not have a payment election in
effect, as provided in Section 5.3(b), when Employment ends, the shares credited
to the Participant's Deferred Shares Account shall be paid in a single payment
as of the date the Participant's Employment ends.
5.3 Payment Election for Termination of Employment. Each Participant
----------------------------------------------
may submit a payment election form specifying how the Participant's Deferred
Shares Account (as reduced by any amounts previously paid under Sections 5.4 or
5.5) shall be paid upon the Participant's termination of Employment for any
reason other than death.
(a) The payment election form shall specify which of the
following forms of payment shall apply:
(1) A single payment made as of the date Employment ends.
(2) A single payment made as of the first business day of
the first, second or third calendar year immediately following the calendar year
in which Employment ends.
(3) Fifteen or fewer annual installment payments commencing
in the first, second or third calendar year immediately following the calendar
year in which the Participant's Employment ends. Each payment shall be made as
of the first business day of the calendar year. Each payment shall be equal to
(i) the Participant's Deferred Shares Account share
-8-
<PAGE>
balance as of December 31 of the immediately preceding calendar year, multiplied
by (ii) a fraction, the numerator of which is one and the denominator is the
number of installments remaining, including the current year's payment.
(b) If the Participant does not have a balance in his or her Deferred
Shares Account at the time a payment election form is submitted, the payment
election form shall become effective on the date of receipt by the Service
Center. If the Participant has a Deferred Shares Account balance at the time a
payment election form is submitted, the payment election shall become effective
on the one year anniversary of the date the election form is received by the
Service Center, provided the Participant has remained continuously employed by
the Company until that date. If the Participant has previously submitted a
payment election form, the Participant may not submit a new payment election
form until his or her prior election has become effective. In addition, no new
payment election form may be submitted which would shorten the period during
which payments are made after Employment ends or accelerate the date upon which
payment commences after Employment ends.
5.4 In-Service Payment Election. Each Participant may submit an in-
---------------------------
service payment election form directing that a specified number of shares from
his or her Deferred Shares Account shall be paid in a single payment in a
specified calendar year, provided the Participant remains continuously employed
by an Employer until that calendar year.
(a) The in-service payment shall be made in a single payment as
of the first business day of the calendar year specified by the Participant.
Each Participant may have up to 4 in-service elections in effect at one time.
(b) Each in-service payment election shall become effective upon
receipt by the Service Center. An in-service payment election may only apply to
Profit Shares which are deferred after the form is received by the Service
Center, but shall not include Profit Shares deferred in the calendar year
preceding the calendar year specified for payment. A Participant may not change
an in-service payment election.
5.5 Payments due to Hardship. In the event a Participant has an
------------------------
unforeseeable emergency, the Plan Administrator in his or her sole discretion
may, upon the Participant's written request and submission of such information
as the Plan Administrator may request, authorize a payment to the Participant
from his or her Deferred Shares Account of a number of shares of Common Stock
having a Fair Market Value, determined as of the date the hardship is approved,
no greater than necessary to meet such emergency. For purposes of this section,
an unforeseeable emergency means an unanticipated emergency that is caused by
any event beyond the control of the Participant and that would result in severe
financial hardship to the individual
-9-
<PAGE>
if the withdrawal were not permitted.
5.6 Reemployed Employees. If a former Employee is reemployed by an
--------------------
Employer, any payments then being made under the Program shall continue.
5.7 Payments Upon Death of Participant.
----------------------------------
(a) A Participant may designate any person or persons (not exceeding
10), including a trust, as his or her primary beneficiary or contingent
beneficiary to receive his or her Deferred Shares Account in the event of the
Participant's death. Any such designation shall be made by filing the Program
form designated for that purpose with the Service Center. The Participant may
change or cancel his or her beneficiary designation at any time prior to death
without the consent of any designated beneficiary. If no beneficiary has been
designated by the Participant, or if no beneficiary is alive at the date of the
Participant's death, payment shall be made to the Participant's estate.
(b) The Participant may elect on the death benefit payment election
form that his or her Deferred Shares Account shall be paid, except as provided
in (c) below, upon the Participant's death in accordance with one of the
following options:
(1) In a single payment as of the date of death.
(2) In a single payment as of the first business day of the
calendar year immediately following the calendar year in which the death occurs.
(3) In three approximately equal payments, each made as of the
first business day of the three calendar years immediately following the
calendar year in which the death occurs.
If no death benefit payment election is in effect at the date of the
Participant's death and if a single payment or installment payments have not
been made, payment shall be made in a single payment as of the date of death.
(c) If the Participant's death occurs after installment payments have
commenced, payments shall continue in installments to the Participant's then
living beneficiaries. Upon the death of the last surviving beneficiary, payment
shall be made in a single payment to the Participant's estate as of the date of
such death. If no beneficiary is living at the Participant's death, payment
shall be made in a single payment to the Participant's estate as of the date of
death.
5.8 Withholding Taxes. The Company shall have the
-----------------
-10-
<PAGE>
right to withhold sufficient shares of Common Stock from any payments under the
Program to apply to any and all taxes required to be collected under federal,
state or local law. Shares of Common Stock used to satisfy withholding taxes
shall be valued at their Fair Market Value on the date of payment.
5.9 Temporary Postponement of Payment to Executive Officers.
-------------------------------------------------------
BankAmerica reserves the right to temporarily postpone payment from the Deferred
Shares Account of any Participant who is an Executive Officer at the time such
payment would have occurred, or was an Executive Officer in the period
immediately preceding such date, if BankAmerica determines in good faith that
such delay is necessary to avoid adverse tax consequences to the Company under
Internal Revenue Code Section 162(m), or other tax provision.
-11-
<PAGE>
ARTICLE VI
SHARES SUBJECT TO THE PROGRAM
-----------------------------
6.1 Source of Shares. Profit Shares delivered to Participants under
----------------
the Program shall be issued under the Management Stock Plan under which the
Option was granted. Dividend Equivalent Shares shall be issued under the
BankAmerica Corporation 1992 Management Stock Plan.
6.2 Rights as Shareholder. No Participant shall have rights as a
---------------------
shareholder with respect to any shares credited to his or her Deferred Shares
Account unless and until the shares of Common Stock are registered in the name
of the individual.
-12-
<PAGE>
ARTICLE VII
PROGRAM AMENDMENT, TERMINATION AND ADMINISTRATION
-------------------------------------------------
7.1 Amendment and Termination. BankAmerica is the "plan sponsor" of
-------------------------
the Program as that term is defined in ERISA. BankAmerica may amend, suspend or
terminate the Program in whole or in part at any time by a written instrument
executed by the Personnel Relations Officer of BankAmerica. However, any action
which would materially alter the manner in which the investment return on
Participants' Deferred Shares Accounts is determined or which terminates the
Program shall be approved by the Executive Personnel and Compensation Committee
of the Board of Directors of BankAmerica. No such amendment, suspension or
termination shall reduce the amount credited to Participants' Deferred Shares
Accounts as of the date of such action. Upon Program termination, all amounts
credited to Participants' Deferred Shares Accounts shall be paid to Participants
in a single payment as of the date of termination.
7.2 Plan Administrator. The Plan Administrator is the named
------------------
fiduciary, as that term is defined in ERISA, of the Program having discretionary
authority to control and manage the operation and administration of the Program.
7.3 Powers and Duties of Plan Administrator.
---------------------------------------
(a) The Plan Administrator shall have discretionary authority to
determine eligibility for benefits and to construe the terms of the Program. The
Plan Administrator shall have such other discretionary authority as may be
necessary to enable it to discharge its responsibilities under the Program as
administrator and named fiduciary, including, but not limited to, the power:
(1) To review appeals by Participants under Article
VIII.
(2) To appoint or employ one or more persons to assist
in the administration of the Program.
(3) To adopt such rules as it deems appropriate for the
administration of the Program.
(4) To prescribe procedures to be followed by
Participants.
(5) To prepare and distribute information relating to
the Program.
(6) To request from the Company and Participants such
information as shall be necessary for proper administration of the Program.
-13-
<PAGE>
(b) The decision of the Plan Administrator upon any matter within
its authority shall be final and binding on all parties, including the Company
and Participants and their beneficiaries.
7.4 Reliance Upon Information. In making decisions under the
-------------------------
Program, the Plan Administrator shall be entitled to rely upon information
furnished by a Participant, beneficiary or the Company.
-14-
<PAGE>
ARTICLE VIII
CLAIMS FOR BENEFITS
-------------------
8.1 Claims Procedure.
----------------
(a) Claims Must be Filed. An employee, Participant, beneficiary
--------------------
or estate of a deceased Participant (the "claimant") who has a claim for payment
from his or her Deferred Shares Account or concerning any other matter under the
Program must give written notice of such claim or other matter to the Service
Center.
(b) Review of Claim. After the Service Center has reviewed the
---------------
claim and obtained any other information it deems necessary to render a decision
on the claim, the Service Center shall notify the claimant within 90 days after
receipt of the claim of the acceptance or denial of the claim, unless special
circumstances require an extension of time for processing the claim. Such an
extension of time may not exceed 90 additional days and notice of the extension
shall be provided to the claimant prior to the termination of the initial 90 day
period indicating the special circumstances requiring the extension and the date
by which a final decision on the claim is expected.
(c) Denied Claims. In the event any application for benefits is
-------------
denied, in whole or in part, the Service Center shall notify the claimant of
such denial in writing and shall advise the claimant of the right to appeal the
denial and to request a review thereof. Such notice shall be written in a
manner calculated to be understood by the claimant and shall contain:
(1) Specific reason for such denial.
(2) Specific reference to the Program provisions on which
such denial is based.
(3) A description of any information or material necessary
for the Employee to perfect the claim.
(4) An explanation of why such material is necessary.
(5) An explanation of the Program's appeal and review
procedure.
8.2 Appeal and Review Procedure.
---------------------------
(a) Appeal to Plan Administrator. If the claimant's claim for
----------------------------
benefits is denied in whole or in part, the claimant, or the claimant's duly
authorized representative, may appeal the denial by submitting to the Plan
Administrator a
-15-
<PAGE>
written request for review of the application within 60 days after receiving
written notice of such denial. The Plan Administrator shall give the applicant
(upon request) an opportunity to review pertinent Program documents (other than
legally privileged documents) in preparing such request for review.
(b) Contents of Appeal. The request for review must be in
------------------
writing and shall be addressed to the Option Gain Deferral Program Plan
Administrator, c/o Executive Resources at the address stated in the current
Company directory. The request for review shall set forth all of the grounds
upon which it is based, all facts in support thereof and any other matters which
the claimant deems pertinent. The Plan Administrator may require the claimant to
submit (at the claimant's expense) such additional facts, documents or other
material as the Plan Administrator deems necessary or advisable in making its
review.
(c) Review of Appeal. The Plan Administrator shall act upon each
----------------
request for review within 60 days after its receipt thereof unless special
circumstances require further time for processing. Written notice of an
extension of time beyond 60 days shall be furnished to the claimant prior to the
commencement of the extension. In no event shall the decision on review be
rendered more than 120 days after the Plan Administrator receives the request
for review.
(d) Denied Appeals. In the event the Plan Administrator
--------------
confirms the denial of the claim for benefits in whole or in part, it shall give
written notice of its decision to the claimant. Such notices shall be written in
a manner calculated to be understood by the claimant and shall contain the
specific reasons for the denial.
8.3 Exhaustion of Remedies. No legal action for benefits under the
----------------------
Program shall be brought unless and until the following steps have occurred:
(a) The claimant has submitted a written application for benefits
in accordance with Section 8.1.
(b) The claimant has been notified that the claim has been
denied.
(c) The claimant has filed a written request appealing the denial
in accordance with Section 8.2.
(d) The claimant has been notified in writing that the Plan
Administrator has denied the claimant appeal or has failed to take any action on
the appeal within the time prescribed by Section 8.2.
-16-
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1 Source of Payments. The Deferred Shares Accounts established
------------------
under the Program are unfunded bookkeeping accounts. BankAmerica's obligations
under the Program shall be merely that of an unfunded and unsecured promise to
pay benefits in the future. No assets of the Company shall be held under any
trust for the benefit of Participants, their beneficiaries, heirs, successors or
assigns, or held in any way as collateral for the fulfillment of the Company's
obligations under the Program. Any and all of the Company's assets shall be,
and shall remain, the general unpledged and unrestricted assets of the Company.
9.2 Prohibition on Alienation. No amount payable under the Program
-------------------------
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, hypothecation, charge, attachment, garnishment, execution,
or levy of any kind or any other process of law, voluntary or involuntary. Any
attempt to dispose of any rights to benefits payable under the Program shall be
void. Notwithstanding the preceding sentence, the Company shall have the right
to offset from a Participant's unpaid amounts under the Program any amounts due
and owing from the Participant to the extent permitted by law.
9.3 Not a Contract of Employment. Participation in this Program by
----------------------------
an Eligible Employee shall not give such Employee any right to be retained in
the employ of the Company and the ability of the Company to dismiss or discharge
an Employee is specifically reserved.
9.4 Headings Not to Control. Headings and titles within the Program
-----------------------
are for convenience only and are not to be read as part of the text of the
Program.
9.5 Separability of Program Provisions. If any provisions of the
----------------------------------
Program are for any reason declared invalid or not enforceable, such provisions
will not affect the remaining terms and conditions, but the Program will be
construed and enforced thereafter as if such provisions had not been inserted.
9.6 Applicable Law. The validity and effect of the Program and the
--------------
rights and obligations of all persons affected thereby, are to be construed and
determined in accordance with applicable federal law, and to the extent that
federal law is inapplicable, under the laws of the State of California.
9.7 Entire Plan. This document is a complete statement of the
-----------
Program and as of January 1, 1998 supersedes all representations, prior plans,
promises and inducements, proposals, written or oral, relating to its subject
matter. The Company shall not be bound by or liable to any person for any
representation, promise or inducement made by any person which is
-17-
<PAGE>
not embodied in this document or in any authorized written amendment to the
Program.
-18-
<PAGE>
IN WITNESS WHEREOF, BankAmerica Corporation, has caused this instrument to
be executed by its duly authorized officer, this 9/th/ day of February, 1998 to
----- --------
be effective March 1, 1998.
BANKAMERICA CORPORATION
By /s/ Kathleen J. Burke
--------------------------------
Kathleen J. Burke
Vice Chairman and
Personnel Relations Officer
-19-
<PAGE>
Exhibit 12
Page 1 of 2
BankAmerica Corporation
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------
(dollar amounts in millions) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Fixed charges:
Interest expense (other than interest on deposits) $ 2,995 $ 2,713 $ 2,455 $1,505 $1,215
Interest payments on trust preferred securities (see footnote (a)) 143 7 - - -
Interest factor in rent expense 122 125 120 109 112
Other 2 - - 3 2
--------- --------- --------- --------- ---------
$ 3,262 $ 2,845 $ 2,575 $1,617 $1,329
========= ========= ========= ========= =========
Earnings:
Income from operations $ 3,210 $ 2,873 $ 2,664 $2,176 $1,954
Applicable income taxes 2,116 1,900 1,903 1,541 1,474
Fixed charges 3,262 2,845 2,575 1,617 1,329
Other (51) (9) (12) (55) (39)
--------- --------- --------- --------- ---------
$ 8,537 $ 7,609 $ 7,130 $5,279 $4,718
========= ========= ========= ========= =========
Ratio of earnings to fixed charges,
excluding interest on deposits 2.62 2.67 2.77 3.26 3.55
INCLUDING INTEREST ON DEPOSITS
Fixed charges:
Interest expense $ 8,788 $ 8,072 $ 7,378 $4,842 $4,186
Interest payments on trust preferred securities (see footnote (a)) 143 7 - - -
Interest factor in rent expense 122 125 120 109 112
Other 2 - - 3 2
--------- --------- --------- --------- ---------
$ 9,055 $ 8,204 $ 7,498 $4,954 $4,300
========= ========= ========= ========= =========
Earnings:
Income from operations $ 3,210 $ 2,873 $2,664 $2,176 $1,954
Applicable income taxes 2,116 1,900 1,903 1,541 1,474
Fixed charges 9,055 8,204 7,498 4,954 4,300
Other (51) (9) (12) (55) (39)
--------- --------- --------- --------- ---------
$14,330 $12,968 $12,053 $8,616 $7,689
========= ========= ========= ========= =========
Ratio of earnings to fixed charges,
including interest on deposits 1.58 1.58 1.61 1.74 1.79
</TABLE>
(a) Trust preferred securities represent corporation obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the corporation.
<PAGE>
Exhibit 12
Page 2 of 2
BankAmerica Corporation
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------
(dollar amounts in millions) 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EXCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense (other than interest on deposits) $ 2,995 $ 2,713 $ 2,455 $1,505 $1,215
Interest payments on trust preferred securities (see footnote (a)) 143 7 - - -
Interest factor in rent expense 122 125 120 109 112
Preferred dividend requirements (see footnote (b)) 166 307 389 424 423
Other 2 - - 3 2
-------- -------- -------- -------- --------
$ 3,428 $ 3,152 $ 2,964 $2,041 $1,752
======== ======== ======== ======== ========
Earnings:
Income from operations $ 3,210 $ 2,873 $ 2,664 $2,176 $1,954
Applicable income taxes 2,116 1,900 1,903 1,541 1,474
Fixed charges, excluding preferred dividend requirements 3,262 2,845 2,575 1,617 1,329
Other (51) (9) (12) (55) (39)
-------- -------- -------- -------- --------
$ 8,537 $ 7,609 $ 7,130 $5,279 $4,718
======== ======== ======== ======== ========
Ratio of earnings to fixed charges and preferred dividends,
excluding interest on deposits 2.49 2.41 2.41 2.59 2.69
INCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense $ 8,788 $ 8,072 $ 7,378 $4,842 $4,186
Interest payments on trust preferred securities (see footnote (a)) 143 7 - - -
Interest factor in rent expense 122 125 120 109 112
Preferred dividend requirements (see footnote (b)) 166 307 389 424 423
Other 2 - - 3 2
-------- -------- -------- -------- --------
$ 9,221 $ 8,511 $ 7,887 $5,378 $4,723
======== ======== ======== ======== ========
Earnings:
Income from operations $ 3,210 $ 2,873 $ 2,664 $2,176 $1,954
Applicable income taxes 2,116 1,900 1,903 1,541 1,474
Fixed charges, excluding preferred dividend requirements 9,055 8,204 7,498 4,954 4,300
Other (51) (9) (12) (55) (39)
-------- -------- -------- -------- --------
$14,330 $12,968 $12,053 $8,616 $7,689
======== ======== ======== ======== ========
Ratio of earnings to fixed charges and preferred dividends,
including interest on deposits 1.55 1.52 1.53 1.60 1.63
</TABLE>
(a) Trust preferred securities represent corporation obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the corporation.
(b) Preferred stock dividend requirements represent pre-tax earnings necessary
to cover preferred stock dividends declared during the years ended December
31, 1997, 1996, 1995, 1994, and 1993 of $100 million, $185 million, $227
million, $248 million, and $241 million, respectively.
<PAGE>
Did your bank perform for you today?
1997 Annual Report
<PAGE>
- -------------------------------------------------------------------------------
Letter to Shareholders 3
- -------------------------------------------------------------------------------
Financial Contents 20
- -------------------------------------------------------------------------------
Financial Review 21
- -------------------------------------------------------------------------------
Consolidated Financial Statements 54
- -------------------------------------------------------------------------------
Corporate Information 93
- -------------------------------------------------------------------------------
BankAmerica Today
BankAmerica Corporation and its consolidated subsidiaries provide diverse
financial products and services to individuals, corporations, small- and mid-
size businesses, government agencies, and financial institutions throughout the
world. BankAmerica is the nation's second largest banking company, measured by
market capitalization at December 31, 1997.
BankAmerica operates one of the financial services industry's outstanding global
banking franchises. We have offices in 38 countries, and regionally we are
focused on the Pacific Rim. The corporation's management structure was
reorganized in 1997 to reflect a focus on two core businesses: Global Retail
Banking and Global Wholesale Banking.
The Global Retail Bank is a leader in providing financial services to consumers
and small- and mid-size businesses. Using diverse delivery channels for customer
convenience, it reaches more than 11 million households and nearly 1 million
businesses. Consumer and commercial financial services are provided throughout
the U.S. and in much of Asia. The Global Retail Bank's major presence is in the
western United States.
The Global Wholesale Bank is a leading provider of tailored financial solutions
to clients across the U.S. and around the world. With one of the most extensive
global banking networks, BankAmerica offers clients the full spectrum of
financial service capabilities from capital raising and capital markets, cash
management and trade finance, to investment banking and financial advisory
services.
Forward-Looking Statements
This report contains forward-looking statements, usually containing the words
"estimate," "project," "expect," "objective," "goal," or similar expressions.
Those statements are subject to uncertainties, including those discussed in this
report, particularly in Year 2000 on page 28, Recent International Developments
and Regional Foreign Exposures on pages 35 -- 37, and in Risk Management and
Capital Management on pages 44 -- 53. These uncertainties could cause actual
results to differ materially. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date hereof.
Readers should also consider information on risks and uncertainties contained in
the discussions of competition, supervision and regulation, and forward-looking
statements in BAC's most recent report on Form 10-K.
Claire Giannini Hoffman (1904-1997)
BankAmerica Corporation lost a direct link to its roots in 1997 with the passing
of Claire Giannini Hoffman, daughter of the company's founder, A.P. Giannini.
Mrs. Hoffman was herself a significant figure in international business and
banking circles and served on BankAmerica's Board of Directors. Her spirit and
devotion to the founding principles of this company will be greatly missed.
Chauncey J. Medberry, III (1917-1997)
BankAmerica Corporation and the city of Los Angeles both lost a widely respected
leader with the passing of Chauncey J. Medberry, III. He was BankAmerica's
Chairman of the Board from 1971 to 1981. He was also a director of numerous
civic and charitable organizations in Southern California. His energy, skill and
selflessness left lasting imprints on his company and his home town.
<PAGE>
BankAmerica Corporation has coupled an outstanding global franchise with strict
financial discipline to produce profitable growth. Our governing objective is to
maximize value for our shareholders.
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
1
<PAGE>
BankAmerica Corporation
- --------------------------------------------------------------------------------
Selected Financial Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollar amounts in millions, except per share data) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
FOR THE YEAR
Net income $ 3,210 $ 2,873
Diluted earnings per
common share* 4.32 3.65
- --------------------------------------------------------------------------------
AT YEAR END
Loans $167,111 $165,415
Total assets 260,159 250,753
Deposits 172,037 168,015
Stockholders' equity 19,837 20,713
- --------------------------------------------------------------------------------
SELECTED RATIOS
Rate of return on average
common equity 16.69% 15.00%
Ratio of common equity to
total assets 7.39% 7.37%
Tier 1 risk-based
capital ratio 7.53% 7.77%
</TABLE>
- --------------------------------------------------------------------------------
*Restated to reflect the implementation of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS No.128) and a two-for-one stock
split effective June 2, 1997.
DILUTED EARNINGS PER COMMON SHARE*
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
$2.39 $2.68 $3.24 $3.65 $4.32
*Restated to reflect the implementation of SFAS No. 128 and a two-for-one stock
split effective June 2, 1997.
RETURN ON AVERAGE COMMON EQUITY
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
12.88% 13.20% 14.58% 15.00% 16.69%
EXPENSE-TO-REVENUE RATIO*
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
59.50% 60.42% 58.08% 54.85% 53.53%
*Excludes net other real estate owned expense, amortization of intangibles, and
expenses associated with trust preferred securities. Also excludes the effect
of the following items in 1997: a $246 million gain on the sale of Security
Pacific Financial Services, Inc. (SPFS), charges of approximately $112 million
associated with the decision to exit Midwest retail facilities, and in the
third quarter of 1997, expenses connected with multiple legal matters,
writedowns on corporate real estate, and contributions to BankAmerica
Foundation totaling $140 million. In addition, excludes the effect of the
following items in 1996: an $82 million pre-tax one-time Savings Association
Insurance Fund (SAIF) assessment, a $280 million pre-tax restructuring charge,
and a $147 million nontaxable gain from the initial public offering of BA
Merchant Services, Inc. (BPI) common stock.
- --------------------------------------------------------------------------------
2
<PAGE>
BankAmerica Corporation
Chairman and CEO Dave Coulter
Dear Shareholders:
On the cover of this Annual Report we pose a question: Did your bank perform for
you today? Throughout 1997, I believe the answer for BankAmerica Corporation
shareholders was a resounding "Yes."
I am proud to report that 1997 was a very good year for us. We registered gains
in all the important financial yardsticks. Return on equity (which indicates how
effectively we employ our capital) increased 169 basis points from a year ago to
nearly 17 percent. Diluted earnings per common share were up 18 percent over
1996. Our stock price increased 46 percent and total shareholder return (stock
price appreciation plus dividends) was 49 percent. Over the past two years,
total shareholder return was 136 percent, the best performance among the 10
largest banks in the United States. These results helped prompt your Board of
Directors, recently, to raise the quarterly dividend on common stock 13 percent
to 34.5 cents a share.
We achieved these results by paying close attention to an approach represented
by a simple formula: "Great Franchise + Financial Discipline = Profitable
Growth." It's this formula that continues to guide our efforts in 1998.
We are a global financial services leader operating in the world's most vibrant
markets. Our good name and deep client base offer the potential for significant
revenue growth in these markets. But to provide for profitable growth, we must
pay close attention to the fundamentals.
This means having the day-to-day financial discipline to make decisions that
will help us achieve our goals for profitability. For this purpose, we target
three key areas: operating leverage, risk management, and capital management.
Paying close attention to the fundamentals means tightly managing our operating
leverage by keeping operating expense growth well below operating revenue
growth. In 1997, the corporation achieved a 4 percent spread between revenue
growth and expense growth in order to produce an 11 percent increase in
operating income.
In times when competitive pressures and economic conditions limit revenue growth
and narrow our margins, maintaining tight expense discipline is necessary to
achieve our desired operating leverage. We have made progress recently in a
number of areas, including the restructuring and, in some cases, outsourcing of
some of our business and staff support units for improved efficiency.
Consolidating most of our subsidiary banks into a single entity has produced
additional ongoing savings. And a corporate initiative to coordinate and
centralize our purchasing activities has produced significant savings.
Management of risk -- credit risk, market risk, foreign risk, and business risk
- -- has to be a core competency of BankAmerica, and is a key determinant of our
overall financial performance. We apply a variety of strategies to mitigate
risks to which we are exposed, including careful evaluation of the
creditworthiness of borrowers; diversification of loan portfolios; high-quality
internal auditing functions; maintenance of contingency systems for operations
support in the event of natural disasters; appropriate limits on trading
activities; and a conservative approach to managing liquidity and interest rate
exposure.
One current risk management challenge is managing through economic turmoil in
Asia. BankAmerica, like most other multinational corporations, has been affected
by the situation. Our fourth quarter results were clearly impacted by the
volatility in Asian markets. But thanks to the diversity of our portfolios and
our careful approach to risk management, our overall performance in 1997
remained strong. Although Asian economies will likely slow down in the near
term, we are confident that over
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
3
<PAGE>
BankAmerica Corporation
a longer horizon, the Pacific Rim will remain a very important market.
Finally, in terms of fundamentals, BankAmerica has imposed a heightened capital
discipline throughout the organization. Businesses, products, and client
relationships are all being examined and evaluated on an ongoing basis to
determine whether returns on each exceed the cost of capital. Changing market
conditions make some once-attractive business lines less valuable to our
shareholders so we must continue to ask whether we want to direct our efforts in
other areas.
Capital management decisions are evident in the ongoing divestitures and
acquisitions of businesses and products. In 1997, we sold Security Pacific
Financial Services, a consumer finance company; and our branch system in Hawaii;
and also announced our intention to sell our manufactured housing finance
company, BA Housing Services; and exit Midwest grocery store banking centers. At
the same time, we acquired Robertson Stephens & Company, the investment banking
and investment management firm; and formed a strategic alliance with D.E. Shaw,
one of Wall Street's most technologically advanced securities trading firms;
investments that will add value to existing core capabilities.
We have also been active in managing our balance sheet through various means
including numerous portfolio sales and securitizations that have helped improve
the returns on capital for key businesses. As part of our capital management
discipline, we also repurchased $2 billion of common stock, and retired $1.6
billion of preferred stock in 1997, indicating our belief that unless excess
capital can be profitably employed, it should be returned to shareholders. To
that end, your Board of Directors recently increased our common stock repurchase
authority by $3.5 billion.
Of course, financial discipline alone isn't enough to produce the above-average
returns our shareholders expect: We have an outstanding franchise. BankAmerica
serves nearly 14 million checking and savings customers in more than 11 million
households. We have nearly 7,700 ATMs, approximately 1,800 branches, and our
telephone customer service network handles nearly 21 million calls a month. We
also have relationships with 85 percent of the Fortune 500 companies. We're
among the top providers of commercial and industrial loans worldwide. We're a
recognized leader in Community Reinvestment activities with a 10-year, $140
billion loan commitment to mostly minority, low-income, and small business
borrowers; and our Environmental Program has been honored by business and
government leaders. This is a formidable base on which we can build greater
shareholder value. We intend to first make this outstanding franchise even more
effective by improving our
- --------------------------------------------------------------------------------
Office of the Chairman: left to right, H. Eugene Lockhart, Jack L. Meyers, David
A. Coulter, Michael J. Murray, Kathleen J. Burke, Michael E. O'Neill, and Martin
A. Stein
- --------------------------------------------------------------------------------
4
<PAGE>
BankAmerica Corporation
organization, our systems, our service, and our people. And we also believe we
can grow this franchise in profitable ways.
We took a major step in 1997 by creating a Global Wholesale Bank and a Global
Retail Bank. Gene Lockhart joined us from Mastercard to lead the Retail Bank,
bringing fresh perspective and strong leadership to this rapidly changing
business. Mike Murray took charge of the Global Wholesale Bank, bringing his
years of corporate banking experience to the job of positioning our wholesale
operations for the future. You can learn more about their plans for growing
these businesses on the pages following this letter.
An important priority in developing our franchise is technology. Bank of America
was the first bank to successfully apply computers to its operations back in the
1950s. Today we are every bit as mindful of the need for innovative technology
- -- not just to automate processes, but to deliver better service. For instance,
we conducted our first fully electronic loan syndication in 1997, enabling
participants to get detailed information about the transaction from their
desktop computers. Our online banking site has been called "the best overall
Internet banking service," by The New York Times. Our Corporate Data Store has
one of the industry's most extensive client information repositories. It's the
backbone of our relationship marketing effort, providing insight into the
additional services we can profitably sell to existing clients. Many of our
businesses, including some we have real strength in today, such as payments, are
changing by virtue of technology. We must find new ways to use our systems to
remain competitive in those businesses.
Our immediate technology objective is making our systems Year 2000 compliant.
Our goal is that every unit at BankAmerica will implement and begin testing
modifications by the end of 1998. But long term, our goal is to set the industry
standard for technology-driven customer service. That is, we want a common
customer service infrastructure providing consistent and effective service no
matter how our customers want to interface with us.
Another priority that you should note on the following pages is that we are
determined to increase the emphasis on our clients. We have launched a major
initiative to improve client focus at BankAmerica. We want to set ourselves
apart from the competition by excelling at service, making it a living,
breathing part of our day-to-day business existence.
To achieve all of these improvements will require a great team from top to
bottom. Therefore our people are critical to our success. That is why I am proud
of the Take Ownership! stock option program introduced in 1996. It was designed
to better link the interests of employees and management with those of
shareholders, and our employees today are vigorously acting like owners. Our
team is strong, and with training, direction and the right incentives, it's
getting even better.
Success, of course, also requires leadership from the Board of Directors, and I
would like to once again offer my sincere thanks to our board for its guidance,
insight, and hard work on behalf of all shareholders. I would especially like to
recognize the many contributions of director John M. Richman, who will be
retiring as of the 1998 Annual Meeting.
We believe that 1998 will be another year of challenge and tremendous change,
but one thing will remain the same: Everything we do at BankAmerica will have a
common purpose, to maximize value for our shareholders. There is no better
objective for our organization because maximizing shareholder value means always
looking for better ways to do business. And there are always better alternatives
- -- it's a never-ending process.
TOTAL SHAREHOLDER RETURN*
1991 1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------ ------
39.8% 33.4% 2.8% -11.5% 69.4% 58.1% 49.2%
*Appreciation in price of common stock plus common stock dividends.
Did your bank perform for you today? Yes. And as we continue this process of re-
examination, of searching for a better way, I am confident that we will perform
for you in the future, as well.
Thank you for sharing your confidence through your investment in BankAmerica.
- --------------------------------------------------------------------------------
David A. Coulter
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
San Francisco, California, February 6, 1998
5
<PAGE>
Did Your Bank Make a Difference Today?
BankAmerica Corporation makes a difference for millions of consumers and
businesses every day. Through our products and services, our people, and our
commitment to social responsibility, we help make life easier, businesses more
successful and communities stronger.
Here's how:
. We're among the top providers of commercial and industrial loans worldwide
with more than $55 billion outstanding at the end of 1997.
. We're the No. 1 provider of Small Business Administration loans in the
western U.S.
. Our BA Merchant Services, Inc. subsidiary is the fourth-largest processor of
merchant credit card transactions in the U.S.
. BankAmerica Mortgage originated more than $16 billion in home loans
nationwide in 1997 and serviced nearly $90 billion.
. Nearly 14 million consumers have checking and savings accounts with us, and
more than 10 million have credit card accounts.
. We have approximately 1,800 branches, nearly 1,000 in-store locations, and
nearly 7,700 ATM machines in the U.S.
. We process more than 20 million checks every 24 hours.
Only the Federal Reserve System handles more.
. Our 24-hour customer service network handles nearly 21 million calls every
month.
. Our Internet web site averages more than 1 million hits every day.
. Our Bank of America Community Development Bank provides financing for small
businesses in 28 states, and financing for affordable housing in more than
40 states.
. Our $140 billion commitment for community development lending over 10 years
is the largest multi-year goal ever established by a bank.
. We are the first Fortune 500 financial services company to endorse the CERES
Principles, a corporate code of conduct for environmental responsibility.
. The national Points of Light Foundation has recognized TeamAmerica, our
employee grassroots organization, for its volunteer network.
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
CHART--BankAmerica Consumer Banking Profile
- --------------------------------------------------------------------------------
CALIFORNIA NORTHWEST SOUTHWEST
States served California Washington, Oregon Arizona, Nevada,
Idaho, Alaska New Mexico, Texas
Branches 973 395 436
ATMs* 3,955 1,256 1,866
ATM transactions/mo. 35.7 million 7.2 million 5.9 million
Teller transactions/mo. 15.8 million 7.1 million 5.7 million
Teleservicing calls/mo. 11.8 million 3.5 million 5.6 million
Point-of-sale/mo. 11.8 million 3.9 million 3.5 million
BankAmerica has retail banking operations in Hong Kong, Macau, India, Taiwan,
Singapore, and the Philippines.
*BankAmerica operates 621 ATMs in 25 other states.
- --------------------------------------------------------------------------------
CHART--BankAmerica Global Network in 38 countries
- --------------------------------------------------------------------------------
Argentina Cayman Islands Greece Japan Philippines
Buenos Aires Grand Cayman Athens Tokyo Manila
Australia Chile India Malaysia Poland
Melbourne Santiago Calcutta Kuala Lumpur Warsaw
Sydney China Chennai Labuan Russia
Bahamas Beijing Mumbai Mexico Moscow
Nassau Dalian New Delhi Guadalajara Singapore
Belgium Guangzhou Indonesia Mexico City Singapore
Antwerp Hong Kong Jakarta Monterrey South Africa
Brussels Shanghai Ireland Netherlands Johannesburg
Brazil Colombia Dublin Amsterdam South Korea
Sao Paulo Bogota Israel Pakistan Pusan
Canada France Tel Aviv Faisalabad Seoul
Calgary Paris Italy Islamabad
Montreal Germany Milan Karachi
Toronto Frankfurt Lahore
Vancouver
Spain United States
Barcelona Atlanta
Bilbao Boston
Madrid Chicago
Switzerland Houston
Geneva Los Angeles
Taiwan Menlo Park
Taipei Miami
Thailand New York
Bangkok San Francisco
United Arab Emirates Seattle
Dubai Venezuela
United Kingdom Caracas
London Vietnam
Hanoi
Ho Chi Minh City
- --------------------------------------------------------------------------------
7
<PAGE>
BankAmerica Corporation organized the Global Retail Bank in 1997 with a clear
purpose: to create shareholder value by building enduring relationships of
increasing value with our clients.
We intend to be our clients' most important financial services partner by
enabling our employees to listen to and understand our clients, provide valuable
solutions to their needs, and deliver superior service that exceeds their
expectations.
BankAmerica has one of the industry's outstanding retail banking franchises. We
also have outstanding talent on our team. Our challenge now is to make the most
of those advantages. By investing in products, people and technology, and by
putting our clients first, we can become a "Best in Class" Global Retail Bank.
- --------------------------------------------------------------------------------
H. Eugene Lockhart, President, Global Retail Bank
- --------------------------------------------------------------------------------
8
<PAGE>
BankAmerica Corporation
BankAmerica Corporation's Global Retail Bank offers exceptional banking choice
and convenience to consumers, small- and middle-market businesses, and high-net-
worth individuals. BankAmerica has a leading consumer and middle-market banking
franchise throughout the western U.S., a strong and growing commercial and
private banking presence in the Midwest, and a significant retail presence in
Asia.
In 1996 we asked BankAmerica Corporation employees to act like owners through
our stock option program Take Ownership! Now, in addition to that, we are asking
everyone in the Global Retail Bank to think and act like clients, and to do that
first and foremost by becoming clients ourselves. Only when we think and act as
our clients do can we fully understand what they want from their financial
institution.
Our goal is to become a "Best in Class" Global Retail Bank when measured in
terms of overall sales and service quality, employee satisfaction and
motivation, and economic profit.
We can accomplish our goal by focusing on the client: understanding client needs
and preferences, designing products and differentiating delivery to meet client
needs, and setting goals and measuring results by client segment.
BankAmerica clients benefit from access to:
. The nation's largest proprietary ATM network with nearly 7,700 machines in
34 states.
. Approximately 1,800 branches in nine western states.
. Alternative service delivery channels that include the telephone, personal
computers, and in-store financial service centers.
. Nationwide commercial banking products and services, including capital
raising, cash management, credit, and leasing.
. Nationwide consumer loan origination capabilities including first mortgages,
credit cards, and auto loans.
. Comprehensive private banking, trust and investment management services.
The Global Retail Bank has a relationship orientation across all products and
channels of distribution. We want to actively manage our high-value client
relationships to grow our share of their business and maximize the value of
those relationships. That's why we started the Financial Relationship Manager
program, assigning more than 1,000 well-trained professionals to personally
serve our most complex and rewarding relationships.
We aim for "Best in Class" sales and service quality in our local markets. It's
this goal that prompted us in 1997 to take a step unprecedented in the financial
services industry -- covering our customers for liability they incur from
unauthorized transactions on our popular debit and ATM cards.
This also is why we are reworking our technology infrastructure with the goal of
a common platform that provides efficient service to client segments. For
example, until last year BankAmerica had 42 toll-free customer service telephone
numbers throughout the U.S. Now that number is down to two. By investing in
technology we also will make better use of our Data Store -- the key to
unlocking information that will enable us to develop product and service
strategies for distinct client segments, based on measurable differences in what
clients want and are willing to pay for.
Success in our organization depends on our people, on their teamwork and their
common commitment to delivering the power of BankAmerica's Global Retail Bank to
clients. With that in mind we are introducing a new incentive structure so that,
in addition to economic profit generation, employees are rewarded for such
things as service quality, leadership, and teamwork.
Retail Banking Leadership
We serve more than 11 million households through nearly 14 million checking and
savings accounts through our branch networks in California, the Northwest and
the Southwest, and through nationwide lending businesses including mortgages and
credit cards.
BankAmerica has a leading market position, based on deposits, in most of the
West's leading Metropolitan Statistical Areas. In California, we're No. 1 in Los
Angeles/Long Beach, San Francisco/Oakland, Riverside/San Bernardino, San Diego,
Orange County, Sacramento, and San Jose. In the Northwest, we're No. 1 in
Seattle/Bellevue/Everett, and No. 2 in Portland/Vancouver. In the Southwest,
we're No. 1 in Las Vegas, and No. 2 in Phoenix/Mesa.
BankAmerica has more than 260,000 clients performing electronic banking through
HomeBanking(TM), our PC-based consumer transaction service, and Pay-by-
Phone(TM), which permits bill paying by telephone. Customers may access
HomeBanking(TM) through the Internet, America Online or the bank's Managing Your
Money(TM) software.
Nationwide Consumer Loan Products
BankAmerica Mortgage Group is the seventh-largest
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
9
<PAGE>
GLOBAL RETAIL BANK
"More than 1,000 of us have been trained for the Financial Relationship
Manager program. I'm the only person the Niwranskis need to know at the bank.
Whether it's a question about personal checking or international wire
transfers for their business, they call me. I love being able to give my
clients personal service."
Katrina Wilson, Vice President, Financial Relationship Manager, Bellingham,
Washington
originator and ninth-largest servicer of residential first mortgages in the
U.S., providing financing to homebuyers in all 50 states. Its assets are $31.5
billion.
In 1966, our BankAmericard became the first nationally accepted bank credit
card. Today, the Credit Card Group issues credit cards in all 50 states, has 10
million accounts, and is one of the largest issuers of Visa/MasterCard accounts
in the country.
National Consumer Assets Group has more than 520,000 home equity accounts,
nearly 450,000 indirect auto accounts, nearly 300,000 other direct lending
accounts, and 334,000 student loans.
Business Banking provides products and services to nearly 1 million small
business clients and has a leading market position in California, Nevada, and
Washington. We provide a variety of deposit and lending products and offer the
convenience of banking via personal computers. Small business owners can even
apply for loans by telephone.
National Commercial Banking
National Commercial Banking provides a range of capital raising, lending, and
cash management services to middle-market companies with revenues from $10
million to $500 million nationwide. It also serves specialty industries such as
agribusiness and the wholesale auto dealer business.
National Commercial Banking serves 12,000 clients through 60 offices in 12
states, with market coverage in 38 states.
National Commercial Banking has a leading market position in California and
Washington, with a growing presence in other key markets including Illinois,
Oregon and Arizona.
Global Private Banking
BankAmerica has consolidated its regional and international private banking
businesses in the Global Private Bank.
The Global Private Bank has about 25,000 clients, and delivers banking, trust,
and investment management
10
<PAGE>
"Due to the global nature of our business, we demand instant responses and
replies to our financial transactions. That's the kind of service we get from
our banker."
Eve Niwranski, General Manager and Harry Niwranski, President, Helicopter Parts
International, supply helicopter parts and service to government agencies and
commercial enterprises in several countries, Blaine, Washington
11
<PAGE>
"I appreciate how they look out for the interests of my company, and that their
capabilities match up well with our increasingly complex financial needs, from
cash management services to capital markets products."
Harry H. Bake, Owner and President, Sierra Tel Communications Group, provides
telephone services to 22,000 customers in California's Sierra Nevada foothills
and cellular service to 35,000 customers in Northern and Central California.
12
<PAGE>
GLOBAL RETAIL BANK
"There is a high degree of mutual loyalty in this relationship. We have had
the privilege of being there when Harry was looking for options while growing
his company. The bank continues to provide for his personal financial needs,
also. That is the essence of Commercial Banking at Bank of America, serving
the business and the individual."
Michael Stain, Commercial Banking Relationship Manager, Fresno, California
services and works closely with commercial, corporate, retail, and global
private equity areas of BankAmerica to reach our deep client base.
Savings, Investment, Retirement, and
Insurance Products
BankAmerica Insurance Group, through affiliated insurance companies or agencies,
is authorized to underwrite credit-related insurance products in 48 states and
the District of Columbia, and to act as an agent or broker for the distribution
of insurance products in 24 states. The group has sold insurance products to
more than 1.2 million BankAmerica customers.
Investment Services
In 1997, BA Investment Services, Inc. (BAIS) celebrated its 10th anniversary of
providing Bank of America clients with non-FDIC-insured investment products and
services. Nearly 400 Series-7-registered investment and insurance specialists
are located in approximately 1,600 Bank of America branches in six western
states. Our affiliate, Seafirst Investment Services, located in Seattle, has 60
investment representatives that service Seafirst clients in the Northwest, and
BancAmerica Robertson Stephens has bond trading floors in San Francisco, Los
Angeles, and San Diego. Collectively, these investment groups provide financial
solutions, information, and personal service to help make it possible for
clients to identify their investment objectives, accumulate wealth, and retire
with security and dignity.
BAIS offers investors hundreds of no-load and load mutual funds, including the
Pacific Horizon, Time Horizon, World Horizon, and Robertson Stephens proprietary
mutual fund families, as well as a wide range of funds from other
nationally-recognized companies. Additionally, investors can choose from
fixed-income products such as municipal and corporate bonds and U.S. Treasury
Securities, competitively-priced stock brokerage, margin and covered option
accounts, fixed and variable annuities, TrustAmerica(TM), a proprietary living
trust product and wealth transfer, and business continuation life insurance
products.
13
<PAGE>
The aspiration of the Global Wholesale Bank is to be recognized and rewarded by
our clients as a global financial services leader delivering solutions to the
complex needs of issuers and investors.
Our challenges are significant. Clients are increasingly sophisticated, markets
are more global, while bank and securities products and providers are
converging. Thus, we are raising our performance standards and changing the way
we compete.
We strive to consistently deliver our institutional strengths--capacity and
product breadth, global reach, and superior execution through our Client Team
approach--to each client. To expand our client-focused capabilities we will
continually invest in our people, our products and our global network while
realizing superior returns for our shareholders.
As our clients succeed, so will we.
- --------------------------------------------------------------------------------
Michael J. Murray, President, Global Wholesale Bank
- --------------------------------------------------------------------------------
14
<PAGE>
BankAmerica Corporation
BankAmerica Corporation's Global Wholesale Bank is a proven leader -- delivering
innovative financial solutions to clients in the U.S. and around the world.
We have one of the most significant global corporate franchises of any U.S.
bank -- maintaining relationships with 85 percent of Fortune 500 companies and
an almost equal share of the global 500. Our offices in 38 countries, broad
spectrum of products, and talented people have firmly established our leadership
position in global finance. We are:
. A leading bank in loan syndications, ranking in the top two in
arranger/co-arranger volume both in the U.S. and globally for the third
consecutive year.
. No.1 Derivatives Bank based on a 1997 poll of corporate executives by
Treasury & Risk Management magazine.
. "1997 Asian Loan House of the Year" awarded to BA Asia Limited by
International Financing Review for bringing innovative deal structures to
the market.
. No.1 in Latin America loan syndications, with more than $20 billion in
agent/co-agent volume in 1997.
. The largest bank-affiliated commercial paper dealer in the U.S., with more
than 210 commercial paper program dealerships representing a mix of
domestic and foreign issuers.
A competitive strength of the Global Wholesale Bank is our relationship teams'
ability to understand our clients' business, anticipate their needs, and then
tailor financial solutions to meet those needs. Our teams allow us to deepen
client relationships through cross-sell opportunities and deliver the customized
capabilities our clients require -- the key to long-term corporate success for
our clients and for us.
The Global Wholesale Bank is building a growth platform -- making strategic
investments in new technology, strengthening our product breadth, and pursuing a
strategy of disciplined expansion into high-growth global markets.
We aggressively pursue advanced technologies to increase the economies of scale
we already enjoy, and to further enhance our responsiveness by developing
innovative solutions for our clients. For instance, Bank of America sponsored
the Leasing Exchange, a website-based venue listing lease assets for sale in the
secondary market. We've also launched full loan syndications via the Internet,
leveraging technology to accelerate the document-intensive syndication
processes.
In March 1997, Bank of America formed a strategic alliance with D.E. Shaw & Co.,
one of the most technologically sophisticated firms on Wall Street. Using
advanced computational and quantitative techniques, D.E. Shaw develops
client-oriented, equity-linked solutions to identify nondirectional equity and
fixed-income trading opportunities.
Building out our growth platform includes strengthening our product
capabilities, sustaining and extending our excellence in traditional credit
products, integrating and enhancing our cash management services, and investing
in targeted debt and equity capital raising capabilities.
In October 1997 we further expanded our product scope, specifically capital
raising products, by acquiring Robertson Stephens & Company, an investment bank
recognized for providing outstanding equity underwriting, research, strategic
advisory, and investment management services. These capabilities complement our
extensive client franchise and broad array of corporate finance products and
advisory services, particularly in high-growth industries and markets.
To strategically position our global network for the future, we are continuing
to pursue a targeted penetration of high-growth global markets. In August 1997,
Bank of America established a wholly owned subsidiary, Bank of America (Polska)
SA, in Warsaw, Poland. With this office we further open the Polish market to
BankAmerica's major U.S. and international corporate clients and strengthen our
ability to serve them in an emerging market. To expand our product offering in
Russia, on December 30, 1997 we signed a memorandum of understanding to open a
wholly owned subsidiary in Moscow.
The Global Wholesale Bank will continue to invest capital in productive ways as
we strive to improve the effectiveness and profitability of the franchise. Our
strong client base, full product suite, and team approach firmly position us at
the forefront of global finance.
Capital Raising
Our complete range of capital raising services -- from traditional credit and
sophisticated corporate finance and advisory services to equity underwriting --
provides clients with integrated origination, structuring, and distribution
solutions.
BancAmerica Robertson Stephens has established strong market positions in a wide
range of wholesale and investment banking products. We have proven leadership in
secondary loan trading and strong distribution capabilities in private equity,
private placements, and public debt (investment grade and high yield).
Recognized as a leading structurer of asset-backed commercial paper programs,
BancAmerica Robertson Stephens is
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL WHOLESALE BANK
"We had three weeks to develop a highly complex financing for a major AmeriServe
acquisition. We worked with the company to structure an innovative solution that
included a senior bank financing, a high yield debt financing, and a unique
receivables securitization financing that Corporate Finance magazine selected as
the Securitization Deal of the Year in 1997."
Kurt Anstaett, Relationship Manager, Chicago, Illinois
also a top agent for corporate debt products and is one of the largest
distributors of syndicated bank loans in the global marketplace.
Global Capital Markets
During 1997 our Global Capital Markets Group was strengthened by the additional
resources provided through strategic alliance, acquisition and the hiring of a
number of top quality professionals. Bank of America's strategic alliance with
D.E. Shaw & Co. has expanded our capabilities to include equity derivatives,
convertible bonds, warrants structuring, distribution, and market making.
Significant investment was made to develop capabilities in commodities trading,
credit derivatives, emerging markets trading, and U.S. corporate securities.
Global Foreign Exchange trading reported record volumes and revenues in 1997 and
is well positioned to manage business when markets are turbulent. Global
Emerging Markets Trading performed well and is now positioned to expand its
presence in the forfaiting, primary eurobond, and Central and East European
local currency markets.
In Italy, the central bank confirmed Bank of America's status as the foremost
dealer in Italian government bonds in both the primary and secondary markets.
Cash Management and Trade Services
Bank of America is a world leader in providing cash management and trade
services to corporations, other financial institutions, and government entities.
Using our integrated national and global systems, our clients can efficiently
manage their receivables and payables wherever their trading partners are
located.
Services range from locally and regionally linked account structures to
worldwide collection and payment solutions, from simple export letters of credit
to complex structured trade financing for major international projects. We
provide the solutions our clients need from basic cash management and trade
services to comprehensive systems for managing treasury activities globally.
Global Equity Investments
With one of the largest private equity portfolios in the business, our Global
Equity Investments Group makes
16
<PAGE>
"Why do we work with Bank of America? They thoroughly understand our
business, provide innovative solutions to match our strategic and financial
objectives, and we have complete confidence that they will deliver, and
deliver quickly."
A. Petter Ostberg, Chief Financial Officer, Holberg Industries, Inc., (Parent
Company of AmeriServe), AmeriServe Food Distribution Inc., America's largest
food service distributor to restaurant chains, Dallas, Texas.
17
<PAGE>
"Technology is our business. The world is our market. We need a financial
services partner that understands both. Bank of America has the expertise and
powerful global presence to meet our needs."
Dr. Morris Chang, Chairman and President, Taiwan Semiconductor Manufacturing
Company, Ltd., the world's largest integrated circuit foundry, Taipei, Taiwan.
18
<PAGE>
GLOBAL WHOLESALE BANK
"Taiwan Semiconductor is Taiwan's largest company in market capitalization.
Business Week selected the Chairman and President, Dr. Morris Chang, as one of
the 25 top managers of the year in 1997. This is a powerful client that we work
night and day to please. From our credit administrators in Hong Kong to high
tech bankers in Silicon Valley, we have a global team that's powerful too, and
one that knows the client very well."
Vivian Tan, Corporate Finance Manager, Syndications, and Rock Su, Relationship
Manager, Taipei, Taiwan
direct and indirect private equity investments in North and South America, Asia,
and Europe. The group annually invests $750 million to $1 billion in venture
capital, leveraged buyout, acquisitions, growth, and recapitalization
transactions worldwide.
LEASING
Recognized as a premier global provider of leasing and equipment finance,
BankAmerica Leasing and Capital Group offers a broad array of advisory,
arranging, and syndication services. The group has nearly $19 billion in total
original equipment cost, owned or managed for other investors.
BUSINESS CREDIT
BankAmerica Business Credit, Inc., one of the largest commercial finance
companies in the U.S., provides senior secured, closely monitored financing to
large corporate and middle-market companies engaged principally in
manufacturing, distribution, and retailing. In addition, the unit provides loans
secured by consumer receivables of independent finance companies, health care
receivables financing, discounted loan purchases, and debtor-in-possession
financing. The group manages a portfolio of $7 billion with offices throughout
the United States, Canada, and the United Kingdom.
COMMERCIAL REAL ESTATE
With 90 years of experience in the commercial real estate market, Bank of
America delivers expertise in credit and financial services to a variety of
market segments, including developers, investors, pension fund advisors, real
estate investment trusts, and property managers. Our real estate financing draws
on commercial mortgage loans, construction lending, real estate acquisition
lending, mortgage warehousing, syndicated real estate bank loans, and secured
private placements.
ACHIEVING OUR OBJECTIVES
Expanding our capabilities, building on strong client relationships, and
generating solid financial performance are our objectives. These objectives not
only meet client needs, but also enable us to realize superior returns across a
changing marketplace.
19
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Overview 21
Operating Leverage and Capital Management 23
Results of Operations 24
Net Interest Income 24
Noninterest Income 26
Noninterest Expense 27
Income Tax 28
Comparison of 1996 with 1995 28
Business Sectors 29
Balance Sheet Review 32
Overview 32
Loan Portfolio Management 32
Allowance for Credit Losses 38
Nonperforming Assets 41
Off-Balance-Sheet Financial Instruments 43
Credit-Related Financial Instruments 43
Derivative Financial Instruments 43
Risk Management 44
Credit Risk Management 44
Operational Risk 45
Market Risk 45
Liquidity Risk Management 49
Capital Management 50
Capital Review 50
Pending Accounting Standards 53
- --------------------------------------------------------------------------------
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Report of Management 54
Report of Independent Auditors 55
Consolidated Financial Statements 56
Notes to Consolidated Financial Statements 60
- --------------------------------------------------------------------------------
Corporate Information
- --------------------------------------------------------------------------------
Boards of Directors/BankAmerica Corporation
and Bank of America NT&SA 93
Principal Officers and Senior Management
Council/BankAmerica Corporation 94
BankAmerica Corporate Governance Principles 95
Glossary of Common Banking Terms 96
- --------------------------------------------------------------------------------
Great Franchise + Financial Discipline = Profitable Growth
- --------------------------------------------------------------------------------
20
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
FINANCIAL REVIEW
OVERVIEW
BankAmerica Corporation (the parent) and its subsidiaries (collectively BAC) is
the second largest bank holding company in the United States based upon total
market capitalization of $50.2 billion at December 31, 1997. At year-end 1997,
BAC's closing stock price was $73.00 per common share, up 46 percent from
year-end 1996.
PRICE RANGE OF COMMON STOCK/A/
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
High 27.7500 25.1250 34.2500 51.9375 81.9375
Low 20.1875 19.1875 19.7500 29.3750 47.6875
</TABLE>
/a/ Reflects a two-for-one stock split effective June 2, 1997.
BAC reported record earnings of $3,210 million for 1997. BAC's earnings for the
year ended December 31, 1997 increased $337 million, or 12 percent, from $2,873
million in 1996. Diluted earnings per common share for 1997 were $4.32, an
increase of 18 percent from $3.65 in 1996. Diluted cash earnings per common
share, which excludes amortization of intangibles, were $4.69 for 1997, an
increase of 17 percent from $4.02 in 1996. Return on average common equity was
16.69 percent in 1997, up 169 basis points from 15.00 percent in 1996.
Total revenues, the sum of net interest revenue and noninterest revenue, were
$14,797 million in 1997, an increase of $798 million, or 6 percent, from 1996.
Net interest income was $8,669 million in 1997, up $82 million, or 1 percent,
from 1996. BAC's net interest margin was 4.06 percent in 1997, compared with
4.23 percent in 1996. The change in net interest income reflects an increase in
loans through new originations offset by sales and securitizations and by a
decrease in the net interest margin. Noninterest income increased $716 million,
or 13 percent, from 1996 to $6,128 million in 1997. The increase in noninterest
income reflects an increase in servicing fees primarily due to the growth of
loan sales and securitizations, and the acquisition of Robertson, Stephens &
Company Group, L.L.C. (Robertson Stephens). Noninterest expense was $8,521
million in 1997, an increase of 2 percent, or $180 million from $8,341 million
in 1996. BAC effectively managed expenses by keeping the rate of expense growth
well below that of revenues.
- --------------------------------------------------------------------------------
RATIO AND STOCK DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996/a/ 1995/a/
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SELECTED FINANCIAL RATIOS
Expense-to-revenue/b/ 53.53% 54.85% 58.08%
Rate of return (based on net income) on:
Average common equity 16.69 15.00 14.58
Average total equity 16.05 14.18 13.62
Average total assets 1.25 1.19 1.17
CAPITAL RATIOS
Ratio of common equity to total assets 7.39 7.37 7.57
Ratio of average total equity to average total assets 7.82 8.38 8.61
Common dividend payout ratio 27.42 29.03 28.01
STOCK DATA
Book value per common share at year end $27.94 $26.00 $23.95
Closing common stock price 73 49 7/8 32 3/8
Number of common shares outstanding at year end/c/ 688,056,859 710,533,790 734,894,404
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Shares and per share amounts and stock prices have been restated to reflect
a two-for-one stock split effective June 2, 1997.
/b/ Excludes net other real estate owned expense, amortization of intangibles,
and expenses associated with trust preferred securities. Also excludes the
effect of the following pre-tax items in 1997: a $246 million gain on the
sale of Security Pacific Financial Services, Inc. (SPFS), charges of
approximately $112 million associated with the decision to exit Midwest
retail facilities, and in the third quarter of 1997, expenses connected with
multiple legal matters, writedowns on corporate real estate, and
contributions to BankAmerica Foundation totaling $140 million. In addition,
excludes the effect of the following items in 1996: an $82 million pre-tax
one-time Savings Association Insurance Fund (SAIF) assessment, a $280
million pre-tax restructuring charge, and a $147 million nontaxable gain
from the initial public offering of BA Merchant Services, Inc. (BPI) common
stock.
/c/ There were 134,709 common stockholders of record at January 31, 1998.
21
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(dollar amounts in millions, except per share data) 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 17,457 $ 16,659 $ 15,840 $ 12,384 $ 11,627
Interest expense 8,788 8,072 7,378 4,842 4,186
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 8,669 8,587 8,462 7,542 7,441
Provision for credit losses 950 885 440 460 803
Noninterest income 6,128 5,412 4,546 4,135 4,261
Noninterest expense 8,521 8,341 8,001 7,500 7,471
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 5,326 4,773 4,567 3,717 3,428
Provision for income taxes 2,116 1,900 1,903 1,541 1,474
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 3,210 $ 2,873 $ 2,664 $ 2,176 $ 1,954
PER SHARE DATA/a/
Earnings per common share/b/ $ 4.45 $ 3.72 $ 3.28 $ 2.70 $ 2.41
Diluted earnings per common share/b/ 4.32 3.65 3.24 2.68 2.39
Dividends declared per common share 1.22 1.08 0.92 0.80 0.70
BALANCE SHEET DATA AT YEAR END
Loans $ 167,111 $ 165,415 $ 155,373 $ 140,912 $ 126,556
Total assets 260,159 250,753 232,446 215,475 186,933
Deposits 172,037 168,015 160,494 154,394 141,618
Long-term debt 13,922 15,785 15,328 15,428 14,115
Common equity 19,223 18,471 17,599 15,823 14,165
Total equity 19,837 20,713 20,222 18,891 17,144
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Per share amounts have been restated to reflect a two-for-one stock split
effective June 2, 1997.
/b/ Reflects the adoption of Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS No. 128) including the restatement of prior
years.
Total loans at year-end 1997 were $167.1 billion, up $1.7 billion, or 1 percent,
from $165.4 billion at year-end 1996. Increases in the loan portfolio through
new originations were mostly offset by sales and securitizations. Average loans
in 1997 increased $7.6 billion, or 5 percent, from 1996.
Total nonaccrual assets were $899 million at year-end 1997, down $219 million,
or 20 percent, from year-end 1996. In addition, BAC's nonaccrual coverage ratio
(the allowance for credit losses to total nonaccrual assets) was 389 percent at
year-end 1997, up from 315 percent at December 31, 1996.
BAC continued to effectively redeploy its capital throughout 1997. During 1997,
the stock repurchase program was extended to allow the parent to repurchase an
additional $3 billion of its common stock and to redeem an additional $1 billion
of its preferred stock by the end of 1998. In 1997, BAC repurchased 31.7 million
shares of its common stock for $2,025 million, and redeemed $1,628 million of
its preferred stock. In addition, BAC continued to maintain capital ratios above
the regulatory "well-capitalized" levels. On October 1, 1997, BAC completed the
acquisition of Robertson Stephens, a San Francisco-based investment banking and
investment management firm. The acquisition of Robertson Stephens allows BAC to
offer a broader range of equity underwriting and other investment banking and
investment management services. BAC also 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. Also
during 1997, BAC completed the sale of its consumer finance subsidiary, Security
Pacific Financial Services Inc. (SPFS), which resulted in a $246 million gain,
and the sales of certain rural Texas branches and its branch system in Hawaii,
which resulted in gains of $33 million. Furthermore, BAC announced decisions to
exit Midwest retail facilities and to sell its manufactured housing business,
which are expected to be completed in 1998.
- --------------------------------------------------------------------------------
SUMMARY OF RESULTS
EXCLUDING AMORTIZATION OF INTANGIBLES/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(dollar amounts in millions, except per share data) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income excluding
amortization of intangibles $3,474 $3,145 $2,946
Diluted cash earnings
per common share/b/ 4.69 4.02 3.62
Rate of return on average
common equity 18.11% 16.52% 16.26%
- ----------------------------------------------------------------------------------------------
</TABLE>
/a/ For purposes of this table, amortization amounts are related to those
intangibles that are deducted from Tier 1 capital under regulatory
guidelines. Amortization amounts excluded from this table totaled
$264 million, $272 million, and $282 million for the years ended December
31, 1997, 1996, and 1995, respectively.
/b/ Restated to be consistent with the requirements of SFAS No. 128 and a
two-for-one stock split effective June 2, 1997.
22
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
As part of its continuing efforts to improve efficiency by eliminating redundant
functions and reducing costs, BAC combined several interstate affiliate banks
into Bank of America NT&SA (the Bank) during 1997. On January 1, 1997, Bank of
America (BofA) Alaska, N.A., BofA Arizona, BofA Nevada, BofA New Mexico, N.A.,
and BofA NW, National Association (formerly Seattle-First National Bank) were
merged into the Bank. On July 1, 1997, BofA Illinois and BofA Trust Company of
Florida, N.A. were merged into the Bank. During 1996, BofA Oregon and
BankAmerica National Trust Company were merged into the Bank.
In 1996, BAC completed the initial public offering (IPO) of 16,100,000 shares of
Class A Common Stock of BA Merchant Services, Inc. (ticker symbol "BPI" on the
New York Stock Exchange), a subsidiary of BAC, resulting in a $147 million
nontaxable gain. Also during 1996, as a result of decisions to implement a
number of changes in its business activities, BAC recorded a pre-tax
restructuring charge of $280 million. In addition, as a result of legislation to
recapitalize the Savings Association Insurance Fund (SAIF), BAC recognized a
charge of $82 million. For further information on the restructuring charge and
SAIF assessment, refer to Notes 27 and 28 of the Notes to Consolidated Financial
Statements on page 88, respectively.
Operating Leverage and Capital Management
BAC demonstrated effective operating leverage and capital management in both
1997 and 1996. Operating leverage is achieved when the rate of revenue growth
exceeds that of expenses. Effective capital management enhances operating
leverage when the growth in net income exceeds that of common shares outstanding
and preferred stock dividends. By increasing revenues, effectively managing
expenses, and taking strategic capital management steps, BAC realized increases
in net income applicable to common stock of 16 percent in 1997 compared with
1996 and 10 percent in 1996 over 1995. In addition, the rate of return on
average common equity increased 169 basis points in 1997 over 1996 and 42 basis
points in 1996 compared with 1995.
As shown in the table below, revenue for 1997 increased 6 percent from 1996
while noninterest expense increased only 2 percent. In 1996, revenue increased 8
percent while noninterest expense increased 4 percent from 1995. The average
number of diluted common shares outstanding decreased 2 percent for both 1997
over 1996 and 1996 compared with 1995. In addition, preferred stock dividends in
1997 decreased 46 percent from 1996 and 19 percent in 1996 over 1995. However,
the decreases in preferred stock dividends were partially offset by the
after-tax effect of expenses related to trust preferred securities.
- --------------------------------------------------------------------------------
OPERATING LEVERAGE AND CAPITAL MANAGEMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage Percentage
(dollar amounts in millions, except per share data) 1997 1996 Change 1996 1995 Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING LEVERAGE COMPONENTS
Net interest income $ 8,669 $ 8,587 1% $ 8,587 $ 8,462 1%
Noninterest income 6,128 5,412 13 5,412 4,546 19
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 14,797 13,999 6 13,999 13,008 8
Noninterest expense 8,521 8,341 2 8,341 8,001 4
Operating income/a/ 6,276 5,658 11 5,658 5,007 13
Provision for credit losses 950 885 7 885 440 101
Provision for income taxes 2,116 1,900 11 1,900 1,903 --
CAPITAL MANAGEMENT COMPONENTS
Net income 3,210 2,873 12 2,873 2,664 8
Preferred stock dividends 100 185 (46) 185 227 (19)
Net income applicable to common stock 3,110 2,688 16 2,688 2,437 10
Average number of diluted common shares outstanding
(in thousands)/c/ 719,777 736,055/b/ (2) 736,055/b/ 751,112/b/ (2)
Diluted earnings per common share/c/ $ 4.32 $ 3.65/b/ 18 $ 3.65/b/ $ 3.24/b/ 13
Average common equity 18,635 17,926 4 17,926 16,716 7
Rate of return on average common equity 16.69% 15.00% 169bp 15.00% 14.58% 42bp
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents income before the provisions for credit losses and income taxes.
/b/ Restated to reflect a two-for-one stock split effective June 2, 1997.
/c/ Reflects the adoption of SFAS No. 128 including the restatement of prior
years.
bp Basis points.
23
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is the difference between interest earned on assets and
interest incurred on liabilities. On a taxable-equivalent basis, net interest
income was $8,695 million in 1997, up $91 million from 1996. The increase
primarily resulted from growth in earning assets, partially offset by an
increase in the cost of funds. During 1997 and 1996, BAC securitized
approximately $2.1 billion and $1.5 billion, respectively, in credit card loans.
Excluding the effect of these credit card securitizations, taxable-equivalent
net interest income would have increased $256 million from 1996.
NET INTEREST INCOME
(in millions of dollars)
1993 1994 1995 1996 1997
----------------------------------------------
$7,463 $7,566 $8,487 $8,604 $8,695
Average earning assets totaled $214.3 billion in 1997, up $11.0 billion, or 5
percent, from 1996. The increase was largely attributable to growth in most
segments of the loan portfolio, partially offset by loan sales and
securitizations, as average loans increased $7.6 billion from 1996. In addition,
trading account assets rose $3.0 billion from 1996.
The net interest margin, which is the difference between interest income and
interest expense expressed as a percentage of average earning assets, was 4.06
percent, down 17 basis points from 1996. During the year ended December 31,
1997, the yield on average earning assets decreased 4 basis points, primarily
due to lower prevailing market rates. At the same time the cost of funds
increased, primarily in domestic interest-bearing deposits, the largest
component of interest-bearing liabilities. In addition, BAC has experienced a
shift in the mix of liabilities toward wholesale funding sources, including
foreign interest-bearing deposits and domestic purchased funds, which are more
costly than traditional core deposits. For more information, refer to the
Average Balances and Rates table on the following page. BAC's net interest
income and margin include the recognition of hedging with certain on- and
off-balance-sheet financial instruments. The recognition of hedging with
derivative financial instruments reduced BAC's net interest income results by
approximately $95 million in 1997, compared with an approximate income of $5
million in 1996.
- --------------------------------------------------------------------------------
IMPACT OF CREDIT CARD SECURITIZATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1997/a/
-------------------------------------------------
Before
Credit Card Credit Card
(dollar amounts in millions) Securitizations Securitizations Reported
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 8,878 $ (209) $ 8,669
Credit and other card fees 419 (41) 378
Other noninterest income 5,571 179/b/ 5,750
- --------------------------------------------------------------------------------
Total revenue 14,868 (71) 14,797
Noninterest expense 8,521 -- 8,521
Income before provision for
credit losses 6,347 (71) 6,276
Provision for credit losses 1,089 (139)/c/ 950
- --------------------------------------------------------------------------------
Income before income taxes $ 5,258 $ 68 $ 5,326
Net interest margin 4.11% (0.05)% 4.06%
BALANCE SHEET DATA
AT YEAR END
Credit card loans $ 10,318 $ 3,621 $ 6,697
Total assets 263,780 3,621 260,159
AVERAGE BALANCE
SHEET DATA
Credit card loans 9,902 2,115 7,787
Earning assets 216,438 2,115 214,323
Total assets 257,916 2,115 255,801
Net credit losses --
credit card portfolio 612 (139) 473
SELECTED FINANCIAL RATIOS
Annualized ratio of net credit losses
on credit card loans to average
credit card loans 6.17% (0.10)% 6.07%
Delinquent credit card loan ratio/d/ 2.89 (0.04) 2.85
- --------------------------------------------------------------------------------
</TABLE>
/a/ Includes the effects of accumulated credit card securitizations of $3,621
million at December 31, 1997.
/b/ Includes a $68 million gain, net of amortized cost, associated with the
implementation of Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities."
/c/ Represents charge-offs on the investor's share.
/d/ 60 days or more past due.
24
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES AND RATES
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
1997 1996 1995
---------------------------------------------------------------------------
(dollar amounts in millions) Balance/a/ Rate/b/ Balance/a/ Rate/b/ Balance/a/ Rate/b/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 6,197 6.70% $ 5,717 7.93% $ 5,853 7.95%
Federal funds sold 746 5.54 533 5.41 548 5.89
Securities purchased under resale agreements 10,032 7.73 10,334 6.32 8,823 7.00
Trading account assets 15,538 7.96 12,541 8.01 9,106 8.18
Available-for-sale securities/c,d/ 11,934 7.03 11,383 7.45 9,768 7.83
Held-to-maturity securities/c/ 3,850 7.63 4,347 7.42 7,192 7.29
Domestic loans:
Consumer--residential first mortgages 35,260 7.38 37,572 7.47 35,407 7.06
Consumer--residential junior mortgages 14,898 8.46 14,264 8.59 13,832 9.05
Consumer--credit card 7,787 14.56 8,837 14.53 8,230 14.95
Other consumer 20,416 9.59 17,465 9.85 14,149 9.89
Commercial and industrial 34,280 7.95 32,944 7.83 30,927 8.47
Commercial loans secured by real estate 12,653 8.93 11,508 8.84 10,586 9.04
Financial institutions 3,175 5.30 2,815 4.40 2,511 5.69
Lease financing 2,747 5.70 2,127 6.92 1,835 6.06
Loans for purchasing or carrying securities 1,945 7.55 1,270 6.78 1,303 7.02
Construction and development loans secured by real estate 2,269 12.88 2,816 10.69 3,367 11.07
Agricultural 1,656 8.70 1,570 8.70 1,619 9.67
Other 1,511 6.17 1,176 6.39 1,394 6.56
- ------------------------------------------------------------------------------------------------------------------------------------
Total domestic loans 138,597 8.52 134,364 8.56 125,160 8.73
Foreign loans 27,429 7.56 24,087 7.73 21,754 8.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans/c/ 166,026 8.36 158,451 8.44 146,914 8.65
Total earning assets 214,323 8.16 203,306 8.20 188,204 8.43
Nonearning assets 45,010 42,060 42,641
Less: Allowance for credit losses 3,532 3,524 3,672
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 255,801 $ 241,842 $ 227,173
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 5,657 1.57% $ 12,205 1.22% $ 13,241 1.20%
Savings 11,757 2.06 12,872 2.05 13,550 2.08
Money market 39,918 2.78 28,772 3.14 29,070 2.99
Time 30,419 5.50 30,132 5.13 30,002 4.90
- ------------------------------------------------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits 87,751 3.55 83,981 3.41 85,863 3.24
Foreign interest-bearing deposits:
Banks located in foreign countries 13,156 6.04 12,957 5.89 10,245 6.63
Governments and official institutions 10,802 5.47 9,579 5.23 6,845 5.80
Time, savings, and other 21,260 6.08 19,058 6.47 16,131 6.60
- ------------------------------------------------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits 45,218 5.92 41,594 6.00 33,221 6.44
Total interest-bearing deposits 132,969 4.36 125,575 4.27 119,084 4.13
Federal funds purchased 1,176 5.43 1,492 5.29 2,222 5.89
Securities sold under repurchase agreements 11,583 6.99 11,702 5.94 9,110 6.38
Other short-term borrowings 17,911 6.13 14,448 6.11 9,301 6.77
Long-term debt 14,665 6.97 15,396 6.86 15,761 7.06
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 178,304 4.93 168,613 4.79 155,478 4.75
Domestic noninterest-bearing deposits 34,655 34,415 33,272
Foreign noninterest-bearing deposits 1,643 1,557 1,630
Other noninterest-bearing liabilities 19,344 16,898 17,238
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 233,946 221,483 207,618
Trust preferred securities/e/ 1,857 90 --
Stockholders' equity 19,998 20,269 19,555
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 255,801 $ 241,842 $ 227,173
Interest income as a percentage of average earning assets 8.16% 8.20% 8.43%
Interest expense as a percentage of average earning assets (4.10) (3.97) (3.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin 4.06% 4.23% 4.51%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Average rates are presented on a taxable-equivalent basis. The
taxable-equivalent adjustments are based on a marginal tax rate of 40%.
/c/ Average balances include nonaccrual assets.
/d/ Refer to the table on page 32 of the Balance Sheet Review 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.
25
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Noninterest Income
Noninterest income for 1997 was $6,128 million, an increase of $716 million, or
13 percent, from $5,412 million in 1996. The increase reflected growth in fees
and commissions, trading income, and other noninterest income.
<TABLE>
<CAPTION>
NONINTEREST INCOME
(in millions of dollars)
Trading Income Other Noninterest Income Fees and Commissions Total
-------------- ------------------------ -------------------- -----
<S> <C> <C> <C> <C>
1996 $630 $1,416 $3,366 $5,412
1997 $692 $1,575 $3,861 $6,128
</TABLE>
Fees and commissions, the largest component of noninterest income, increased
$495 million, or 15 percent, from 1996, reflecting BAC's continued expansion of
its fee-generating activities. The increase in loan fees and charges of $259
million was primarily attributable to higher loan servicing fees, mainly as a
result of growth in credit card securitizations as well as the effects of
implementing Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" (SFAS No. 125). In addition, the increase in loan fees and charges
was partially related to higher revenues from late payment and overlimit charges
on credit card accounts. The growth in the "other" component of other fees and
commissions of $155 million was largely due to the acquisition of Robertson
Stephens and growth in ATM fees in 1997. Revenues earned in 1997 from deposit
account fees rose $48 million from 1996, mainly due to growth in fee-generating
retail accounts.
Trading income increased $62 million, or 10 percent, from 1996 and was primarily
attributable to improved trading activities in foreign exchange. However, the
overall increase in trading income was impacted by the volatile overseas market
toward the end of 1997. For more information on the functional components of
trading income, refer to Note 25 of the Notes to Consolidated Financial
Statements on pages 80 -- 86.
- --------------------------------------------------------------------------------
NONINTEREST INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FEES AND COMMISSIONS
Deposit account fees:
Retail $1,086 $1,057 $ 931
Commercial 361 342 372
Credit and other card fees 378 355 315
Trust fees:
Corporate and employee benefit 9 18 53
Personal and other 246 211 247
Other fees and commissions:
Loan fees and charges 623 364 310
Off-balance-sheet credit-related
instrument fees 304 345 344
Financial services fees 252 216 189
Mutual fund and
annuity commissions 89 100 81
Other 513 358 345
- --------------------------------------------------------------------------------
3,861 3,366 3,187
TRADING INCOME 692 630 527
OTHER NONINTEREST INCOME
Private equity investment activities 510 427 337
Net gain on sales of loans 249 89 24
Net gain on sales of subsidiaries
and operations 213 180 25
Net gain on available-for-sale securities 116 61 34
Gain on issuance of subsidiary's stock -- 147 --
Other income 487 512 412
- --------------------------------------------------------------------------------
1,575 1,416 832
$6,128 $5,412 $4,546
- --------------------------------------------------------------------------------
</TABLE>
Other noninterest income for 1997 rose $159 million, or 11 percent, from 1996,
reflecting an overall increase in most categories as discussed in more detail
below.
Noninterest income related to net gain on sales of loans increased $160 million
from 1996, largely due to growth in sales of residential mortgages and increased
securitizations of manufactured housing loans. Noninterest income related to
private equity investment activities increased $83 million from 1996 due to
higher realized capital gains and partnership distributions. Net gain on
available-for-sale securities grew $55 million, primarily reflecting improved
realized gains from the sale of securities. In addition, net gain on sales of
subsidiaries and operations totaled $213 million in 1997, an increase of $33
million from 1996. The amount in 1997 included pre-tax gains of $246 million
associated with the sale of SPFS, $24 million from the Texas branch
divestitures, $23 million from the sale of retail branches in California, and $9
million from the sale of retail operations in Hawaii. The effect of these gains
was partially offset by charges of approximately $112 million for asset
dispositions, personnel expenses, and other costs associated primarily with the
decision to exit Midwest retail facilities.
26
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Net gain on sales of subsidiaries and operations for 1996 included pre-tax gains
of $82 million from the sale of a Hong Kong consumer and commercial finance
subsidiary, $50 million from the divestiture of BAC's ITSS business, and
$39 million from a reduction of BAC's equity interest in KorAm Bank. Also, 1996
included a nontaxable gain of $147 million from the IPO of BPI common stock.
Noninterest Expense
Noninterest expense was $8,521 million in 1997, up $180 million, or 2 percent,
from $8,341 million in 1996. The increase primarily reflected higher personnel
expense, partially offset by a decline in other noninterest expense.
NONINTEREST EXPENSE
(in millions of dollars)
<TABLE>
<CAPTION>
Equipment Occupancy Other Noninterest Expense Personnel Total
--------- --------- ------------------------- --------- -----
<S> <C> <C> <C> <C> <C>
1996 $702 $757 $2,818 $4,064 $8,341
1997 $725 $753 $2,763 $4,280 $8,521
</TABLE>
Personnel expense, the largest component of noninterest expense, increased $216
million, or 5 percent, from 1996. The increase in personnel expense was
primarily associated with the acquisition of Robertson Stephens in 1997. In
addition, the increase reflected higher variable pay related to incentive plans,
base salaries, and other compensation, partially offset by lower staff levels.
BAC's staff level on a full-time-equivalent (FTE) basis was approximately 77,000
at December 31, 1997, down from approximately 78,000 at December 31, 1996. FTE
is a measurement equal to one full-time employee working a standard day. BAC had
approximately 90,500 employees, both full-time and part-time, at December 31,
1997, down from approximately 92,100 employees at year-end 1996.
Other noninterest expense decreased $55 million, or 2 percent, from 1996,
primarily due to a restructuring charge in 1996 and decreases in 1997 in
regulatory fees and related expenses, partially offset by an increase in
professional service fees and other expense.
STAFF LEVELS
(in thousands)
<TABLE>
<CAPTION>
Number of Employees Full-time-equivalent staff
------------------- --------------------------
<S> <C> <C>
1993 96.4 79.2
1994 98.6 82.1
1995 95.3 79.9
1996 92.1 78.0
1997 90.5 77.0
</TABLE>
BAC recorded a pre-tax restructuring charge in 1996 of $280 million as a result
of decisions to implement a number of streamlining measures in its business
activities. For more information regarding the restructuring charge, refer to
Note 27 of the Notes to Consolidated Financial Statements on page 88. The
decline in regulatory fees and related expenses of $94 million was primarily due
to the inclusion in 1996 of a one-time assessment of $82 million associated with
the recapitalization of the SAIF. For more information regarding this special
deposit assessment, refer to Note 28 of the Notes to Consolidated Financial
Statements on page 88. The decline in other noninterest expense was partially
offset by an increase in professional service fees of $54 million which was
mainly attributable to widespread increases in outside services. The increase in
other expense of $264 million was primarily due to expenses associated with
trust preferred securities of $144 million in 1997, an increase of $137 million
over the prior year. In addition, other expense in 1997 included increases in
charges associated with multiple legal matters and contributions to the
BankAmerica Foundation.
- --------------------------------------------------------------------------------
NONINTEREST EXPENSE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
PERSONNEL
Salaries $3,572 $3,291 $3,309
Employee benefits 708 773 718
- --------------------------------------------------------------------------------
4,280 4,064 4,027
OCCUPANCY 753 757 738
EQUIPMENT 725 702 663
OTHER NONINTEREST EXPENSE
Professional services 398 344 313
Communications 379 363 359
Amortization of intangibles 358 373 428
Regulatory fees and related expenses 29 123 176
Restructuring charge -- 280 --
Other expense 1,599 1,335 1,297
- --------------------------------------------------------------------------------
2,763 2,818 2,573
$8,521 $8,341 $8,001
- --------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Year 2000
BAC's noninterest expense for 1997 included approximately $90 million incurred
in connection with making its computer systems year 2000 compliant. BAC expects
to substantially complete this project by the end of 1998 and estimates its
total costs over the four year period 1997 - 2000 will be approximately $380
million. Included in this amount is $80 million for retention and incentive
payments. None of these costs, however, are expected to materially impact BAC's
results of operations in any one reporting period. In addition, a significant
portion of these costs are not expected to be incremental to BAC but instead
will constitute a reassignment of existing internal systems technology
resources. BAC believes that its plans for dealing with the year 2000 issue will
result in timely and adequate modifications of its systems and technology.
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures BAC undertakes, but also on the way in which the year
2000 issue is addressed by governmental agencies, businesses, and other entities
who provide data to, or receive data from, BAC, or whose financial condition or
operational capability is important to BAC as suppliers or customers. Therefore,
BAC is communicating with these parties to ensure they are aware of the year
2000 issue, to learn how they are addressing it, and to evaluate any likely
impact on BAC. It is possible that if all aspects of the year 2000 issues are
not adequately resolved by these parties, BAC's future business operations and,
in turn, its financial position and results of operations could be negatively
impacted. In addition, BAC's credit risk associated with its borrowers may
increase as a result of their individual year 2000 issues. As a result, BAC
expects that there may be increases in problem loans and credit losses in future
years. However, at this time, it is not possible to quantify the potential
impact of such situations.
Income Tax
BAC's effective income tax rates for 1997 and 1996 were 39.7 percent and 39.8
percent, respectively. For further information concerning the provisions for
federal, state, and foreign income taxes, refer to Note 22 of the Notes to
Consolidated Financial Statements on pages 74 -- 75.
Comparison of 1996 with 1995
Net income in 1996 was $2,873 million, up 8 percent from $2,664 million in 1995,
and was primarily attributable to substantial growth in noninterest income.
Taxable-equivalent net interest income was $8,604 million in 1996, up $117
million from 1995, primarily due to growth in average earning assets of
$15.1 billion, or 8 percent, partially offset by a decrease in the net interest
margin. BAC's net interest margin for 1996 was 4.23 percent, down 28 basis
points from 1995.
The provision for credit losses increased $445 million, or 101 percent, from
1995.
Noninterest income for 1996 increased $866 million, or 19 percent, from
$4,546 million in 1995. Fees and commissions increased $179 million, or 6
percent, from 1995, primarily reflecting higher revenues from retail deposit
account fees, loan fees and charges, financial services fees, as well as credit
and other card fees, partially offset by a decrease in trust fees. Trading
income increased $103 million, or 20 percent, from 1995, and was primarily
attributable to growth in foreign exchange trading income as well as improved
performance in emerging markets, Latin America, Europe, and domestic debt
securities. Other noninterest income for 1996 rose $584 million, or 70 percent,
from 1995, reflecting higher net gain on sales of subsidiaries and operations, a
gain on the issuance of BPI stock, higher income related to private equity
investment activities, and increased net gain on sales of loans.
Noninterest expense was $8,341 million in 1996, up $340 million, or 4 percent,
from 1995, reflecting increases in personnel, occupancy, equipment, and other
expenses. Personnel expense increased $37 million, or 1 percent, from 1995,
largely due to expanded employee benefits as the result of retirement
enhancements that became effective January 1, 1996. A decrease in salaries,
largely attributable to reductions in staff levels, partially offset the
increase. Occupancy and equipment expense increased $58 million, or 4 percent,
from 1995. The increase was primarily due to higher depreciation expense on
equipment.
Other noninterest expense increased $245 million, or 10 percent, from 1995,
primarily due to the previously discussed restructuring charge. The increase was
partially offset by decreases in amortization of intangibles as well as
regulatory fees and related expenses. Amortization of intangibles decreased
$55 million, or 13 percent, from 1995, largely attributable to the impact of the
fourth-quarter 1995 adoption of Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights." Regulatory fees and related
expenses declined $53 million, primarily due to a reduction in Federal Deposit
Insurance Corporation assessment rates. Partially offsetting this reduction in
deposit insurance premiums was a one-time assessment of $82 million in 1996
associated with the recapitalization of the SAIF.
28
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Business Sectors
For 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.
The information set forth in the table on pages 30 and 31 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.
Consumer Banking
BAC's Consumer Banking Group served over 11 million households in 1997, which
gave it the largest customer base of any bank in the western U.S. Consumer
Banking provides a full array of deposit and loan products to individuals and
small businesses through about 1,800 full-service branches, close to 7,700 ATMs,
and telephone and other delivery channels.
Consumer Banking's net income for 1997 was up $360 million, or 33 percent, from
1996. Net interest income in 1997 decreased primarily due to loan sales and
securitizations in residential first mortgages and credit card receivables.
Noninterest income increased due to higher revenues from service charges on
deposit accounts and from ATM fees in California, larger gains on the sales of
residential first mortgages, and higher loan servicing revenue. The increase in
loan servicing revenue resulted primarily from credit card securitizations as
well as the effects of implementing SFAS No.125. Also contributing to
noninterest income was a $246 million gain associated with a sale of a consumer
finance subsidiary, SPFS, which was partially offset by charges of approximately
$112 million primarily associated with a decision to exit Midwest retail
facilities. Noninterest income for 1996 included an $82 million gain from the
sale of a Hong Kong consumer and commercial finance subsidiary and a $147
million nontaxable gain from the IPO of BPI common stock. Noninterest expense
for 1997 included charges connected with writedowns on corporate real estate and
contributions to the BankAmerica Foundation, while 1996's noninterest expense
included a $100 million restructuring charge and an $82 million one-time
assessment for the recapitalization of the SAIF. The provision for credit losses
for 1997 decreased $270 million from 1996 primarily due to the reduction of the
unallocated allowance assigned to Consumer Banking. Average loan outstandings
grew $1 billion, or 1 percent, from December 31, 1996, reflecting growth in
manufactured housing loans, consumer auto loans, and lease financing, while a
reduction in residential real estate loans partly offsets this increase.
Net income in 1996 was up $39 million, or 4 percent from 1995. Net interest
income increased primarily due to higher revenues from growth in average loan
balances, primarily the residential, consumer installment, and credit card
portfolios. Noninterest income for Consumer Banking increased $639 million due
to higher revenues from service fees and charges associated with deposit
accounts, increased gains on loan sales, and the aforementioned gains from the
IPO of BPI common stock and the sale of a Hong Kong subsidiary. Noninterest
expense increased $360 million primarily due to the aforementioned restructuring
charge and SAIF recapitalization. The provision for credit losses for Consumer
Banking in 1996 increased $450 million from 1995 primarily as a result of growth
in the consumer loan portfolio.
U.S. Corporate and International Banking
U.S. Corporate and International Banking provides capital-raising services,
trade finance, cash management, investment banking, capital markets and credit
products, and financial advisory services to large public- and private-sector
institutions that are part of the global economy. BAC is one of the leading
U.S.-based providers of financial services to institutions conducting business
within the U.S. and across international boundaries, with offices in the U.S.
and 37 other countries and territories in North and South America, Asia, Europe,
Africa, and the Middle East.
U.S. Corporate and International Banking's net income for 1997 increased $10
million, or 1 percent, from 1996. Higher net interest and noninterest income
levels were offset by increases in noninterest expense and the provision for
credit losses. The increase in net interest income resulted from higher earning
asset balances. Noninterest income was up $273 million predominantly due to
increased fees and commissions from the newly acquired Robertson Stephens
coupled with improved foreign exchange and trading account profits, higher
securities gains, and increased gains on the sales of loans and other assets.
Lower commitment fees partially offset the increases in noninterest income. In
addition, noninterest income in 1996 included a $43 million gain on the
liquidation of an Australian subsidiary and a $39 million gain that resulted
from a reduction of BAC's equity interest in KorAm Bank, an Asian investment.
Noninterest expense increased in 1997 primarily due to expenses associated with
the acquisition of Robertson Stephens. Noninterest expense in 1996 included a
$130 million restructuring charge. The increase in the provision for credit
losses was primarily related to the volatile conditions in emerging markets
toward the end of 1997. These conditions also resulted in lower trading income
during the latter part of 1997.
Net income in 1996 for U.S. Corporate and International Banking increased $217
million from 1995. The $161 million increase in net interest income primarily
resulted from loan growth, especially in the foreign loan portfolio. Noninterest
29
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
income was up $329 million from 1995, primarily due to higher trading income,
income related to global private equity activities and financial management
fees. Also reflected in the 1996 noninterest income are the aforementioned gains
on the liquidation of an Australian subsidiary and from a reduction of BAC's
equity interest in KorAm Bank. The 1995 amount included a $50 million gain on
the sale of an asset received in lieu of debt repayment. Noninterest expense
increased in 1996 due to the aforementioned restructuring charge and higher
group variable compensation, primarily resulting from higher incentive accruals
associated with trading activities.
Middle Market Banking
Middle Market Banking provides a full range of financial products and services,
primarily in the West and the Midwest, targeting companies with annual revenues
between $5 million and $500 million. Included in this sector is a national
commercial finance company, BankAmerica Business Credit, Inc., that serves
mid-sized and large companies with specialized needs throughout the U.S. and in
Canada.
Middle Market Banking's net income for 1997 increased $8 million, or 2 percent,
from 1996. The increase in net interest income was primarily attributable to
higher loan volumes.
Net income in 1996 for Middle Market Banking increased $75 million from 1995,
primarily attributable to a reduction in the provision for credit losses,
reflecting an improvement in credit quality.
Commercial Real Estate Services
Commercial Real Estate Services provides credit and other financial services to
a variety of real estate market segments, including developers, investors,
pension fund advisors, real estate investment trusts, and property managers.
Regional clients are served throughout California and in ten other states.
National clients, such as publicly traded corporations and private entities, are
served through offices in California.
Commercial Real Estate Services' net income for 1997 increased $22 million, or
11 percent, from 1996, largely due to an increase in net interest income coupled
with an improvement in credit losses. Included in net interest income for 1997
was an interest recovery of $23 million from a single borrower. Improved credit
quality of commercial real estate loans caused the decrease in the provision for
credit losses.
Commercial Real Estate Services' net income for 1996 increased $9 million, or 5
percent, from 1995.
- --------------------------------------------------------------------------------
BUSINESS SECTORS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31/a/
-------------------------------------------------------------------------------------------------
U.S. Corporate and
Total Consumer Banking International Banking
(dollar amounts in millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 8,669 $ 8,587 $ 8,462 $ 5,455 $ 5,529 $ 5,239 $ 1,573 $ 1,464 $ 1,303
Noninterest income 6,128 5,412 4,546 3,031 2,675 2,036 2,409 2,136 1,807
Noninterest expense 8,521 8,341 8,001 5,257 5,259 4,899 2,198 2,150 1,868
- ------------------------------------------------------------------------------------------------------------------------------------
Income before the provisions for
credit losses and income taxes 6,276 5,658 5,007 3,229 2,945 2,376 1,784 1,450 1,242
Provision for credit losses 950 885 440 643 913 463 359 12 37
Provision for income taxes 2,116 1,900 1,903 1,130 936 856 525 548 532
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income 3,210 2,873 2,664 1,456 1,096 1,057 900 890 673
Preferred stock dividends 100 185 227 45 87 106 34 59 72
- ------------------------------------------------------------------------------------------------------------------------------------
Net income attributable
to common equity $ 3,110 $ 2,688 $ 2,437 $ 1,411 $ 1,009 $ 951 $ 866 $ 831 $ 601
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $166,026 $158,451 $146,914 $ 83,322 $ 82,366 $ 75,551 $ 45,860 $ 42,204 $ 40,041
Earning assets 214,323 203,306 188,204 84,240 83,224 76,383 79,027 72,398 64,598
Total assets 255,801 241,842 227,173 93,880 93,892 85,820 105,082 94,809 87,715
Deposits 169,267 161,547 153,986 99,733 96,543 96,332 48,718 45,173 37,371
Common equity 18,635 17,926 16,715 8,422 8,491 7,814 6,422 5,765 5,373
SELECTED FINANCIAL RATIOS
Return on average
common equity 16.69% 15.00% 14.58% 16.77% 11.90% 12.21% 13.48% 14.44% 11.22%
Expense-to-revenue/b/ 54.34 56.86 58.08 58.10 60.35 62.18 52.63 58.19 59.18
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ For comparability purposes, 1996 and 1995 amounts reflect BAC's business
sector allocation methodologies at December 31, 1997.
/b/ Excludes net other real estate owned expense, amortization of intangibles,
and expenses associated with trust preferred securities.
NM - Not meaningful.
30
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Wealth Management
Wealth Management encompasses a number of strategically significant businesses
serving individuals and institutions with sophisticated financial planning and
management needs. The range of capabilities represented in Wealth Management
includes institutional investment management supporting BAC's corporate and
commercial banking relationships, private banking, investment management, and
trust services for high-net-worth clients both in the U.S. and internationally.
Wealth Management's net income increased $10 million, or 15 percent, for 1997
compared with 1996. Noninterest income increased primarily due to higher trust
fees. Noninterest expense was up during 1997 due to higher compensation and
consultant expenses.
Net income for Wealth Management in 1996 increased $20 million from 1995. The
increase primarily resulted from higher net interest income and noninterest
income partially offset by increased noninterest expense. The increase in net
interest income primarily reflected loan growth. Noninterest income increased
due to growth in mutual fund and annuity revenues as well as higher trust fees.
Noninterest expense increased primarily due to higher performance-based pay.
All Other
This sector includes the results from corporate asset and liability management
activities (investment securities, federal funds purchased 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 BAC's Institutional Trust and Securities Services (ITSS) business,
which BAC had substantially divested by the end of the first quarter of 1996.
This sector's net income for 1997 decreased $73 million from the amount reported
for the comparable period a year ago. Net interest income decreased $59 million
due to differences in risk management and risk transfer pricing methodologies.
The transfer pricing process used to allocate the effects of hedging to the
appropriate business sectors leaves residual differences that contribute to the
change in net interest income. Noninterest income for 1996 included a $50
million pre-tax gain associated with the divestiture of the ITSS business. The
increase in noninterest expense was primarily related to charges associated with
multiple legal matters in 1997. In addition, noninterest expense in 1996
included expenses associated with the ITSS business.
- --------------------------------------------------------------------------------
BUSINESS SECTORS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31/a/
-----------------------------------------------------------------------------------------
Commercial Real Estate
Middle Market Banking Services
(dollar amounts in millions) 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 917 $ 866 $ 836 $ 438 $ 389 $ 406
Noninterest income 224 205 194 36 39 35
Noninterest expense 504 475 480 104 102 130
- ------------------------------------------------------------------------------------------------------------------------------------
Income before the provisions for
credit losses and income taxes 637 596 550 370 326 311
Provision for credit losses -- (32) 21 (52) (11) (62)
Provision for income taxes 255 254 230 194 131 176
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income 382 374 299 228 206 197
Preferred stock dividends 10 18 22 4 8 11
- ------------------------------------------------------------------------------------------------------------------------------------
Net income attributable
to common equity $ 372 $ 356 $ 277 $ 224 $ 198 $ 186
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $21,996 $19,567 $17,621 $9,264 $ 9,712 $9,645
Earning assets 22,063 19,612 17,629 9,296 9,730 9,662
Total assets 25,258 22,638 21,065 9,650 10,056 9,900
Deposits 7,742 7,048 7,264 2,409 2,067 1,592
Common equity 1,915 1,783 1,585 691 735 827
SELECTED FINANCIAL RATIOS
Return on average
common equity 19.44% 19.96% 17.57% 32.43% 26.95% 22.31%
Expense-to-revenue/b/ 40.72 42.48 43.64 25.19 29.00 31.30
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended December 31/a/
-----------------------------------------------------------------------------------------
Wealth Management All Other
(dollar amounts in millions) 1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 168 $ 162 $ 153 $ 118 $ 177 $ 525
Noninterest income 280 232 224 148 125 250
Noninterest expense 316 279 288 142 76 336
- ------------------------------------------------------------------------------------------------------------------------------------
Income before the provisions for
credit losses and income taxes 132 115 89 124 226 439
Provision for credit losses -- 1 1 -- 2 (20)
Provision for income taxes 56 48 42 (44) (17) 67
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income 76 66 46 168 241 392
Preferred stock dividends 3 6 6 4 7 10
- ------------------------------------------------------------------------------------------------------------------------------------
Net income attributable
to common equity $ 73 $ 60 $ 40 $ 164 $ 234 $ 382
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $ 4,450 $ 3,950 $ 3,470 $ 1,134 $ 652 $ 586
Earning assets 4,609 4,052 3,575 15,088 14,290 16,358
Total assets 5,161 4,586 4,151 16,770 15,861 18,522
Deposits 6,863 6,640 5,609 3,802 4,076 5,818
Common equity 477 438 405 708 714 711
SELECTED FINANCIAL RATIOS
Return on average
common equity 15.66% 14.01% 10.09% NM NM NM
Expense-to-revenue/b/ 64.48 65.83 71.29 NM NM NM
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Balance Sheet Review
Overview
At December 31, 1997, BAC's assets totaled $260.2 billion, up $9.4 billion from
year-end 1996. Growth in interest-earning assets, primarily trading account
assets and securities purchased under resale agreements, increased $3.3 billion
and $2.5 billion, respectively, from their 1996 levels. This increase in
interest-earning assets was largely funded by increases in securities sold under
repurchase agreements and federal funds purchased.
Total deposits increased $4.0 billion, or 2 percent, from year-end 1996.
Domestic deposits increased $4.4 billion while foreign deposits decreased $0.4
billion from year-end 1996. Interest-bearing domestic deposits increased $10.5
billion from 1996 primarily due to a $9 billion transfer from noninterest-
bearing deposits. The transfer occurred as part of an initiative to reduce
reserve requirements on noninterest-bearing deposits at the Federal Reserve
Bank. Excluding this transfer, interest-bearing and noninterest-bearing domestic
deposits would have increased by approximately $1.5 billion and $3 billion,
respectively.
For further information related to BAC's management of assets and liabilities,
as well as information on BAC's liquidity and capital, refer to the Risk
Management section on pages 44 -- 45 and the Liquidity Risk Management and
Capital Management sections on pages 49 -- 53.
Loan Portfolio Management
The Loan Portfolio Management section should be read in conjunction with the
credit quality and credit risk management sections. For information regarding
credit quality, refer to pages 38 -- 42. For information regarding credit risk
management, refer to page 44.
During 1997, increases in the total loan portfolio through new originations were
mostly offset by sales and securitizations. At December 31, 1997, BAC's loan and
lease portfolio totaled $167.1 billion, an increase of $1.7 billion from
year-end 1996. Increases that occurred in the domestic commercial loan and the
foreign loan portfolios were offset by a decline in domestic consumer loans, as
described more fully in the remainder of this section. The relative composition
of the loan portfolios has remained fairly constant, with domestic loans
comprising approximately 83 percent and 84 percent of the portfolio at year-ends
1997 and 1996, respectively.
- --------------------------------------------------------------------------------
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES--AVERAGE BALANCES AND RATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
- --------------------------------------------------------------------------------------------------------------------------
Rate based Rate based Rate based Rate based
on fair on amortized on fair on amortized
(dollar amounts in millions) Balance/a/ value/b/ cost/b/ Balance/a/ value/b/ cost/b/
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $ 1,418 6.51% 6.48% $ 1,440 6.72% 6.70%
Mortgage-backed securities 7,000 6.85 6.88 6,305 6.83 6.82
Other domestic securities 911 5.56 6.21 786 5.64 6.61
Foreign securities 2,605/c/ 8.31/d/ 8.05/d/ 2,852/c/ 9.69/d/ 9.19/d/
- --------------------------------------------------------------------------------------------------------------------------
$11,934 7.03% 7.05% $11,383 7.45% 7.42%
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31
1995
- --------------------------------------------------------------------------------------------------
Rate based Rate based
on fair on amortized
(dollar amounts in millions) Balance/a/ value/b/ cost/b/
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $ 1,659 6.49% 6.45%
Mortgage-backed securities 4,962 6.94 6.89
Other domestic securities 660 5.22 5.84
Foreign securities 2,487/c/ 11.17/d/ 10.10/d/
- -------------------------------------------------------------------------------------------------
$ 9,768 7.83% 7.64%
- -------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(dollar amounts in millions) Balance/a/ Rate/b/ Balance/a/ Rate/b/ Balance/a/ Rate/b/
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES
U.S. Treasury and other government agency securities $ 11 5.18% $ 33 4.95% $ 388 6.72%
Mortgage-backed securities 2,022 7.47 2,308 7.60 4,490 7.15
State, county, and municipal securities 353 7.66 416 7.57 445 7.89
Other domestic securities 54 6.86 99 7.28 178 7.62
Foreign securities 1,410 7.89 1,491 7.15 1,691 7.62
- ------------------------------------------------------------------------------------------------------------------------------------
$3,850 7.63% $4,347 7.42% $7,192 7.29%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Average rates are presented on a taxable-equivalent basis. The
taxable-equivalent adjustments are based on a marginal tax rate of 40%.
/c/ Average balances include nonaccrual assets.
/d/ Rates reflect interest received on nonaccrual debt-restructuring par bonds.
32
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
DOMESTIC CONSUMER LOANS
Domestic consumer loan outstandings at year-end 1997 declined $6.1 billion, or 8
percent, from year-end 1996, primarily due to decreases in residential first
mortgages and credit card receivables resulting from loan sales and
securitizations. These declines were partially offset by an increase in other
installment loans. New originations of residential first mortgages for the year
amounted to $16 billion but were more than offset by the sale of $12.5 billion
of mortgages, $0.6 billion related to the sale of BofA Hawaii, and $8.6 billion
of pay-offs and other activities from the portfolio, resulting in a net decrease
of $5.7 billion for 1997. At December 31, 1997, approximately 71 percent of the
residential real estate loans were secured by properties in California, compared
with 70 percent in 1996. For more information on the portfolio by geographic
area and loan type, refer to the table on page 34.
At year-end 1997, the credit card loan portfolio decreased $2.0 billion from its
1996 level, mainly due to securitizations of approximately $2.1 billion of
credit card receivables during the year. Excluding the accumulated effects of
the credit card securitizations of $3.6 billion and $1.5 billion at December 31,
1997 and 1996, respectively, this portfolio would have increased by $140 million
from year-end 1996, primarily outside of California.
The increase in other installment loans at year-end 1997 from year-end 1996 was
largely due to increases in manufactured housing loans and auto loans and
leases. Growth in auto loans and leases resulted primarily from originations in
the Western states, augmented by an expansion of these loans and leases in the
Northeast, Southeast, and Midwest regions.
Delinquent domestic consumer loans that are 60 days or more past due decreased
$85 million from year-end 1996 reflecting a lower level of delinquencies in two
large portfolios: residential first mortgages and residential junior mortgages.
Partially offsetting this decrease was an increase in delinquencies related to
manufactured housing. At December 31, 1997, the delinquency ratio for the credit
card portfolio increased 49 basis points from the 1996 ratio to 2.85 percent.
This ratio increase correlates to the upward trend in charge-offs within the
credit card portfolio.
TOTAL LOAN OUTSTANDINGS BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Northern California 9.0% 10.7%
Central California 5.4% 8.0%
Southern California 14.9% 18.8%
Other Western States 15.2% 21.2%
Other U.S. 38.4% 25.3%
Foreign 17.1% 16.0%
</TABLE>
- --------------------------------------------------------------------------------
DOMESTIC CONSUMER
LOAN DELINQUENCY INFORMATION/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(dollar amounts in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DELINQUENT CONSUMER LOANS
Residential first mortgages $417 $477 $642
Residential junior mortgages 44 62 90
Credit card 191 206 190
Other 137 129 100
- --------------------------------------------------------------------------------
$789 $874 $1,022
- --------------------------------------------------------------------------------
DELINQUENT CONSUMER
LOAN RATIOS/b/
Residential first mortgages 1.31% 1.27% 1.76%
Residential junior mortgages 0.30 0.42 0.67
Credit card 2.85 2.36 2.08
Other 0.66 0.67 0.62
- -------------------------------------------------------------------------------
1.06% 1.09% 1.36%
- -------------------------------------------------------------------------------
</TABLE>
/a/ 60 days or more past due.
/b/ Ratios represent delinquent balances expressed as a percentage of total
loans for that loan category.
For further information regarding BAC's domestic consumer loan delinquencies
refer to the table above.
DOMESTIC COMMERCIAL LOANS
Domestic commercial loan outstandings increased $5.8 billion, or 10 percent,
during 1997, reflecting growth in most commercial loan categories.
Commercial and industrial loans, the largest component of BAC's domestic
commercial loan portfolio, consists of loans made to large corporate and middle
market customers. At December 31, 1997, domestic commercial and industrial loans
totaled $36.6 billion, up $3.2 billion from year-end 1996. The increase in
commercial and industrial loans was primarily attributable to a combination of
BAC's successful efforts to diversify and expand its market share as well as to
increased loan demand from large corporate and middle market borrowers in
various industries throughout the U.S. Refer to the table on page 35 for more
information on commercial and industrial loans by industry type.
Included in BAC's commercial portfolio are mortgages on large commercial
properties, primarily in California, the Northwest, the Southwest, and the
Midwest states. At December 31, 1997, commercial loans secured by real estate
increased $0.4 billion from year-end 1996. Growth in this loan category resulted
from the improved California economy, increased expansion in the Northwest,
Southwest, and Midwest states and a general stabilization of the commercial real
estate market.
33
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
LOAN OUTSTANDINGS
- -----------------------------------------------------------------------------------------------------------------------------------
December 31
(in millions) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 31,749 $ 37,459 $ 36,572 $ 33,818 $ 30,483
Residential junior mortgages 14,847 14,743 13,777 13,589 12,847
Other installment 18,418 16,979 13,834 10,598 9,129
Credit card/a/ 6,697 8,707 9,139 8,020 7,474
Other individual lines of credit 1,937 1,948 1,847 1,736 1,901
Other 461 401 319 403 215
- ------------------------------------------------------------------------------------------------------------------------------------
74,109 80,237 75,488 68,164 62,049
COMMERCIAL:
Commercial and industrial 36,602 33,404 32,745 28,814 20,486
Loans secured by real estate 12,897 12,488 10,975 10,277 9,251
Financial institutions 3,485 3,109 2,834 2,872 2,170
Lease financing 2,892 2,542 1,927 1,814 1,715
Loans for purchasing or carrying securities 2,668 1,941 1,458 1,529 3,090
Construction and development loans
secured by real estate 2,206 2,252 3,153 3,616 4,418
Agricultural 1,824 1,696 1,737 1,840 1,679
Other 1,896 1,270 1,574 1,623 1,478
- ------------------------------------------------------------------------------------------------------------------------------------
64,470 58,702 56,403 52,385 44,287
138,579 138,939 131,891 120,549 106,336
FOREIGN
Commercial and industrial 18,484 16,394 15,003 13,496 11,448
Banks and other financial institutions 3,904 3,958 3,386 2,516 2,279
Governments and official institutions 840 970 1,020 896 3,429
Other 5,304 5,154 4,073 3,455 3,064
- ------------------------------------------------------------------------------------------------------------------------------------
28,532 26,476 23,482 20,363 20,220
Total loans 167,111 165,415 155,373 140,912 126,556
Less: Allowance for credit losses 3,500 3,523 3,554 3,690 3,508
- ------------------------------------------------------------------------------------------------------------------------------------
$163,611 $161,892 $151,819 $137,222 $123,048
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Excludes $3,621 million and $1,471 million of securitized credit card
receivables at December 31, 1997 and December 31, 1996, respectively.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DOMESTIC CONSUMER LOANS BY GEOGRAPHIC AREA AND LOAN TYPE AS OF DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Residential
First Junior Manufactured Other Total
(in millions) Mortgages Mortgages Housing Auto Credit Card Consumer Consumer
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $23,161 $ 9,775 $ 884 $3,010 $3,064 $2,135 $42,029
Washington 1,146 1,956 345 1,693 1,166 817 7,123
Arizona 792 1,007 252 550 155 93 2,849
Texas 729 104 673 839 232 114 2,691
Oregon 844 566 147 240 201 97 2,095
Other/a/ 5,077 1,439 6,520 1,333 1,879 1,074 17,322
- ------------------------------------------------------------------------------------------------------------------------------------
$31,749 $14,847 $8,821 $7,665 $6,697 $4,330 $74,109
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ No other state individually exceeded 2 percent of total domestic consumer
loans.
34
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
DOMESTIC COMMERCIAL AND INDUSTRIAL LOANS
BY INDUSTRY TYPE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Entertainment $ 3,143 $ 2,974
Credit institutions and other finance 2,437 2,794
Real estate 2,190 1,972
Energy 2,033 1,395
Business services 1,909 1,431
Health care 1,905 1,847
Electronics 1,832 1,406
Motor vehicle -- wholesale/retail 1,754 1,390
Agribusiness 1,621 1,388
Construction/contractors 1,364 1,285
Industrial machinery 1,313 1,026
Personal and food services 1,277 1,349
Primary metals 1,158 1,027
Forest products 1,141 984
Consumer beverages and food 1,112 1,035
Department/specialty stores 1,109 1,063
Grocery/drug stores 985 949
Utilities 958 1,001
Telecommunications 908 697
Printing and publishing 814 762
Chemicals 744 758
Other/a/ 4,895 4,871
- --------------------------------------------------------------------------------
$36,602 $33,404
- --------------------------------------------------------------------------------
</TABLE>
/a/ For each period presented, no other industry type individually exceeded
2 percent of total domestic commercial and industrial loans.
FOREIGN LOANS
Total foreign loan outstandings increased $2.1 billion, or 8 percent, from
year-end 1996, primarily in the commercial and industrial loan portfolio.
Part of this increase is reflected in the growth of cross-border
outstandings in Mexico during 1997 as shown in the table on the next page.
This growth reflects the improvement in the Mexican economy and resulted
from an active marketing effort with strong existing and newly developed
relationships that enabled BAC to expand its client base and to further
diversify portfolio risk over a broader base of customers and industries.
RECENT INTERNATIONAL DEVELOPMENTS
A number of countries in Asia, including Korea (discussed below), are
experiencing difficulty due to a combination of structural problems and
market reaction to increased awareness of those problems. While each
country's situation is different, many share the common threads of: (1)
government actions which restrain normal functioning of free markets in
physical goods, capital or currencies, (2) perceived weakness of the banking
systems, and (3) perceived overvaluation of the currencies. Because some
individual and institutional sources of capital both within and outside of
some of these countries have reacted to this situation by moving capital out
of the countries or reducing the flow of capital into these countries, there
are now liquidity problems as well as structural problems in some of these
countries.
These problems will cause some of BAC's customers to have difficulty
repaying credit extensions. We anticipate some increase in problem loans
which may be reflected in an increase in nonaccrual assets, provision for
credit losses, and actual charge-offs. In addition, the economies of these
countries will grow more slowly than had been generally expected and in some
cases they will experience actual recession. This will make it more
difficult for BAC to generate revenue from Asia. At year-end 1997 those
effects on BAC were not substantial, but this situation may change.
In addition, and closely related to the matters described above, the
currency and securities markets related to these countries were far more
volatile than usual. Such market conditions provide both increased
opportunities for trading gains and increased risk of trading losses.
It should be noted that Japan, while in a very different situation than many
of the other countries, itself is experiencing slow growth, a strained
banking system and much internal discussion as to the proper pace of market
reform. As noted on pages 36 -- 37, BAC has considerable business in Japan.
It is too soon to determine the ultimate impact on BAC's financial results
from the ongoing developments in Japan.
BAC management believes that if the industrialized countries continue to
support orderly markets and structural reform through their individual
actions and through supranational agencies, if the countries of Asia
continue to implement structural reform, and if all countries avoid
protectionist and isolationist policies and practices, this period of
difficulty should end in approximately two years (with country by country
variations) and the countries of Asia which have done best at the structural
reforms will be stronger than before. BAC expects that Asia will remain an
important market for the financial services which it provides and intends to
remain active in that market. BAC has already adjusted its activities
(including its borrower selection) in view of the risks and opportunities
discussed above, and has increased its foreign credit reserves due to those
risks as more fully discussed on pages 38-40. BAC will continue to adjust
its activities on a country by country basis depending on managerial
judgment of the likely developments in each country and will take such
actions on credit reserves as is appropriate.
Of the countries experiencing liquidity constraints, BAC had exposure to
South Korea in excess of one percent of total assets as of December 31,
1997. BAC's total cross-border outstandings to South Korea at December 31,
1997 amounted to $2.8 billion and represented 1.09 percent of total assets.
Included in these outstandings were $1 billion in short-term trade finance
borrowings and $208 million in net local currency outstandings. Gross local
currency outstandings were $229 million. In addition to the cross-border
outstandings, BAC had derivative and foreign exchange instruments to South
Korean counterparties whose fair value was $335 million, which was equal to
its credit exposure, at December 31, 1997.
35
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CROSS-BORDER OUTSTANDINGS EXCEEDING ONE PERCENT OF TOTAL ASSETS/a/b/c/d/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cross-Border
Total Outstandings
Public Private Cross-Border as a Percentage
(dollar amounts in millions) December 31 Sector/e/ Banks/e/ Sector/e/ Outstandings of Total Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOUTH KOREA 1997 $ 1 $1,193 $1,644 $2,838 1.09%
1996 -- 1,327 1,453 2,780 1.11
1995 106 1,189 1,143 2,438 1.05
Mexico 1997 1,096 217 1,472 2,785 1.07
1996 674 178 465 1,317 0.53
1995 803 114 453 1,370 0.59
Japan 1997 10 596 2,020 2,626 1.01
1996 23 1,285 1,852 3,160 1.26
1995 7 2,253 2,546 4,806 2.07
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Cross-border outstandings include the following assets, primarily in U.S.
dollars, with borrowers or customers in a foreign country: loans, accrued
interest, acceptances, interest-bearing deposits with other banks, trading
assets, available-for-sale securities, held-to-maturity securities, other
interest-earning investments, and other monetary assets. Local currency
outstandings that are neither hedged nor funded by local currency borrowings
are included in cross-border outstandings. Guarantees of outstandings of
borrowers of other countries are considered outstandings of the guarantor.
Loans made to, or deposits placed with, a branch of a foreign bank located
outside the foreign bank's home country are considered loans or deposits
with the country in which the foreign bank is headquartered. Outstandings of
a country do not include amounts of principal or interest that are supported
by written, legally enforceable guarantees by guarantors from other
countries or the amount of outstandings to the extent that they are secured
by tangible, liquid collateral held and realizable by BAC outside the
country.
/b/ At December 31, 1997, total unfunded commitments of the countries listed,
whose unfunded commitments exceeded 10 percent of their respective cross-
border outstandings, were as follows: Mexico -- $1,133 million and
Japan -- $643 million.
/c/ Included in the cross-border outstandings of the countries listed are loans
and other interest-bearing assets on nonaccrual status of $32 million for
Mexico at December 31, 1996 and $17 million for Japan at December 31, 1995.
/d/ No country excluded from this table had cross-border outstandings between
0.75 percent and 1.00 percent of total assets for any of the periods
presented except as follows: Spain -- $2,571 million, Brazil -- $2,202
million, and Canada -- $2,028 million at December 31, 1997, and $2,000
million for Spain at December 31, 1996.
Not included in cross-border outstandings with Mexico were par bonds issued
by the government of Mexico with a face value of $1,228 million at December
31, 1997 and $1,341 million at December 31, 1996 and 1995. The par bonds had
a carrying value of $1,024 million, $1,202 million and $1,162 million at
December 31, 1997, 1996, and 1995, respectively. At December 31, 1997, the
par bonds had a total fair value of approximately $1,023 million. Certain of
these par bonds were recorded in available-for-sale securities and carried
at their fair value of $391 million at December 31, 1997, while the
remainder of these par bonds were recorded in held-to-maturity securities at
their amortized cost. Principal repayment of these par bonds is
collateralized by zero-coupon U.S. Treasury securities that, at maturity in
2019, will have a redemption value equal to the face value of the par bonds.
At December 31, 1997, this collateral had a fair value of approximately $329
million. Future interest payments for a rolling eighteen-month period are
also collateralized by additional U.S. dollar-denominated securities
permitted by the agreement. Mexico's cross-border outstandings also excluded
additional loans of $30 million at December 31, 1997, 1996, and 1995, which
were fully collateralized at maturity by separate zero-coupon U.S. Treasury
securities.
/e/ Sector definitions are based on Federal Financial Institutions Examination
Council instructions for preparing the Country Exposure Report.
No cross-border outstandings to South Korea were reported as restructured at
December 31, 1997, and there were no nonaccrual assets to South Korean
borrowers at that date.
During the fourth quarter of 1997, the government of South Korea and the IMF
reached an agreement in which the IMF agreed to provide financial support in
return for the government's implementation of monetary and other economic
reforms. In addition, many of the country's commercial bank lenders agreed
to roll over their debt. Both of these actions were an effort to relieve the
country's short-term liquidity pressures.
- --------------------------------------------------------------------------------
SUMMARY OF CROSS-BORDER OUTSTANDINGS
WITH SOUTH KOREA
- --------------------------------------------------------------------------------
(in millions) 1997
- --------------------------------------------------------------------------------
Balance, beginning of year $2,780
Net change in short-term cross-border
outstandings 94
Changes in long-term cross-border
outstandings:
New principal 40
Principal repayments (76)
- --------------------------------------------------------------------------------
Balance, end of year $2,838
- --------------------------------------------------------------------------------
Subsequent to year-end 1997, South Korea reached an agreement in principle
with a group of international creditors whereby international creditors will
be able, on a voluntary basis, to exchange certain loans to South Korean
financial institutions which mature in 1998 for new loans to those
institutions. These new loans will be guaranteed by the South Korean
government and will mature in one, two, or three years. At the date of the
agreement in principle, a target date of the end of March was set for the
exchange. BAC intends to use this program for the eligible loans which it
holds.
REGIONAL FOREIGN EXPOSURES
Through its credit and market risk management activities, BAC has been
devoting special attention to those countries that have been negatively
impacted by increasing global economic pressures. This includes special
attention to those Pacific Rim countries that are currently experiencing
currency and other economic problems. For more information on BAC's risk
management processes, refer to pages 44-49.
36
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
REGIONAL FOREIGN EXPOSURE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in millions) Year Ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Cross-Border Loans/f/ Other
Total ----------------------- Net Local ------------------------
Cross-Border Medium-and Currency Medium-and
Region/Country Outstandings/a/ Short-Term Long-Term Outstandings/b/ Securities/c/ Short-Term/d/ Long-Term
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASIA
China $ 653 $ 383 $ 58 $ 2 $ -- $ 160 $ 50
Hong Kong 1,328 498 202 345 -- 104 179
India 1,191 142 212 546 -- 268 23
Indonesia 684 136 230 81 -- 237 --
Japan 2,626 205 207 1,442 -- 722 50
Korea (South) 2,838 691 87 208 -- 1,727 125
Malaysia 532 249 85 156 -- 11 31
Pakistan 351 2 6 312 -- 31 --
Philippines 571 184 67 -- 50 254 16
Singapore 1,107 322 54 624 -- 64 43
Taiwan 865 565 182 -- -- 100 18
Thailand 881 436 182 166 -- 95 2
Other 73 50 8 10 -- 5 --
- ------------------------------------------------------------------------------------------------------------------------------------
13,700 3,863 1,580 3,892 50 3,778 537
CENTRAL AND EASTERN EUROPE
Russia Federation 426 33 5 -- 2 385 1
Other 286 41 77 10 -- 153 5
- ------------------------------------------------------------------------------------------------------------------------------------
712 74 82 10 2 538 6
LATIN AMERICA
Argentina 1,366 288 247 354 188 253 36
Brazil 2,202 741 240 791 47 329 54
Chile 1,567 339 742 476 -- -- 10
Colombia 584 112 287 144 19 15 7
Mexico 3,839 803 831/e/ 340 1,179 197 489
Venezuela 385 73 -- -- 256 37 19
Other 138 -- 4 -- 87 46 1
- ------------------------------------------------------------------------------------------------------------------------------------
10,081 2,356 2,351 2,105 1,776 877 616
Total $24,493 $6,293 $4,013 $6,007 $1,828 $5,193 $1,159
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes the following assets, primarily in U.S. dollars, with borrowers in
a foreign country: loans, accrued interest, acceptances, interest-bearing
deposits in banks, trading account assets, available-for-sale and held-to-
maturity securities, other interest-bearing investments, and other monetary
assets. Amounts also include local currency outstandings that are not funded
by local currency borrowings, and available-for-sale and held-to-maturity
securities that are collateralized by U.S. Treasury securities. Amounts do
not include unrealized gains on off-balance-sheet instruments which totaled
$10,929 million for consolidated BAC. For the countries in this table, these
gains totaled $3,429 million, including $1,429 and $527 million for Japan
and Thailand, respectively. No other country individually exceeded $400
million in total unrealized gains.
/b/ Represents local currency assets in a foreign country that are neither
hedged nor funded by local currency borrowings. These amounts do not
necessarily reflect the results of BAC's foreign currency management
activities and therefore, BAC's net foreign exchange exposures in the
respective currencies are typically significantly smaller. Total local
currency liabilities for the countries in the table amounted to $6,017
million, including $3,464 million for Hong Kong, $760 million for Taiwan,
$514 million for India, $379 million for Singapore, and $262 million for
Malaysia. No other country exceeded $200 million in local currency
liabilities.
/c/ Amounts represent available-for-sale and held-to-maturity securities and
include securities that are collateralized by U.S. Treasury securities as
follows: Mexico -- $1,024 million, Venezuela -- $234 million, Philippines --
$20 million, and Latin America Other -- $87 million. Held-to-maturity
securities amounted to $1,141 million with a fair value of $1,165 million.
/d/ Includes the following assets with borrowers in a foreign country: accrued
interest receivable, acceptances, interest-bearing deposits in banks,
trading account assets, other interest-earning investments, and other short-
term monetary assets.
/e/ Includes a $30 million loan that is collateralized by zero-coupon U.S.
Treasury securities.
/f/ Total loans include nonaccrual loans of $110 million.
In connection with its efforts to maintain a diversified portfolio, BAC
limits its exposure to any one geographic region or country and monitors
this exposure on a continuous basis. The table above sets forth selected
cross-border regional exposures of BAC as of December 31, 1997, including
net local currency assets. Exposure represents loans, securities including
restructured debt, and other monetary assets, and also includes net local
currency monetary assets that have not been funded through local currency
borrowings. The table above is different than previous years' disclosures,
which were limited to emerging market exposures. This new table was adopted
to portray a more comprehensive picture of BAC's foreign exposures in
selected regions.
As part of its efforts to monitor these regional exposures, BAC manages its
currency risks, including its local currency activities in these foreign
countries. The result of this foreign currency management is that BAC's net
unhedged position in any given foreign currency is typically significantly
smaller than the amounts set forth as net local currency outstandings in the
table. For more information regarding currency risks, refer to page 48.
37
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR CREDIT LOSSES
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
(in millions) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $3,523 $3,554 $3,690 $3,508 $3,921
CREDIT LOSSES
Domestic consumer:
Residential first mortgages 21 42 49 49 23
Residential junior mortgages 47 70 74 88 104
Credit card 511 463 386 382 488
Other installment 395 354 174 164 200
Other individual lines of credit 88 79 69 59 90
Other 23 15 9 8 10
Domestic commercial:
Commercial and industrial 119 132 139 47 230
Loans secured by real estate 23 22 50 52 91
Financial institutions -- 45 1 2 18
Lease financing 4 1 1 1 9
Loans for purchasing or carrying securities -- -- 5 -- 2
Construction and development loans secured by real estate 7 61 36 86 291
Agricultural 1 2 3 8 7
Foreign 66 39 15 42 36
- ----------------------------------------------------------------------------------------------------------------------------
Total credit losses 1,305 1,325 1,011 988 1,599
CREDIT LOSS RECOVERIES
Domestic consumer:
Residential first mortgages 1 1 1 4 1
Residential junior mortgages 14 17 16 18 14
Credit card 38 37 41 54 53
Other installment 156 163 72 73 85
Other individual lines of credit 8 9 9 11 12
Other 5 4 3 3 3
Domestic commercial:
Commercial and industrial 42 82 83 94 111
Loans secured by real estate 8 15 16 25 34
Financial institutions 79 -- 5 16 2
Lease financing 2 3 4 6 6
Loans for purchasing or carrying securities 4 1 -- -- --
Construction and development loans secured by real estate 17 11 66 82 87
Agricultural 3 4 7 8 10
Foreign 27 60 99 124 66
- ----------------------------------------------------------------------------------------------------------------------------
Total credit loss recoveries 404 407 422 518 484
Total net credit losses 901 918 589 470 1,115
Provision for credit losses 950 885 440 460 803
Allowance related to mergers and acquisitions/a/ -- -- 3 241 12
Other net additions (deductions) (72)/b/ 2 10 (49) (113)/c/
- ----------------------------------------------------------------------------------------------------------------------------
Balance, End of Year $3,500 $3,523 $3,554 $3,690 $3,508
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents the addition of consummation date allowances for credit losses of
Arbor National Holdings, Inc. in 1995, Continental and Liberty Bank of $238
million and $3 million, respectively, in 1994, and First Gibraltar in 1993.
/b/ Includes allowance for credit losses associated with the sale of SPFS and
BofA Hawaii of $60 million and $8 million, respectively.
/c/ Due to the transfer of certain assets net of their related allowance to
other assets, the allowance for credit losses was reduced by $128 million
during 1993 which included $88 million of regulatory-related allocated
transfer risk reserve (ATRR). Subsequent to the transfer the allowance did
not include any ATRR.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses at December 31, 1997 was $3,500 million, or 2.09
percent of total loan outstandings, compared with $3,523 million, or 2.13
percent, at December 31, 1996. Excluding outstandings in the residential first
mortgage loan portfolio and the portion of the allowance associated with these
outstandings, the ratios were 2.52 percent and 2.67 percent of loans at year-end
1997 and 1996, respectively. The ratio of the allowance for credit losses to
total nonaccrual assets was 389 percent at December 31, 1997, up from 315
percent at December 31, 1996.
The table on the bottom of page 39 shows the allocation of the allowance for
credit losses by loan type. This allocation is based on management's judgment of
potential losses in the respective loan portfolios. While management has
allocated the allowance to various portfolio segments, it is general in nature
and is available for the loan portfolio in its entirety.
38
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
ALLOWANCE FOR CREDIT LOSSES AS A PERCENTAGE OF NONACCRUAL ASSETS
1993 1994 1995 1996 1997
----------------------------------------
122% 177% 188% 315% 389%
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 consider results obtained from statistical models
using historical loan performance data.
In part, the allowance amounts are calculated using migration models that are
based on historical loss experience. In addition, the credit officer responsible
for each portfolio segment makes adjustments based on qualitative evaluations of
individual classified assets, knowledge of portfolio segment conditions, and
on the officer's judgment of factors that are expected to influence the future
performance of the portfolio. These factors include geographic and portfolio
concentrations, new products or markets, evaluation of the changes in the
historical loss experience component, and projections of this component into the
current and future periods based on current knowledge and conditions.
The Composition of Allowance for Credit Losses table below displays how the
allowance for credit losses associated with special mention and classified
assets is determined by combining the historical loss experience component with
the credit management allocated component. The statistical model that BAC uses
in calculating the historical loss experience component reflects the portfolio
experience over a full economic cycle.
- --------------------------------------------------------------------------------
COMPOSITION OF ALLOWANCE
FOR CREDIT LOSSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention
and classified:
Migration model
benchmark $ 353 $ 349 $ 506 $ 516 $ 475
Qualitative credit
management
evaluation 592 426 377 428 770
- --------------------------------------------------------------------------------
Total special mention
and classified 945 775 883 944 1,245
Other:
Domestic consumer 1,432 1,414 1,247 1,059 1,072
Domestic commercial 282 252 229 223 151
Foreign 591 300 300 270 165
- --------------------------------------------------------------------------------
Total allocated 3,250 2,741 2,659 2,496 2,633
Unallocated 250 782 895 1,194 875
- --------------------------------------------------------------------------------
$3,500 $3,523 $3,554 $3,690 $3,508
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES BY LOAN TYPE/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
of Loan of Loan of Loan of Loan of Loan
(dollar amounts in millions) Allowance Category Allowance Category Allowance Category Allowance Category Allowance Category
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic consumer:
Residential first mortgages $ 86 0.27% $ 110 0.29% $ 115 0.31% $ 91 0.27% $ 55 0.18%
Residential junior mortgages 112 0.75 165 1.12 177 1.28 186 1.37 152 1.18
Credit card 411 6.13 385 4.42 394 4.31 344 4.29 425 5.69
Other consumer 822 3.95 755 3.91 561 3.51 438 3.44 440 3.91
Domestic commercial:
Commercial and industrial/b/ 513 1.25 528 1.44 458 1.28 396 1.24 368 1.47
Loans secured by real estate 189 1.46 208 1.67 140 1.28 166 1.62 165 1.78
Financial institutions 11 0.32 4 0.12 10 0.37 6 0.21 8 0.38
Lease financing 32 1.11 45 1.79 48 2.51 51 2.81 48 2.81
Construction and development
loans secured by real
estate 48 2.16 73 3.26 293 9.28 389 10.76 611 13.83
Agricultural 21 1.15 43 2.53 35 1.99 38 2.07 39 2.30
Foreign 1,005 3.52 425 1.61 428 1.82 391 1.92 322 1.59
Unallocated 250 -- 782 -- 895 -- 1,194 -- 875 --
- ------------------------------------------------------------------------------------------------------------------------------------
$3,500 2.09% $3,523 2.13% $3,554 2.29% $3,690 2.62% $3,508 2.77%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes the allowance for credit losses on impaired loans of $81 million
and $115 million at December 31, 1997 and 1996, respectively. 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.
/b/ Includes the allowance for credit losses for commercial and industrial
loans, loans for purchasing or carrying securities, and other commercial
loans.
39
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
After an allowance has been established for the loan portfolio segments, credit
management determines an unallocated portion of the allowance for credit losses
after reviewing factors such as the general economic conditions, recognition of
specific regional and international geographic concerns, and trends in portfolio
growth. When events occur that allow credit management to more clearly identify
the risks in the portfolio, the unallocated portion of the allowance for credit
losses may be reallocated. The decline in the unallocated portion of the
allowance for credit losses in 1997 resulted from a reallocation to address
specific portfolio segments, primarily to the foreign component due to the
foreign transfer risk in Asia and emerging markets globally. See page 35 for
further discussion on recent international developments.
The special mention and classified loans referred to in the table on page 39
include all loans that have been internally risk rated as "special mention,"
"substandard," or "doubtful." Special mention assets are potentially weak, as
the borrower has begun to exhibit deteriorating trends, which if not corrected,
could jeopardize repayment of the loan and result in a "substandard"
classification.
Classified assets include those that are deemed "substandard" or "doubtful."
Substandard assets have a well-defined weakness, which if not corrected,
jeopardizes the full satisfaction of the debt. An asset classified as "doubtful"
has critical weaknesses that make full collection improbable. However, because
of pending events that may work to strengthen the asset, the amount and timing
of the possible loss cannot be determined. BAC's actual historical loss
experience since 1993 indicates ultimate loss rates for "special mention,"
"substandard," and "doubtful" loans of approximately 2 percent, 6 percent, and
34 percent, respectively.
Net credit losses totaled $901 million in 1997, a decrease of $17 million from
1996. The decrease related to the domestic commercial portfolio and was offset
by increases associated with the domestic consumer and foreign portfolios.
Domestic commercial net credit losses decreased $148 million from 1996,
reflecting a large recovery from a financial institution borrower as an outcome
of an asset sale, and an overall decrease in domestic commercial credit losses
of $109 million.
Domestic consumer net credit losses were $863 million in 1997, an increase of
$71 million from 1996. This increase was primarily in the consumer installment
and credit card categories. Growth in the consumer other installment portfolio,
primarily manufactured housing loans, resulted in higher charge-offs. Higher
levels of personal bankruptcy filings contributed to increased charge-offs in
the credit card portfolio.
Net credit losses in the foreign loan portfolio were $39 million in 1997, up $60
million from a net recovery of $21 million in 1996. This increase was primarily
due to credit losses of $48 million in Asia.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NET CREDIT LOSSES (RECOVERIES) AS A PERCENTAGE OF AVERAGE LOAN OUTSTANDINGS
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic consumer:
Residential first mortgages 0.06% 0.11% 0.14% 0.14% 0.07%
Residential junior mortgages 0.22 0.37 0.42 0.53 0.67
Credit card 6.07 4.82 4.19 4.50 5.81
Other installment 1.32 1.25 0.86 0.56 0.74
Other individual lines of credit 4.12 3.75 3.31 0.58 0.93
Other 4.34 3.56 1.84 1.25 2.69
Domestic commercial:
Commercial and industrial 0.23 0.15 0.18 (0.20) 0.58
Loans secured by real estate 0.12 0.08 0.32 0.29 0.59
Financial institutions (2.49) 1.58 (0.17) (0.64) 0.80
Lease financing 0.10 (0.11) (0.16) (0.30) 0.20
Loans for purchasing or carrying securities (0.22) (0.11) 0.36 -- 0.11
Construction and development loans secured by real estate (0.46) 1.77 (0.89) 0.10 3.57
Agricultural (0.15) (0.14) (0.23) -- (0.23)
Total domestic 0.62 0.70 0.54 0.50 1.09
Foreign 0.14 (0.09) (0.39) (0.44) (0.16)
Total loans 0.54 0.58 0.40 0.37 0.89
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC LOANS
Consumer:
Residential
first mortgages $ 345 $ 354/a/ $ 311 $ 319 $ 406
Residential
junior mortgages 43 59/a/ 72 56 49
Other 5 2 2 7 4
Commercial:
Commercial
and industrial 150 241 511 420 457
Loans secured
by real estate 104 206 280 347 570
Financial institutions 41 -- 46 3 64
Lease financing 5 1 -- 1 18
Construction and
development loans
secured by real estate 30 95 495 680 1,037
Agricultural 18 28 29 31 49
- -------------------------------------------------------------------------------
741 986 1,746 1,864 2,654
FOREIGN LOANS,
PRIMARILY
COMMERCIAL 156 109 142 215 232
Other interest-bearing
assets $ 2 23 3 1 --
- -------------------------------------------------------------------------------
$ 899/b/ $1,118/b/ $1,891/b/ $2,080/b/ $2,886/b,c/
- -------------------------------------------------------------------------------
</TABLE>
/a/ Reflects the effect of a change in the past due period on nonaccrual loans,
which is discussed in the Nonperforming Assets section.
/b/ Excludes certain nonaccrual debt-restructuring par bonds and other
instruments that were included in available-for-sale and held-to-maturity
securities of $0.3 million, $67 million, $62 million, and $441 million at
December 31, 1997, 1996, 1995, and 1994 respectively. Also excludes certain
other nonaccrual loans and other instruments issued by various governments
of $1 million, $8 million, and $196 million at December 31, 1995, 1994, and
1993 respectively, that were included in other assets at the lower of cost
or fair value.
/c/ Excludes nonaccrual assets that were identified for accelerated disposition
with carrying values prior to reclassification to other assets of $0.6
billion at December 31, 1993. These nonaccrual assets were included in other
assets at the lower of cost or fair value.
Nonperforming Assets
Nonperforming assets include assets that are on nonaccrual status and other real
estate owned (OREO). Total nonaccrual assets decreased $219 million, or 20
percent, from year-end 1996. This decrease reflected improvements in most
segments of the domestic loan portfolio, particularly in commercial and
industrial loans, construction and development loans secured by real estate, and
commercial loans secured by real estate. These improvements resulted primarily
from payments on nonaccrual loans. Other significant factors that contributed to
the decrease were the restoration of nonaccrual loans to accrual status and
charge-offs. Partially offsetting this overall decline was a large domestic
financial institution loan that was placed on nonaccrual status during the
second half of 1997 and an increase in foreign nonaccrual loans. The increase in
foreign nonaccrual loans was concentrated in Asia primarily due to the
previously discussed economic pressures in this area.
- --------------------------------------------------------------------------------
ANALYSIS OF CHANGE IN NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 1,118 $ 1,891 $ 2,080
Additions:
Loans placed on
nonaccrual status 582 505 1,432
Leases acquired -- 34 --
Other -- 144/a/ --
Deductions:
Sales (150) (130) (35)
Restored to accrual status (178) (360) (399)
Foreclosures (9) (25) (113)
Charge-offs (134) (237) (188)
Other, primarily payments (330) (704) (886)
- --------------------------------------------------------------------------------
Balance, End of Year $ 899 $ 1,118 $ 1,891
- --------------------------------------------------------------------------------
</TABLE>
/a/ Reflects the effect of a change in the past due period on nonaccrual loans,
which is discussed in the Nonperforming Assets section.
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 from 180 days to
90 days. As a result of this change, nonaccrual loans increased by $144 million,
while loans past due 90 days or more and still accruing interest decreased by
the same amount in the fourth quarter of 1996.
NONACCRUAL ASSETS AT YEAR END
(in millions of dollars)
1993 1994 1995 1996 1997
-----------------------------------------------
$2,886 $2,080 $1,891 $1,118 $ 899
41
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CASH INTEREST PAYMENTS ON NONACCRUAL ASSETS BY LOAN TYPE/a/
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 1997
----------------------------------------------------------------------------------
Contractual Cumulative Nonaccrual Book as a
Principal Cumulative Interest Applied Book Percentage of
(dollar amounts in millions) Balance Charge-offs to Principal Balance Contractual
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 346 $ 1 $-- $345 99%
Residential junior mortgages 43 -- -- 43 100
Other consumer 7 2 -- 5 71
Commercial:
Commercial and industrial 472 278 44 150 32
Loans secured by real estate 205 81 20 104 51
Financial institutions 45 2 2 41 91
Lease financing 5 -- -- 5 100
Construction and development
loans secured by real estate 49 16 3 30 61
Agricultural 31 7 6 18 58
- ---------------------------------------------------------------------------------------------------------------------------
1,203 387 75 741 62
FOREIGN, PRIMARILY
COMMERCIAL 282 121 5 156 55
Other interest-bearing assets 2 -- -- 2 100
- ---------------------------------------------------------------------------------------------------------------------------
$1,487 $508 $80 $899 60%
CASH YIELD ON AVERAGE TOTAL
NONACCRUAL BOOK BALANCE
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended December 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 $338 $16 $-- $16
Residential junior mortgages 49 2 -- 2
Other consumer 2 -- -- --
Commercial:
Commercial and industrial 193 10 12 22
Loans secured by real estate 142 14 5 19
Financial institutions 14 12 1 13
Lease financing 4 -- -- --
Construction and development
loans secured by real estate 60 8 2 10
Agricultural 22 4 2 6
- ------------------------------------------------------------------------------------------
824 66 22 88
FOREIGN, PRIMARILY
COMMERCIAL 98 4 4 8
Other interest-bearing assets 5 -- -- --
- ------------------------------------------------------------------------------------------
$927 $70 $26 $96
CASH YIELD ON AVERAGE TOTAL
NONACCRUAL BOOK BALANCE 10.37%
- ------------------------------------------------------------------------------------------
</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.
Loans past due 90 days or more and still accruing interest decreased $32 million
in 1997. Approximately 93 percent of these loans were from the domestic consumer
portfolio, of which 68 percent were from the credit card portfolio. The
decreases in the commercial loan sector were primarily due to loans being
restored to current status.
The improvement in BAC's credit quality during 1997 was also reflected in BAC's
nonperforming asset ratios. At December 31, 1997, the ratio of nonaccrual loans
to total loans was 0.54 percent, down from 0.66 percent at December 31, 1996. In
addition, the ratio of nonperforming assets (comprised of nonaccrual assets and
OREO) to total assets declined 17 basis points from year-end 1996 to 0.42
percent at December 31, 1997.
OREO, which is recorded in other assets, primarily includes properties acquired
through foreclosure or in full or partial satisfaction of loans. OREO was $205
million at December 31, 1997, an increase of $8 million from year-end 1996. At
year-ends 1997 and 1996, the aggregate fair value of properties included in OREO
represented approximately 114 percent and 123 percent, respectively, of their
net carrying value.
- --------------------------------------------------------------------------------
LOANS PAST DUE 90 DAYS OR MORE
AND STILL ACCRUING INTEREST
- --------------------------------------------------------------------------------
December 31
(in millions) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
DOMESTIC
Consumer:
Residential first mortgages $ -- $ --/a/ $180 $133 $153
Residential junior mortgages -- --/a/ 12 23 23
Other consumer 189 186 162 136 152
Commercial:
Commercial and industrial 7 29 20 25 20
Loans secured by real estate 4 5 1 54 138
Financial institutions -- -- 16 16 --
Lease financing -- -- 1 1 --
Construction and
development loans
secured by real estate -- 12 -- 38 86
Agricultural -- 1 -- 8 --
- --------------------------------------------------------------------------------
200 233 392 434 572
FOREIGN 3 2 19 2 6
- --------------------------------------------------------------------------------
$203 $235 $411 $436 $578
- --------------------------------------------------------------------------------
/a/ Reflects the effect of a change in the past due period on nonaccrual loans,
which is discussed in the Nonperforming Assets section.
42
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Off-Balance-Sheet Financial Instruments
In the ordinary course of business, BAC enters into various types of
transactions that involve off-balance-sheet financial instruments. These include
credit-related financial instruments and, interest rate, foreign exchange,
equity, and credit derivative financial instruments.
Credit-Related Financial Instruments
Credit-related financial instruments include commitments to extend credit,
standby letters of credit, and commercial letters of credit. BAC makes
commitments to extend credit to a wide range of customers as part of its ongoing
lending operations. Additionally, BAC issues standby letters of credit to ensure
performance or financial obligations of customers. BAC generally enters into
commercial letters of credit to offer short-term financing and facilitate
domestic and foreign trade transactions for customers.
Derivative Financial Instruments
BAC uses interest rate, foreign exchange, equity, and credit derivative
financial instruments in both its trading and asset and liability management
activities. BAC uses commodity derivative financial instruments solely in its
trading activities. Interest rate, foreign exchange, equity, credit, and
commodity derivative financial instruments include swaps, futures, forwards,
and option contracts, all of which derive their value from underlying interest
rates, foreign exchange rates, credit-related contracts, commodity values, or
equity instruments. Certain transactions involve standardized contracts executed
on organized exchanges, while others are negotiated over-the-counter (OTC), with
the terms tailored to meet the needs of BAC and its customers. At December 31,
1997, notional amounts for credit derivative financial instruments used in
trading or asset and liability management activities were insignificant.
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, financial or commodity indices, and
credit. For example, a multinational consumer products company may choose to
manage the currency risks associated with the foreign countries in which it
operates. BAC will transact cross currency swaps or foreign exchange contracts
with the customer to meet this need. 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. In its
trading activities, BAC primarily employs traditional or "plain-vanilla"
products, such as spot and forward foreign exchange contracts, exchange-traded
futures contracts, and conventional interest rate and cross-currency swaps, as
well as simple option structures which have the aforementioned items as the
underlying instruments, including interest rate caps, collars, and floors. Such
instruments are used by a wide variety of market participants in liquid
currencies and tenors, and accounted for more than 95 percent of all BAC
derivative financial instruments at December 31, 1997. The remainder of the
financial instruments either employed such products in less liquid currencies
and tenors, or involved nontraditional products or transactions -- typically
incorporating more complex option structures -- and were executed primarily to
meet unique customer needs.
In connection with BAC's own asset and liability management activities, it
primarily uses foreign exchange derivative financial instruments to manage the
foreign exchange risk associated with foreign-denominated firm commitments and
net capital exposures; interest rate derivative financial instruments to manage
the interest rate risk associated with its assets and liabilities, including
residential loans, deposits, and long-term debt; equity derivative financial
instruments to manage the price risk associated with fluctuations in the fair
value of marketable equity securities; and credit derivative financial
instruments to hedge credit risk. For an additional discussion of BAC's hedging
objectives and the strategies and financial instruments used to achieve such
objectives, refer to Notes 1 and 25 of the Notes to Consolidated Financial
Statements on pages 60 -- 65 and 80 -- 86, respectively.
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. The Risk Management section that follows provides a discussion of these
risks.
43
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Risk Management
Risk management is integral to BAC's operations and a key determinant of its
overall financial performance, since risk is inherent in most of BAC's business
activities. BAC applies various strategies to mitigate risks to which it is
exposed, namely credit, operational, market, and liquidity risks. These
strategies are discussed in the following sections.
Credit Risk Management
Credit risk is the possibility of loss from the failure of a borrower or
counterparty to fully perform under the terms of a credit-related contract.
Credit risk arises primarily from BAC's lending activities, as well as from
transactions involving other on- and off-balance-sheet instruments. Credit risk
also includes transfer risk, which is the repayment risk that occurs with
transactions subject to potential restrictions on the movement of funds across
borders. For example, although foreign customers possess adequate funds, their
local central banks may preclude them from exchanging their local currency for
the foreign currency (usually U.S. dollars) in which they agreed to repay their
obligations.
BAC's Credit Policy Committee (CPC) oversees all credit-related activities. The
CPC is responsible for managing BAC's overall credit exposure, and for
establishing credit policies, standards, and guidelines that define, quantify,
and monitor credit risk. The CPC also oversees compliance with established
credit limits and conducts reviews of industry, geographic region or country,
product, and individual borrower or counterparty exposure, together with reviews
of problem credits and credit losses. Furthermore, the CPC continually monitors
significant economic developments and internal shifts in strategic emphasis and
updates the credit risk management process accordingly. Managing credit risk
within the guidelines established by the CPC is the responsibility of all BAC
line officers involved in extending credit to customers. The primary focus of
managing credit risk is to evaluate the likelihood that a borrower or
counterparty will repay a loan from expected financial sources and to follow up
with appropriate action. When collateralized transactions are involved, this
includes ensuring that sufficient collateral is obtained at the outset and that
sufficient collateral margins are maintained.
In making credit recommendations and decisions, line officers are supported by
credit specialists within BAC who have expertise in specific areas, including
specialized industries, geographic regions, or types of products. The credit
risk management process is monitored on an ongoing basis by officers from BAC's
Corporate Credit Examination Services. The results of these monitoring
activities are reported to senior credit management and the Auditing and
Examining Committee of the Board of Directors. BAC makes substantial investments
in credit risk training to ensure competence among all credit officers and to
better serve customers' changing needs.
BAC also manages credit risk by diversifying both on- and off-balance-sheet
portfolios by industry, product, and geographic concentration. The extent of
diversification of the loan portfolio by geographic area and type of asset is
evident in the chart on page 33, and in the table on page 34. The
diversification in BAC's off-balance-sheet portfolio is discussed in Note 25 of
the Notes to Consolidated Financial Statements on pages 80-86.
OFF-BALANCE-SHEET CREDIT RISK
OTC derivative financial instruments introduce two additional elements of credit
risk: pre-settlement (or close-out) risk and settlement risk. Pre-settlement
risk arises from the possibility that a counterparty to a transaction is unable
to live up to the terms of its contract and BAC must write off the current
market value of the contract (that has already been recognized as an asset and
taken into income). Settlement risk occurs whenever BAC pays out funds or
delivers assets before it receives payment from the counterparty in the
transaction.
BAC mitigates both pre-settlement and settlement risk primarily by evaluating
the creditworthiness of its counterparties. BAC utilizes the same policies,
procedures, and internal credit risk rating system established for all
on-balance-sheet credit exposures. At December 31, 1997, approximately 88
percent of the derivative counterparties and 81 percent of the foreign exchange
counterparties with whom BAC had credit exposure had investment grade or
equivalent ratings. Considering only those counterparties with greater than $500
thousand of peak potential exposure, these percentages were 91 percent and 88
percent, respectively.
To mitigate pre-settlement risk further, BAC obtains collateral where
appropriate. In addition, BAC uses agreements that allow netting of multiple
transactions in the case of default, such as the internationally recognized
International Swap and Derivatives Association (ISDA) agreement and the
International Foreign Exchange Master Agreement (IFEMA). BAC's policy is to
execute legally enforceable netting agreements with its foreign exchange and
derivative customers whenever possible.
BAC reduces settlement risk through either novation netting (a mutual agreement
to substitute a new contract for two or more existing contracts that are then
discharged) or settlement netting (a contract to settle mutual obligations at
the net value of the individual contracts) arrangements, which may be included
as part of a master netting agreement.
BAC measures both current and potential future exposure when evaluating its
pre-settlement credit risk on foreign exchange and derivative contracts. Current
credit exposure is the amount of unrealized gain on the contract, or the amount
BAC would have the right to receive if a foreign exchange or derivative contract
was terminated on the date of evaluation. Potential credit exposure (at the 97.5
percent confidence level) is calculated based on the range of probable changes
in the contract's fair value over its remaining life, given the historical
pattern of market behavior.
44
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Current credit exposure, based on positive fair values of open OTC contracts at
December 31, 1997, and taking into account the effect of master netting
agreements and arrangements, was $4.1 billion for derivative counterparties and
$6.7 billion for foreign exchange counterparties, compared to $4.8 billion and
$2.7 billion, respectively, at year-end 1996. The increase in foreign exchange
credit exposure from year-end 1996 to 1997 was primarily due to the significant
decline in the value of several Asian currencies and a corresponding increase in
the fair market value of contracts where BAC was committed to pay these
currencies and receive U.S. dollars or another major currency. Disciplined
trading credit risk measurement and control procedures helped to limit BAC's
actual credit losses from pre-settlement risk, which were $20.8 million in 1997
compared to $1.4 million in 1996, despite the economic instability in Asia
during the fourth quarter of 1997. Losses due to settlement risk were limited to
$0.5 million in 1997. There were no settlement risk losses in 1996.
Potential credit exposure is an estimate based on a statistical analysis which
involves numerous assumptions and variables. The process involves simulation of
many scenarios for interest rates and exchange rates. Credit exposure for each
counterparty individually and for the total of all counterparties is determined
for each scenario on a series of future dates. At the 97.5 percent level of
confidence, it is estimated that total current credit exposure of $4.1 billion
in the derivative portfolio as of December 31, 1997 could potentially increase
to a peak of $5.2 billion in the third quarter of 1998. For the foreign exchange
trading portfolio, it is estimated that current exposure of $6.7 billion at
year-end could increase to $8.4 billion in the first quarter of 1998.
Operational Risk
Operational risk is the risk of unexpected losses attributable to human error,
systems failures, fraud, or inadequate internal controls and procedures.
Mitigating this risk are systems and procedures to monitor transactions and
positions, documentation of transactions, regulatory compliance review, and
periodic review by internal auditors. Reconciliation procedures are also in
place to ensure that systems capture critical data. In addition, BAC maintains
contingency systems for operations support in the event of natural disasters.
Market Risk
OVERVIEW
Market risk is the potential of loss arising from adverse changes in market
rates and prices, such as interest rates (interest rate risk), foreign currency
exchange rates (foreign exchange risk), commodity prices (commodity risk) and
prices of equity securities (equity risk). As a financial institution that
engages in transactions involving a broad array of financial products, BAC is
exposed to interest rate risk, foreign exchange risk and, to a much less
significant extent, commodity and equity risk. Financial products that expose
BAC to market risk include securities, loans, deposits, debt, and derivative
financial instruments such as futures, forwards, swaps, options, and other
financial instruments with similar characteristics.
The BAC Asset, Liability, and Financial Management Committee (ALFI) has the
overall responsibility for managing market risk policies for BAC. This includes
all foreign and domestic trading and most nontrading activities. The members of
ALFI are senior executive officers who have principal decision-making
responsibilities for businesses throughout the BAC organization. The Market Risk
Committee (MRC), a subcommittee of ALFI, has delegated responsibility for
approving all global trading activities in all financial instruments, as well as
all foreign treasury activities. It also approves market risk limits for these
activities. The members of the MRC are senior line managers who are responsible
for trading and market risk management and senior corporate officers who are
responsible for accounting, treasury, and credit policies. The Auditing and
Examining Committee regularly reviews policies for managing market risk.
For purposes of exposition, BAC's market risk management activities are divided
into the two categories, trading and nontrading.
TRADING ACTIVITIES
BAC's trading activities include transactions involving derivatives, foreign
currency, and various types of securities. These activities principally expose
BAC to two major types of market risk -- interest rate risk and foreign exchange
risk. In addition, but to a much lesser extent, these activities expose BAC to
commodity risk and equity risk.
BAC manages its exposure to market risk in a variety of ways. First and
foremost, the MRC establishes and monitors various limits on trading activities.
These limits include product volume, gross and net positions, and value-at-risk
(VAR) and profit and loss simulation limits. Product volume limits establish
maximum aggregate amounts of specific types of derivatives, foreign exchange
contracts, and securities that BAC may hold in its trading account at any point
in time. Position limits restrict the gross and net amount of contracts that can
be held in the trading account in any specific maturity grouping. VAR measures
the potential loss in future earnings due to market rate movements within the
trading portfolio using proprietary models that are based on statistical
probability. VAR limits establish the maximum amount of potential loss computed
by the model that BAC is willing to assume at any point in time. Finally, BAC
uses profit and loss simulations to measure the potential for loss in various
segments of the trading portfolio resulting from specific and extremely adverse
scenarios. These scenarios are projected without regard to the statistical
probability of their occurrences. Loss simulation limits establish the maximum
amount of projected loss computed by the simulation that BAC is willing to
assume.
45
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BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
TRADING ACTIVITIES MARKET RISK/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
(in millions) Average VAR High VAR Low VAR Average VAR High VAR Low VAR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Based on Perfect Positive Correlation:
Entire trading account $52.6 $70.0 $41.0 $41.8 $51.5 $31.9
Interest rate 44.5 54.1 34.8 36.1 45.2 28.7
Foreign currency 8.1 18.2 2.4 5.7 12.0 2.2
Based on Zero Correlation:
Entire trading account $23.5 $30.4 $18.0 $17.5 $23.2 $14.1
Interest rate 21.7 27.5 16.5 16.5 21.5 13.3
Foreign currency 8.1 18.2 2.4 5.7 12.0 2.2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ The high and low for the entire trading account may not equal the sum of the
individual components as the highs or lows of the components occurred on
different trading days.
On a day-to-day basis, BAC reduces the market risk to which it is exposed in
the trading account by executing offsetting transactions with other
counterparties. However, BAC may also retain, generally on a temporary
basis, open or uncovered trading account positions in an effort to generate
revenue by correctly anticipating future market conditions and customer
demands or by taking advantage of price differentials among the various
markets in which it operates.
The day-to-day management of interest rate and foreign exchange risks takes
place at a decentralized level within BAC's various trading centers. Limits
established by the MRC are assigned to each trading center. In addition,
documented trading policies and procedures define acceptable boundaries
within which traders can execute transactions in their assigned markets.
BAC uses a VAR methodology to measure the interest rate and foreign exchange
risks inherent in its trading activities. Under this methodology, management
models historical data to statistically calculate, with 97.5 percent
confidence, the potential loss in earnings that BAC might experience if an
adverse one-day shift in market prices was to occur. The instruments covered
by the VAR methodology include derivative financial and foreign currency
instruments, derivative commodity instruments, and financial assets and
liabilities that are included in trading activities.
BAC performs this VAR calculation for each major trading portfolio segment
on a daily basis. It then calculates the combined VAR across these portfolio
segments using two different sets of assumptions. The first calculation
assumes that each portfolio segment experiences adverse price movements at
the same time (i.e., the price movements are perfectly correlated). The
second calculation assumes that these adverse price movements within the
major portfolio segments do not occur at the same time (i.e., they are
uncorrelated).
The table above sets forth the calculated VAR amounts for 1997 and 1996. The
amounts are calculated on a pre-tax basis and commodity and equity risks
have not been included in the table due to their relative insignificance.
BAC's trading risk profile is also depicted below in the histogram of daily
trading-related revenue for 1997. The graph illustrates the number of days
in 1997 in which BAC's trading-related revenue fell within a particular
million-dollar increment. For example, the table shows that the daily
trading revenue during 1997 amounted to between $3 million and $4 million 26
times. In addition, daily trading-related revenue averaged $3.9 million per
day for 1997. For purposes of the table, BAC's daily trading-related revenue
excludes periodic adjustments to the allowance for counterparty default. The
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
HISTOGRAM OF DAILY TRADING-RELATED REVENUE FOR 1997
(Bar chart in non-EDGAR version appears here)
- --------------------------------------------------------------------------------
Daily Revenue
in Millions of Dollars Number of Days
- --------------------------------------------------------------------------------
<S> <C>
- -32 1
- -31 to -13 0
- -12 1
- -11 1
- -10 0
-9 0
-8 1
-7 0
-6 2
-5 1
-4 2
-3 3
-2 4
-1 4
0 9
1 20
2 23
3 29
4 26
5 28
6 30
7 21
8 18
9 13
10 8
11 6
12 2
13 1
14 2
15 0
16 1
17 1
18 0
19 1
----
259
</TABLE>
46
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BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
shaded area in the histogram represents the 95 percent confidence interval
associated with this average daily revenue amount. Excluding a $32 million loss
incurred on a single day of extreme volatility in international emerging
markets, this confidence interval demonstrates BAC's overall success during the
year in controlling the volatility of its daily trading activities, reflecting
its diversified approach toward market risk management.
NONTRADING ACTIVITIES
BAC's nontrading banking activities encompass all activities that are not
accounted for as trading activities. These include lending, accepting deposits,
investing in securities, and issuing debt when needed to fund assets.
Interest Rate Risk
The ALFI committee monitors BAC's nontrading interest rate risk monthly and sets
limits on allowable risk annually. Additionally, the ALFI committee annually
reviews and approves the underlying product and model assumptions used to
measure these risks. ALFI generally monitors three sources of interest rate risk
associated with BAC's nontrading banking activities: gap mismatches, options
risk, and index mismatches. ALFI measures these risks by calculating gap
mismatches and by estimating the economic value of assets and liabilities under
different interest rate scenarios. For risk management purposes, economic value
represents the present value of expected future cash flows on nontrading assets
and liabilities.
GAP MISMATCHES -- Gap mismatches result from timing differences in the repricing
of assets, liabilities and off-balance-sheet instruments (e.g., when BAC commits
to an interest rate on a loan before funding it). To further illustrate, if BAC
makes long-term fixed-rate loans and funds them with floating-rate deposits, a
gap mismatch is created because the repricing periods for the loans and the
deposits are different. In this example, in a rising rate environment, BAC is
exposed to interest rate risk because BAC could become obligated to pay more
interest on the deposits than BAC is receiving on the fixed-rate loans.
OPTIONS RISK -- Options risk commonly exists in BAC's retail banking products.
Examples include interest rate caps on adjustable rate mortgages, prepayment
rights on fixed-rate mortgage loans, and depositor rights to withdraw certain
deposits on demand. Whether interest rates move up or down, options risk
typically benefits BAC's customers while exposing BAC to loss through lower
revenues or higher costs. To further illustrate, if BAC has a fixed-rate
mortgage loan asset that it funds with a 7-year deposit, BAC will have losses if
rates rise. This is because the term of the mortgage loan is likely to be longer
than that of the deposit and new funding will be at higher rates. If rates fall,
BAC will have losses if the loan is refinanced and an asset with a lower rate is
acquired.
INDEX MISMATCH -- Index mismatch risk results when floating-rate assets and
liabilities are tied to different indices. If the indices do not move together,
BAC is exposed to loss. Examples of common indices in retail products are London
InterBank Offered Rate (LIBOR), prime rate, Federal Home Loan Bank 11th District
Cost of Funds rate, and U.S. Treasury rate indices.
ECONOMIC VALUE MEASUREMENT -- BAC measures its interest rate risk through a
statistical process referred to as a Monte Carlo simulation, which creates over
10,000 potential interest rate scenarios benchmarked to current observable
secondary market interest rates and option prices. In this Monte Carlo
simulation, BAC uses historical customer behavior patterns, observed under a
variety of interest rate scenarios, to model the effects on its products. These
historically based models of customer behavior are modified to the extent that
management believes behavior has changed due to new factors in the market.
Assets and liabilities covered in the models include: fixed- and adjustable-rate
mortgages, consumer installment loans and lines of credit, credit card
receivables, commercial mortgages, commercial and industrial loans and lines,
mortgage servicing assets, investment securities, transaction accounts, savings
accounts, money market accounts, time deposits, wholesale deposits, interest
rate swaps, futures, forward rate agreements, interest rate caps and floors, and
purchased options. Off-balance-sheet instruments are included in the models only
if they are used for hedging.
By modeling its products in these Monte Carlo scenarios, BAC can observe the
economic value of each product in each scenario. The aggregate economic value of
all products across these scenarios indicates a range of outcomes, from maximum
loss to maximum gain in economic value. BAC manages risk by limiting the amount
of economic value at risk at the 97.5 percent probability level and concentrates
its risk management efforts in reducing its loss exposure in the worst 2.5
percent of interest scenarios, limiting the amount of risk it will take at this
level.
BAC also measures its interest rate risk through a set of specific "rate shock"
scenarios. In the scenarios, interest rates are adjusted up or down in even
increments of 100 to 200 basis points (bp) over current rates and then held
constant. The table below sets forth BAC's changes in economic value in its
nontrading activities as of December 31, 1997, using the
above-described methods:
Modeled Pre-tax Sensitivity (in millions)
-------------------------------------------
Variance from Variance from
Rate Shock Values using Values using
Scenario Monte Carlo Current
(basis points) Simulation Market Rates
- ---------------------------------------------------------------
+200 $118 $(140)
+100 285 (99)
0 210 0
-100 317 134
-200 428 274
- ---------------------------------------------------------------
47
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
The first column represents the increments in the rate shock scenario. The
second column compares each rate shock scenario with the average economic value
generated from all Monte Carlo scenarios at that rate. Only U.S. dollar
denominated financial instruments are included in these scenarios. The third
column compares each rate shock scenario against values generated using current
interest rates. Both U.S. dollar and foreign currency denominated financial
instruments are included in this scenario. Foreign currency risks result
primarily from positions in Hong Kong dollars, Singapore dollars, and Indian
rupees.
With reference to the values generated from the Monte Carlo scenarios, BAC has
positive economic value outcomes if interest rates remain within 200 basis
points of their December 31, 1997 levels. However, if interest rates move
outside that range, the potential for economic loss increases. With reference to
the values generated by current interest rates, BAC's economic value would be
adversely affected by rising interest rates.
Large interest rate movements negatively affect performance because of embedded
options in retail loan and deposit products. For example, interest rate caps on
adjustable-rate mortgages will hurt performance in sharply rising interest rate
environments, and lags in deposit repricing will hurt performance in sharply
falling interest rate environments. BAC does not have significant interest rate
risk from wholesale products since wholesale products are generally
floating-rate with clear contractual terms.
RISK MANAGEMENT -- BAC employs three primary risk management techniques to keep
interest rate risk within the limits approved by the ALFI committee. The first
technique is the use of interest rate swaps and investment portfolio purchases
or sales to reduce risk caused by gap and index mismatches. The second technique
is the purchase of interest rate caps and floors to reduce the option exposure
embedded in BAC's retail products. Finally, in products where BAC views that it
will be difficult to accurately model interest rate effects as a result of their
dependence on customer behavior, BAC may sell assets or curtail business
activity to limit exposure.
LIMITATIONS -- Interest rate risk modeling on nontrading retail products is
subject to numerous limitations. In addition, BAC recognizes that there are
numerous assumptions and estimates associated with modeling and actual results
could differ from these assumptions and estimates. BAC believes, however, that
it mitigates these uncertainties through close monitoring and by examining
assumptions on an ongoing basis. The continual risk management process should
reduce the impact of unanticipated risk exposures as assumptions are updated and
before the exposures create significant losses.
FOREIGN CURRENCY CAPITAL INVESTMENT RISK
BAC has made investments in a number of operations in foreign countries. The
capital invested in these operations is often denominated in foreign currencies
which exposes BAC to foreign currency risks. The foreign currency risks inherent
in these foreign capital investments are actively managed using the same VAR
methodology employed in the management of foreign currency risks in trading
activities. Limits on the VAR exposures that BAC is willing to accept in both
nontrading and trading activities are established by the MRC. (See the prior
discussion of Trading Activities on page 45 for details of risk management and
parameters of VAR methodology.)
BAC mitigates the foreign currency risks in nontrading activities by executing
offsetting transactions wherever practical. However, not all of the foreign
currency exposures can be offset due to restrictions in local regulations. In
addition, certain exposures are in currencies in which offsetting transactions
are available on an infrequent basis and/or at impractical costs. Nonetheless,
most of the nontrading foreign currency exposures are fully offset.
The table below sets forth the calculated VAR amounts for foreign currency
capital investment risk for each of the years 1997 and 1996. The amounts are
calculated on a pre-tax basis and represent the potential loss in earnings that
BAC might experience if an adverse one-day shift in foreign exchange rates was
to occur.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY VALUE AT RISK
IN CAPITAL INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Average $1.3 $1.8
High 1.9 2.6
Low 1.1 1.4
- --------------------------------------------------------------------------------
</TABLE>
EQUITY RISK
Through its private equity investment activities, BAC owns equity securities
that are subject to fluctuations in their market prices or values. Since these
market prices or values may fall below BAC's investment costs and thereby expose
BAC to the possibility of loss if the investments were sold, BAC is subject to
equity risk when conducting these activities. BAC's Global Equity Investment
group (GEI) is responsible for managing private equity investment activities and
the associated equity risk. Annually, GEI must provide a report of operations to
BAC's Board of Directors and receive approval from the Office of the Chairman
for its equity investment plans for the upcoming year. This approval establishes
an annual limit on BAC's commitment to new equity investments. In addition, a
separate limit denominated as a percentage of total equity exists, which
establishes a ceiling on the funded exposure of equity investment activities.
The annual investment limit is subject to additional approvals where
appropriate, such as that of the Bank's Country Risk Committee for individual
country exposure.
48
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BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
GEI has established internal authorities for approving all equity investing
activities. As the dollar amount of a transaction increases, the level of
management approval necessary also increases from an investment committee which
includes GEI's chief investment officer for smaller transactions, to the Group
Executive Vice President responsible for GEI, to ultimately an amount where the
approval by the President of the Global Wholesale Bank is required.
BAC's equity investments are segregated into two general categories; publicly
traded securities and private equity investments. Investments in publicly traded
securities represent less than 10% of BAC's equity investment portfolio. These
assets are classified as available-for-sale securities and reported at their
fair values with unrealized gains and losses included as a component of
shareholders' equity. Directly held publicly traded securities are reviewed
weekly while those positions owned indirectly through limited partnerships are
reviewed quarterly. The price risks in these assets are hedged, as considered
appropriate, with the purchase of exchange traded or OTC derivative contracts.
Private equity investments which do not have readily available market prices are
reported at historical cost and included in other assets. Private equity
investments represent more than 90% of BAC's equity securities portfolio.
Unrealized losses on these investments, that constitute a permanent decline in
value, are reported in the income statement. Directly held private equity
investments are reviewed by management on a semi-annual basis while those
indirectly held through limited partnerships are reviewed at least annually. In
addition to the individual reviews, management assesses the aggregate portfolio
semi-annually for geographic, industry, and individual investment
concentrations. A comparison of carrying value and estimated fair value is
likewise reviewed.
Liquidity Risk Management
OVERVIEW
Liquidity risk is the possibility that BAC's cash flows may not be adequate to
fund operations and meet commitments on a timely and cost-effective basis. Since
liquidity risk is closely linked to both credit and market risk, many of the
previously discussed market risk limits, risk control mechanisms, and market and
product participation limitations also apply to the monitoring and managing of
liquidity risk.
The coordination of the relative maturities of assets and liabilities is
fundamental to the management of liquidity. BAC's ability to raise funds in
money and capital markets provides flexibility in managing liquidity and
mitigates the potential for liquidity risk. ALFI seeks to balance BAC's sources
and uses of funds while minimizing market exposure. In this capacity, ALFI
places limits on the level of investments in various assets and
off-balance-sheet instruments, as well as on funding levels for wholesale and
other deposits.
BAC manages its liquidity at both the parent and subsidiary levels. The parent
is funded primarily by debt and equity issuances, as well as by dividend and
interest income from its subsidiaries. BAC may issue common stock, preferred
stock, senior debt, including commercial paper, and subordinated debt from time
to time when market conditions are judged appropriate considering funding and
capital needs. For direct banking subsidiaries, the primary source of funding is
domestic retail deposits. Additional funding support is available to selected
banking subsidiaries through the issuance of bank notes and commercial paper.
Subsidiary funding is also available through lines of credit between banking
subsidiaries and the Bank and between nonbanking subsidiaries and the parent,
and from outside funding through notes, commercial paper, and securities sold
under repurchase agreements.
The liquid assets of BAC and of its subsidiaries consist of cash and due from
banks, interest-bearing deposits in banks, federal funds sold, securities
purchased under resale agreements, trading account assets, and
available-for-sale securities. Among the funding sources are core deposits,
foreign deposits, capital markets funds, and purchased money-market liabilities.
Core deposits include domestic interest- and noninterest-bearing retail
deposits, which historically have been a relatively stable source of funds to
BAC. Capital market funds include long-term debt, subordinated capital notes,
and common and preferred equity. Purchased money-market liabilities primarily
include foreign time deposits, federal funds purchased, securities sold under
repurchase agreements, and other short-term borrowings. The credit ratings of
BAC and its subsidiaries, as well as market conditions, generally influence the
cost and availability of funding sources.
LIQUIDITY REVIEW
The ongoing operations of BAC resulted in cash inflows of $2.2 billion and
$17.5 billion in 1997 and 1996, respectively, from deposits and short-term
borrowings. During the same periods, BAC's liquidity was enhanced by proceeds
from sales of loans, totaling $9.8 billion and $5.8 billion, respectively. These
loan sales consisted primarily of loans that were not originated or acquired
with the intent to sell but were sold due to various economic factors, including
changes in the maturity mix of BAC's assets and liabilities, liquidity demands,
regulatory capital considerations, and other similar factors.
During 1997 and 1996, loan sales included the securitization of credit card
receivables of $2.1 billion and $1.5 billion, respectively. In addition, total
sales, maturities, prepayments, and calls of securities exceeded total
purchases, resulting in cash inflows of $29 million and $608 million in 1997 and
1996, respectively.
Total loan originations and purchases exceeded total principal collections,
resulting in cash outflows of $11.9 billion and $17.8 billion in 1997 and 1996,
respectively. In addition, in 1997 and 1996, the parent paid dividends of $953
million and $965 million, respectively, to its preferred and common
stockholders. During the same periods, the parent repurchased common and
preferred stock for $3,667 million and $1,724 million, respectively. For
information concerning dividend and loan restrictions, refer to Note 30 of the
Notes to Consolidated Financial Statements on pages 88 -- 90.
49
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
Capital Management
At December 31, 1997, stockholders' equity amounted to $19.8 billion, a decrease
of $0.9 billion from year-end 1996 primarily due to a decline in preferred stock
of $1.6 billion offset by an increase in common equity of $0.7 billion.
<TABLE>
<CAPTION>
Chart of Common and Total Stockholders' Equity
BankAmerica Corporation
1996 and 1997
March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31,
1996 1996 1996 1996 1997 1997 1997 1997
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Stockholder's
Equity 20.2 20.1 20.5 20.7 20.1 20.4 19.9 19.8
Common
Stockholders'
Equity 17.7 17.9 18.3 18.5 18.5 18.8 19.1 19.2
</TABLE>
In May 1997, BAC's stockholders approved a two-for-one stock split of its common
stock effective June 2, 1997. As a result of the stock split, each shareholder
of record at close of business on June 2, 1997 received one additional share of
common stock for each share of common stock then owned. In addition, the number
of authorized shares of common stock was increased from 700 million to 1.4
billion common shares, par value $1.5625 per share. A total of 387,314,462
shares of common stock were issued in connection with the split, including
37,364,985 shares associated with shares held in treasury. As a result of the
stock split, $605 million was reclassified from additional paid-in capital to
common stock. All references to the number of common shares and per common share
amounts have been restated to reflect the effects of the stock split.
In February 1997, BAC's Board of Directors amended its existing stock repurchase
program. The amended program authorized the parent to buy back up to an
additional $3 billion of its common stock by the end of 1998 and to buy back or
redeem up to an additional $1 billion of its preferred stock by the end of 1998.
At December 31, 1997, the remaining buyback and redemption authorities for
common stock and preferred stock under the current amended program totaled $1.8
billion and $0.2 billion, respectively.
Also, on February 2, 1998, BAC's Board of Directors increased the size of its
existing stock repurchase program and extended it through December 1999. The
amended program will enable the parent to buy back up to an additional $3.5
billion of its common stock and to redeem up to an additional $450 million of
preferred stock by the end of 1999.
Capital Review
BAC's preferred stock declined $1,628 million during 1997 resulting from the
redemption of all 11,250,000 outstanding shares of its 9% Cumulative Preferred
Stock, Series H, on January 15, 1997; all 14,600,000 outstanding shares of its
8 3/8% Cumulative Preferred Stock, Series K, on February 15, 1997; all 798,020
outstanding shares of its 8.16% Cumulative Preferred Stock, Series L, on July
13, 1997; all 696,847 outstanding shares of its 7 7/8% Cumulative Preferred
Stock, Series M, on September 30, 1997; and all 469,273 outstanding shares of
its 8 1/2% Cumulative Preferred Stock, Series N, on December 15, 1997. For
additional information regarding preferred stock, refer to Note 19 of the Notes
to Consolidated Financial Statements on pages 72 -- 73.
Common equity rose $752 million during 1997 primarily due to an increase in
retained earnings of $2.2 billion, partially offset by an increase in treasury
stock of $1.7 billion. During 1997, BAC repurchased 31.7 million shares of its
common stock at an average per-share price of $64.00, which reduced common
equity by $2,025 million. For additional information regarding the common stock
component of the stock repurchase program, refer to Note 16 of the Notes to
Consolidated Financial Statements on pages 71 -- 72.
The common stock repurchases and preferred stock redemptions described above
reflect BAC's strong capital position and commitment to return excess capital to
its shareholders. On February 2, 1998, BAC's Board of Directors declared an
increase in the quarterly dividend on common stock from $0.305 per share to
$0.345 per share. The dividend is payable on March 11, 1998 to shareholders of
record on February 20, 1998.
<TABLE>
<CAPTION>
Dividends Declared per Common Share
BankAmerica Corporation
1993 through 1997
1993 1994 1995 1996 1997
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividends declared per common share $ 0.70 $ 0.80 $ 0.92 $1.08 $1.22
</TABLE>
In addition, in 1996, BAC introduced an employee stock option program, which
allows employees to buy shares of BAC common stock over several years at a grant
price set on the date of the grant. Under the program, beginning November 18,
1996, employees will be granted options every six months for the three
subsequent years. On November 18, 1996, May 19, 1997, and November 18, 1997,
employees were granted their
50
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
first, second, and third option awards through BAC's employee stock option
program. BAC is authorized to grant options to its employees for up to
70,200,000 shares of common stock. The diluted effects of options granted have
been included in the calculation of diluted earnings per common share.
The parent and its domestic banking subsidiaries are subject to risk-based
capital regulations. Bank regulatory authorities use these guidelines to
evaluate capital adequacy based on an institution's asset risk profile and
off-balance-sheet exposures, such as unused loan commitments, standby letters of
credit, and foreign exchange and derivatives contracts.
The Federal Reserve Board (FRB) has established guidelines that certain banking
organizations are required to maintain a minimum 8 percent total risk-based
capital ratio (the ratio of total capital divided by risk-weighted assets),
including a Tier 1 capital ratio of at least 4 percent. The risk-based capital
rules have been further supplemented by a leverage ratio, defined as Tier 1
capital divided by average total assets, after certain adjustments. The minimum
leverage ratio is 4 percent.
In accordance with BAC policy, BAC maintained capital ratios for both the parent
and its domestic banking subsidiaries above the regulatory well-capitalized
levels during 1997, 1996, and 1995. The minimum levels for well-capitalized
status are 10 percent for the total risk-based capital ratio, 6 percent for the
Tier 1 capital ratio, and 5 percent for the leverage ratio.
In 1996, the FRB 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
fourth quarter of 1996, BAC issued $1,477 million of trust preferred securities
and during the first quarter of 1997, BAC issued an additional $396 million of
trust preferred securities.
At December 31, 1997, the calculation of BAC's risk-based capital amounts and
ratios includes its Section 20 securities broker/dealer subsidiary to reflect
the FRB's October 31, 1997 modifications to the risk-based capital regulations
that apply to bank holding companies engaged in securities underwriting and
dealing activities through Section 20 subsidiaries. Prior to October 31,1997,
amounts and ratios excluded the Section 20 subsidiary. At December 31, 1997,
BAC's Tier 1 and total risk-based capital ratios decreased 24 basis points and
23 basis points, respectively, from year-end 1996. These decreases were
primarily due to a $10.2 billion increase in risk-weighted assets combined with
the redemption of preferred stock for $1.3 billion. This redemption amount
excludes $0.3 billion of Series H Preferred Stock that was announced for
redemption in December 1996 and was reflected in the 1996 redemptions only for
risk-based capital purposes. The redemption was partially offset by the issuance
of $396 million of trust preferred securities and an increase in other minority
interest of $160 million. The ratios at December 31, 1996 represented a
temporary increase from targeted levels due to the issuance of trust preferred
securities. BAC's targeted Tier 1 risk-based capital ratio is approximately 7.30
percent. BAC's leverage ratio was 6.81 percent at December 31, 1997, down from
7.44 percent at year-end 1996. The decrease was primarily due to an increase in
average risk-weighted assets.
The table below, Tier 1 Capital Generation, indicates that BAC generated Tier 1
capital of $4,576 million, $5,013 million, and $3,577 million during the years
ended December 31, 1997, 1996, and 1995, respectively. These amounts were used
to pay dividends on common and preferred stock as well as to repurchase common
stock and redeem or buy back preferred stock. The remaining capital generated
was used to fund balance sheet growth and support off-balance-sheet activities,
resulting in net capital application of $495 million in 1997, and net capital
generation of $886 million and $104 million in 1996 and 1995, respectively.
For further information related to the Bank's regulatory capital requirements,
refer to Note 20 of the Notes to Consolidated Financial Statements on pages
73 -- 74.
- --------------------------------------------------------------------------------
TIER 1 CAPITAL GENERATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TIER 1 GENERATION
Net income $ 3,210 $ 2,873 $ 2,664
Amortization of intangibles 264 272 282
Common stock issuances and other 546 302 631
Minority interest/a/ 556 1,566 --
- --------------------------------------------------------------------------------
Total generation 4,576 5,013 3,577
TIER 1 APPLICATIONS
Common stock dividends (853) (780) (684)
Preferred stock dividends (100) (185) (227)
Common stock repurchased (2,025) (1,351) (926)
Preferred stock redeemed (1,347) (680) (206)
Preferred stock converted to common stock -- -- (248)
- --------------------------------------------------------------------------------
Total applications (4,325) (2,996) (2,291)
Capital attributed to growth
in risk-weighted assets (746) (1,131) (1,182)
- --------------------------------------------------------------------------------
Net capital generated (applied) $ (495) $ 886 $ 104
- --------------------------------------------------------------------------------
</TABLE>
/a/ Represents trust preferred securities and other minority interest of $396
million and $160 million, respectively, at December 31, 1997 and $1,477
million and $89 million, respectively, at December 31, 1996.
51
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
RISK-BASED CAPITAL, RISK-WEIGHTED ASSETS, AND RISK-BASED CAPITAL RATIOS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(dollar amounts in millions) 1997/a/ 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RISK-BASED CAPITAL
Common stockholders' equity $ 19,086 $ 18,439 $ 17,598
Qualified perpetual preferred stock 614 1,961 2,623
Minority interest/b/ 2,122 1,566 --
Less: Goodwill, nongrandfathered core deposit and other identifiable
intangibles, and other deductions/cd/ (4,531) (4,922) (5,230)
- ------------------------------------------------------------------------------------------------------------------
Tier 1 risk-based capital 17,291 17,044 14,991
Eligible portion of the allowance for credit losses 2,879 2,758 2,566
Hybrid capital instruments 71 142 214
Subordinated notes and debentures 6,357 6,169 5,798
Less: Other deductions/d/ -- (184) (153)
- ------------------------------------------------------------------------------------------------------------------
Tier 2 risk-based capital 9,307 8,885 8,425
Total 26,598 25,929 23,416
Less: Investments in unconsolidated banking and finance subsidiaries/d/ (44) (49) --
- ------------------------------------------------------------------------------------------------------------------
Total Risk-Based Capital $ 26,554 $ 25,880 $ 23,416
RISK-WEIGHTED ASSETS
Balance sheet assets:
Trading account assets $ 6,826 $ 6,022 $ 3,506
Available-for-sale and held-to-maturity securities 5,103 5,121 5,007
Loans 142,044 139,412 132,504
Other assets 20,662 18,711 16,725
- ------------------------------------------------------------------------------------------------------------------
Total balance sheet assets 174,635 169,266 157,742
Off-balance-sheet items:
Unused commitments 31,567 28,368 26,268
Standby letters of credit 13,459 15,021 12,888
Foreign exchange and derivative contracts 5,623 4,662 4,530
Other 4,421 2,166 2,567
- ------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet items 55,070 50,217 46,253
Total Risk-Weighted Assets $ 229,705 $ 219,483 $ 203,995
RISK-BASED CAPITAL RATIOS
Tier 1 Capital Ratio 7.53% 7.77% 7.35%
Total Capital Ratio 11.56 11.79 11.48
Leverage Ratio 6.81 7.44 6.92
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes the capital and assets of the parent's securities broker/dealer
subsidiary to reflect the Federal Reserve Board's (FRB) October 31, 1997
modifications to the risk-based capital regulations that apply to bank
holding companies engaged in securities underwriting and dealing activities
through Section 20 subsidiaries. Prior to 1997, amounts and ratios excluded
the Section 20 subsidiary.
/b/ Represents trust preferred securities and other minority interest of $1,873
million and $249 million, respectively, at December 31, 1997 and $1,477
million and $89 million, respectively, at December 31, 1996.
/c/ Includes nongrandfathered core deposit and other identifiable intangibles
acquired after February 19, 1992 of $636 million and $73 million,
respectively, at December 31, 1997, $772 million and $67 million,
respectively, at December 31, 1996, and $856 million and $78 million,
respectively, at December 31, 1995. Also includes $8 million and $1 million,
at December 31, 1996 and 1995, 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 was no such excess amount at December 31,
1997.
/d/ Reflects FRB's revisions to its risk-based capital regulations regarding the
treatment of investments in unconsolidated banking and finance subsidiaries
as a reduction in computing total capital. Prior to 1996, half of the amount
was included in other deductions from Tier 1 Capital and half was included
in other deductions from Tier 2 Capital.
52
<PAGE>
BankAmerica Corporation 1997 Annual Report
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
Risk-Based Capital Ratios (Bar chart in non-EDGAR version appears here)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
---------------------------------
<S> <C> <C> <C>
Tier 1 7.4% 7.8% 7.5%
Total 11.5% 11.8% 11.6%
- --------------------------------------------------------------------------------
</TABLE>
Pending Accounting Standards
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 did not and is not
expected to have a material effect on BAC's financial position or results of
operations.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (SFAS No. 130), which is effective for
fiscal years beginning after December 15, 1997. SFAS No. 130 requires companies
to report and display comprehensive income and its components (revenues,
expenses, gains, and losses) in the financial statements. The adoption of SFAS
No.130, which will be implemented in the first quarter of 1998, will result in a
change in financial statement presentation and will not have an impact on BAC's
financial position or results of operations.
Also in June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(SFAS No. 131), which is effective for financial statements for periods
beginning after December 15, 1997 and need not be applied to interim financial
statements in the initial year of its application. SFAS No. 131 establishes
standards for a more comprehensive disclosure about an enterprise's operating
segments. BAC plans to adopt SFAS No. 131 in the first quarter of 1998. The
adoption of SFAS No. 131 applies solely to disclosures and will not have an
impact on BAC's financial position or results of operations.
53
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Report of Management
The management of BankAmerica Corporation and its subsidiaries (BAC) has
responsibility for the preparation, integrity, and reliability of the financial
statements and related financial information contained in this annual report.
The financial statements were prepared in accordance with generally accepted
accounting principles and prevailing practices of the banking industry and
include necessary judgments and estimates by management.
Management has established and is responsible for maintaining an internal
control environment designed to provide reasonable assurance as to the integrity
and reliability of the financial statements, the protection of assets, and the
prevention and detection of fraudulent financial reporting. The internal control
environment includes: an effective financial accounting structure; a
comprehensive internal audit function; an independent auditing and examining
committee (the audit committee) of the Board of Directors; and extensive
financial and operating policies and procedures. BAC's management also fosters
an ethical climate supported by a code of conduct, appropriate levels of
management authority and responsibility, an effective corporate organizational
structure, and appropriate selection and training of personnel.
The Board of Directors, primarily through the audit committee, oversees the
adequacy of BAC's control environment. The audit committee, whose members are
neither officers nor employees of BAC, meets periodically with management,
internal auditors, credit examination officers, and the independent auditors to
review the functioning of each and to ensure that each is properly discharging
its responsibilities.
BAC's financial statements are audited by Ernst & Young LLP, BAC's independent
auditors, whose audit is made in accordance with generally accepted auditing
standards and includes such audit procedures as they consider necessary to
express the opinion in their report that follows. In addition, Ernst & Young LLP
reviews BAC's quarterly financial information. A review is substantially less in
scope than an audit in accordance with generally accepted auditing standards
and, accordingly, Ernst & Young LLP does not express an opinion on the quarterly
financial information. Ernst & Young LLP meets regularly with management as well
as the audit committee to discuss its audit and its findings as to the integrity
of the financial statements and the adequacy of the internal controls.
Management recognizes that there are inherent limitations in the effectiveness
of any internal control environment. However, management believes that, as of
December 31, 1997, BAC's internal control environment, as described above,
provided reasonable assurance as to the integrity and reliability of the
financial statements and related financial information.
/s/ DAVID A COULTER
- -------------------------------------
David A. Coulter
Chairman and Chief Executive Officer
/s/ MICHAEL E. O'NEILL
- -------------------------------------
Michael E. O'Neill
Vice Chairman and Chief Financial Officer
/s/ JOHN J. HIGGINS
- -------------------------------------
John J. Higgins
Executive Vice President and Chief Accounting Officer
January 20, 1998
54
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors
Shareholders and Board of Directors
BankAmerica Corporation
We have audited the accompanying consolidated balance sheet of BankAmerica
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of BankAmerica Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BankAmerica
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
- ------------------------------
Ernst & Young LLP
San Francisco, California
January 20, 1998
55
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BankAmerica Corporation and Subsidiaries Year Ended December 31
(dollar amounts in millions, except per share data) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees $13,872 $13,363 $12,707
Interest-bearing deposits in banks 415 453 466
Federal funds sold 41 29 32
Securities purchased under resale agreements 776 653 618
Trading account assets 1,230 1,001 741
Available-for-sale and held-to-maturity securities 1,123 1,160 1,276
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income 17,457 16,659 15,840
INTEREST EXPENSE
Deposits 5,793 5,359 4,923
Federal funds purchased 64 79 131
Securities sold under repurchase agreements 810 695 581
Other short-term borrowings 1,099 883 630
Long-term debt 1,022 1,056 1,113
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 8,788 8,072 7,378
Net interest income 8,669 8,587 8,462
Provision for credit losses 950 885 440
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 7,719 7,702 8,022
NONINTEREST INCOME
Deposit account fees 1,447 1,399 1,303
Credit and other card fees 378 355 315
Trust fees 255 229 300
Other fees and commissions 1,781 1,383 1,269
Trading income 692 630 527
Private equity investment activities 510 427 337
Net gain on sales of loans 249 89 24
Net gain on sales of subsidiaries and operations 213 180 25
Net gain on available-for-sale securities 116 61 34
Gain on issuance of subsidiary's stock -- 147 --
Other income 487 512 412
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 6,128 5,412 4,546
NONINTEREST EXPENSE
Salaries 3,572 3,291 3,309
Employee benefits 708 773 718
Occupancy 753 757 738
Equipment 725 702 663
Professional services 398 344 313
Communications 379 363 359
Amortization of intangibles 358 373 428
Regulatory fees and related expenses 29 123 176
Restructuring charge -- 280 --
Other expense 1,599 1,335 1,297
- ------------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 8,521 8,341 8,001
Income before income taxes 5,326 4,773 4,567
Provision for income taxes 2,116 1,900 1,903
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 3,210 $ 2,873 $ 2,664
Net income applicable to common stock $ 3,110 $ 2,688 $ 2,437
Earnings per common share 4.45 3.72 3.28
Diluted earnings per common share 4.32 3.65 3.24
Dividends declared per common share 1.22 1.08 0.92
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
56
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BankAmerica Corporation and Subsidiaries December 31
(dollar amounts in millions) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 14,280 $ 16,223
Interest-bearing deposits in banks 5,862 5,708
Federal funds sold 105 134
Securities purchased under resale agreements 9,774 7,275
Trading account assets 15,551 12,205
Available-for-sale securities 12,786 12,113
Held-to-maturity securities (market value: 1997 - $3,744; 1996 - $3,920) 3,667 4,138
Loans 167,111 165,415
Less: Allowance for credit losses 3,500 3,523
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans 163,611 161,892
Customers' acceptance liability 3,561 2,861
Accrued interest receivable 1,570 1,441
Goodwill, net 3,822 3,938
Identifiable intangibles, net 1,374 1,616
Unrealized gains on off-balance-sheet instruments 10,929 7,682
Premises and equipment, net 3,880 3,987
Other assets 9,387 9,540
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 260,159 $ 250,753
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Interest-bearing $ 94,495 $ 84,133
Noninterest-bearing 33,704 39,694
Deposits in foreign offices:
Interest-bearing 42,326 42,732
Noninterest-bearing 1,512 1,456
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits 172,037 168,015
Federal funds purchased 3,751 2,176
Securities sold under repurchase agreements 11,159 7,644
Other short-term borrowings 15,702 17,566
Acceptances outstanding 3,563 2,861
Accrued interest payable 978 879
Unrealized losses on off-balance-sheet instruments 10,502 7,633
Other liabilities 6,835 6,004
Long-term debt 13,922 15,785
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 238,449 228,563
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 614 2,242
Common stock, par value $1.5625 (authorized: 1997 and 1996 - 1,400,000,000 shares;
issued: 1997 - 774,697,520 shares; 1996 - 774,592,574 shares) 1,210 605
Additional paid-in capital 7,974 8,467
Retained earnings 13,726 11,500
Net unrealized gain on available-for-sale securities 137 32
Common stock in treasury, at cost (1997 - 86,640,661 shares; 1996 - 64,058,784 shares) (3,824) (2,133)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 19,837 20,713
Total Liabilities and Stockholders' Equity $ 260,159 $ 250,753
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
57
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BankAmerica Corporation and Subsidiaries Year Ended December 31
(in millions) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,210 $ 2,873 $ 2,664
Adjustments to net income to arrive at net cash provided (used) by operating activities:
Provision for credit losses 950 885 440
Net gain on sales of loans and subsidiaries and operations (462) (269) (49)
Depreciation and amortization 870 896 879
Provision for deferred income taxes 694 605 268
Change in assets and liabilities net of effects from acquisitions and pending dispositions:
(Increase) decrease in accrued interest receivable (129) 17 (9)
Increase in accrued interest payable 99 31 17
Increase in trading account assets (3,346) (2,689) (2,685)
Increase (decrease) in current income taxes payable 375 (29) 265
Deferred fees received from lending activities 170 240 142
Increase in loans held for sale (1,145) (622) (880)
Other, net (265) (2,981) 1,683
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,021 (1,043) 2,735
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales proceeds 1,968 1,985 2,509
Maturities, prepayments, and calls 4,992 5,805 5,722
Purchases (7,400) (7,661) (7,416)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 911 1,111 2,514
Purchases (442) (632) (976)
Proceeds from loan sales and securitizations 9,834 5,776 1,982
Purchases of loans (690) (2,555) (1,711)
Purchases of premises and equipment (663) (665) (649)
Proceeds from sales of other real estate owned 330 432 525
Acquisitions, net of cash acquired (100) -- --
Net cash provided (used) by:
Loan originations and principal collections (11,186) (15,269) (14,429)
Interest-bearing deposits in banks 26 53 472
Federal funds sold 29 587 (81)
Securities purchased under resale agreements (2,499) (2,313) 297
Other, net 80 542 138
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4,810) (12,804) (11,103)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,690 3,719 2,588
Principal payments and retirements of long-term debt and subordinated capital notes (3,139) (2,965) (2,652)
Net proceeds from issuance of trust preferred securities 396 1,477 --
Proceeds from issuance of common stock -- 83 151
Proceeds from issuance of treasury stock 223 99 --
Preferred stock redeemed (1,628) (391) (206)
Treasury stock purchased (2,039) (1,333) (926)
Common stock dividends (853) (780) (684)
Preferred stock dividends (100) (185) (227)
Net cash provided (used) by:
Deposits 4,022 7,580 6,100
Federal funds purchased 1,575 (2,984) 1,877
Securities sold under repurchase agreements 3,515 1,261 878
Other short-term borrowings (1,864) 9,939 2,282
Other, net (54) 216 (87)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,744 15,736 9,094
Effect of exchange rate changes on cash and due from banks 102 22 8
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and due from banks (1,943) 1,911 734
Cash and due from banks at beginning of year 16,223 14,312 13,578
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and Due from Banks at End of Year $14,280 $16,223 $14,312
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
58
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BankAmerica Corporation and Subsidiaries Year Ended December 31
(in millions) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of year $ 2,242 $ 2,623 $ 3,068
Preferred stock redeemed (1,628) (381) (197)
Convertible preferred stock converted to common stock -- -- (248)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 614 2,242 2,623
COMMON STOCK
Balance, beginning of year 605 602 581
Common stock issued -- 3 21
Issuance of 387,314,462 shares of common stock to effect a two-for-one common stock split 605 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 1,210 605 602
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 8,467 8,328 7,743
Common stock issued 29 142 594
Issuance of 387,314,462 shares of common stock to effect a two-for-one common stock split (605) -- --
Preferred stock redeemed -- (18) (9)
Treasury stock issued in excess of cost 83 15 --
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 7,974 8,467 8,328
RETAINED EARNINGS
Balance, beginning of year 11,500 9,606 7,854
Net income 3,210 2,873 2,664
Common stock dividends (853) (780) (684)
Preferred stock dividends (100) (185) (227)
Foreign currency translation adjustments, net of related income taxes (31) (14) (1)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 13,726 11,500 9,606
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES
Balance, beginning of year 32 1 (326)
Valuation adjustments, net of related income taxes 105 31 327
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year 137 32 1
COMMON STOCK IN TREASURY, AT COST
Balance, beginning of year (2,133) (938) (29)
Treasury stock purchased (2,025) (1,351) (926)
Treasury stock issued 362 173 29
Other (28) (17) (12)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, end of year (3,824) (2,133) (938)
Total Stockholders' Equity $ 19,837 $ 20,713 $ 20,222
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
59
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Notes to Consolidated Financial Statements
1 Significant Accounting Policies
The consolidated financial statements of BankAmerica Corporation and
subsidiaries (BAC) are prepared in conformity with generally accepted accounting
principles and prevailing practices of the banking industry. The statements also
reflect specialized industry accounting practices of certain nonbanking
subsidiaries that may differ from those used by banking subsidiaries. The
following is a summary of the significant accounting and reporting policies used
in preparing the consolidated financial statements.
Financial Statement Presentation
The consolidated financial statements of BAC include the accounts of BankAmerica
Corporation (the parent) and companies in which more than 50 percent of the
voting stock is owned directly or indirectly by the parent, including Bank of
America NT&SA (the bank), and other banking and nonbanking subsidiaries. The
revenues, expenses, assets, and liabilities of the subsidiaries are included in
the respective line items in the consolidated financial statements after
elimination of intercompany accounts and transactions.
The consolidated statement of cash flows depicts the change in cash and due from
banks as disclosed in the consolidated balance sheet. Cash flows from hedging
transactions are classified in the same category as the cash flows from the
items being hedged.
Certain amounts in prior periods have been reclassified to conform to the
presentation in the current year. Additionally, as explained in Note 18 on page
72, all references to the number of common shares and per common share amounts
have been restated to reflect the effects of a stock split effective June 2,
1997.
Use of Estimates in the Preparation of Financial Statements
The preparation of the consolidated financial statements of BAC requires
management to make estimates and assumptions that affect reported amounts. These
estimates are based on information available as of the date of the financial
statements. Therefore, actual results could differ from those estimates.
Trading Account Assets
Trading account assets, which are generally held for the short term in
anticipation of market gains and resale, are carried at their fair values.
Realized and unrealized gains and losses on trading account assets are included
in trading income.
Available-for-Sale and Held-to-Maturity Securities
BAC's securities portfolios include U.S. Treasury and other government agency
securities, mortgage-backed securities, state, county, municipal, and foreign
government securities, equity securities and corporate debt securities.
Debt securities for which BAC has the positive intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. Debt
securities that BAC may not hold to maturity and marketable equity securities
are classified as available-for-sale securities unless they are considered to be
part of trading-related activities. Available-for-sale securities are reported
at their fair values, with unrealized gains and losses included on a net-of-tax
basis as a separate component of stockholders' equity. Securities for which no
market values were available are stated at cost.
Dividend and interest income, including amortization of premiums and accretion
of discounts, for both securities portfolios are included in interest income.
Realized gains and losses generated from sales of available-for-sale securities
are recorded in net gain on available-for-sale securities and are computed using
the specific identification method. Any decision to sell available-for-sale
securities is based on various factors, including movements in interest rates,
changes in the maturity mix of assets and liabilities, liquidity demands,
regulatory capital considerations, or other similar factors.
Loans
Loans are generally carried at the principal amount outstanding net of unearned
discounts. Interest income on discounted loans is generally recognized using
methods that approximate the interest method, which provides a level rate of
return over a loan's term.
Loans, other than those originated or acquired with the intent to sell, may be
sold prior to maturity due to various economic factors, including significant
movements in interest rates, changes in the maturity mix of assets and
liabilities, liquidity demands, regulatory capital considerations, or other
similar factors. All loans that are held for sale are recorded at the lower of
cost or fair value. The fair value of loans held for sale represents the cash
price anticipated to be received for the loans in a current sale.
Loans are generally placed on nonaccrual status when full payment of principal
or interest is in doubt, or when they are past due 90 days as to either
principal or interest. During the fourth quarter of 1996, BAC changed the past
due period for nonaccrual residential real estate loans and consumer loans that
are collateralized by junior mortgages on residential real estate from 180 days
to 90 days. When a loan is placed on nonaccrual status, interest accrued but not
received is reversed against interest income. If management determines that
60
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
ultimate collectibility of principal is in doubt, cash receipts on nonaccrual
loans are applied to reduce the principal balance. Senior management may grant a
waiver from nonaccrual status if a past due loan is well secured and in the
process of collection. A nonaccrual loan may be restored to accrual status when
all principal and interest amounts contractually due, including arrearages, are
reasonably assured of repayment within a reasonable period, and there has been a
sustained period of payment performance by the borrower in accordance with the
contractual terms of the loan.
BAC provides equipment financing to its customers through a variety of lease
arrangements. Direct financing leases are carried at the aggregate of lease
payments receivable plus estimated residual value of the leased property, less
unearned income. Unearned income on direct financing leases is amortized over
the lease terms by methods that approximate the interest method. Leveraged
leases, which are a form of financing lease, are carried net of nonrecourse
debt. Unearned income on leveraged leases is amortized over the lease terms by
methods that approximate the interest method.
Allowance for Credit Losses
The allowance for credit losses is a reserve for estimated credit losses and
other credit-related charges. Actual credit losses and other charges, net of
recoveries, are deducted from the allowance for credit losses. Other charges to
the allowance include amounts related to loans of subsidiaries and operations
sold and to loans which were either sold or transferred to other assets pending
disposition. A provision for credit losses, which is a charge against earnings,
is added to the allowance based on a quarterly assessment of the portfolio.
While management has attributed reserves to various portfolio segments, the
allowance is general in nature and is available for the credit portfolio in its
entirety.
BAC generally evaluates a loan for impairment when it is placed on nonaccrual
status and all or a portion is internally risk rated as substandard or doubtful.
BAC measures impairment of loans when it is probable that all amounts, including
principal and interest, will not be collected in accordance with the contractual
terms of the loan agreement. The amount of impairment and any subsequent changes
are recorded as a change in the allocation of the allowance for credit losses.
Substantially all of BAC's impaired loans are on nonaccrual status.
BAC uses one of three methods to measure loan impairment depending on the
circumstances surrounding the loan; present value of a loan's expected future
cash flows, fair value of the collateral, or the loan's observable market value.
The present value of a loan's expected future cash flows is the most widely used
method and is calculated using the loan's effective interest rate based on the
original contractual terms. When foreclosure or liquidation is probable or when
the primary source of repayment is provided by real estate collateral,
impairment is measured based upon the fair value of the collateral less
estimated selling and disposal costs. When quoted market prices are available,
impairment is based on the loan's observable market value less estimated selling
and disposal costs.
Premises and Equipment
Premises, equipment, and leasehold improvements are carried at cost, less
accumulated depreciation and amortization computed on a straight-line basis over
the estimated useful lives of the respective assets or the terms of the leases.
Net gains and losses on disposal or retirement of premises and equipment are
included in other income.
Other Real Estate Owned
Other real estate owned (OREO), which is recorded in other assets, includes
properties acquired through foreclosure or in full or partial satisfaction of
the related loan, former premises no longer used in business operations, and
properties that are nonperforming acquisition, development, and construction
arrangements. OREO also includes loans where BAC has obtained physical
possession of the related collateral.
OREO is carried at the lower of fair value, net of estimated selling and
disposal costs, or cost. Fair value adjustments are made at the time that real
estate is acquired through foreclosure or when full or partial satisfaction of
the related loan is received. These fair value adjustments are treated as credit
losses. Changes in estimated selling and disposal costs, routine holding costs,
subsequent declines in fair values, and net gains or losses on disposal of
properties classified as OREO are included in other expense as incurred.
Goodwill and Identifiable Intangibles
Goodwill represents the excess of the purchase price over the estimated fair
value of identifiable net assets associated with BAC's merger and acquisition
transactions. Goodwill is amortized on a straight-line basis generally over 25
years.
Core deposit intangibles (CDI) represent the intangible value of depositor
relationships resulting from deposit liabilities assumed in acquisitions and are
amortized using an accelerated method based on the expected runoff of the
related deposits.
Other identifiable intangibles consist primarily of credit card intangibles
(CCI), which represents the intangible value of credit card customer
relationships resulting from customer balances acquired. Other identifiable
intangibles are amortized using accelerated methods over their estimated periods
of benefit.
61
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Goodwill and identifiable intangibles are assessed quarterly for other-than-
temporary impairment. Should such an assessment indicate that the value of
goodwill may be impaired, an evaluation of the recoverability would be performed
prior to any writedown of the assets. If the net book value of identifiable
intangibles were to exceed their respective undiscounted future net cash flows,
identifiable intangibles would be written down to their respective undiscounted
future net cash flows.
Mortgage Servicing Assets
Mortgage servicing assets (MSA) are capitalized when acquired either through the
purchase or origination of mortgage loans that are subsequently sold or
securitized with the servicing rights retained. The capitalized MSA are
assessed, on a periodic basis, for impairment based on the fair value of those
rights. For this analysis, the MSA are stratified based on one or more
predominant risk characteristics and any resulting impairment is recognized
through a valuation allowance for each impaired stratum. For purposes of
measuring impairment, BAC stratifies its MSA by loan type, investor type, and
interest rate to reflect the predominant risk characteristics. BAC then uses a
fair valuation model which incorporates assumptions used by market participants
in estimating future net servicing income based on estimates of the cost of
servicing per loan, the discount rate, float value, an inflation rate, ancillary
income per loan, prepayment speeds and default rates.
MSA are included in other assets and are amortized as an offset to other fees
and commissions in proportion to and over the period of estimated net servicing
income. The accounting for MSA is in accordance with Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (SFAS No. 125), which BAC
adopted in 1997. The adoption of SFAS No. 125 did not have a material effect on
BAC's financial position or results of operations.
Investments in Affiliates, Joint Ventures, and Other Entities
Investments in affiliates, joint ventures, and other entities are recorded in
other assets. Investments in affiliates, which are generally 20- to
50-percent-owned companies, and joint ventures are generally accounted for by
the equity method. BAC's share of net income or loss from these investments is
recorded in other income. Gains or losses resulting from issuances of stock by
equity affiliates that change BAC's percentage of ownership are recognized at
the issue date and are also recorded in other income. Dividends are recorded as
a reduction of the carrying value of the investment when received.
Investments in other entities (less than 20-percent-owned companies) that are
not represented by marketable securities are generally carried at cost less
writedowns for declines in value that are judged to be other than temporary.
These valuation losses are recorded in other income when identified. Dividends
are recorded in other income when received.
Derivative Financial Instruments
BAC uses interest rate, foreign exchange, equity, and credit derivative
financial instruments in both its trading and asset and liability management
activities. BAC uses derivative commodity instruments solely in its trading
activities. At December 31, 1997, BAC's notional amounts for credit derivative
financial instruments were not material.
TRADING ACTIVITIES
Interest rate derivative financial instruments used in BAC's trading activities
consist primarily of swaps and options. Foreign exchange financial instruments
include spot, futures, forward, swap, and option contracts. Credit derivative
financial instruments include credit default swaps and total rate of return
swaps. Commodity derivative financial instruments include commodity futures,
forwards, swaps, and options. All derivative financial instruments used in
trading activities are carried at fair value. Fair value for these instruments
is determined based on readily available market prices or by using pricing
models where no market price is available. Any realized and unrealized gains and
losses resulting from adjusting these instruments to fair value are recognized
immediately in trading income.
Interest rate, foreign exchange, credit, and commodity derivative financial
instruments used for trading activities, and their related gains and losses, are
reported in the consolidated balance sheet in unrealized gains (losses) on
off-balance-sheet instruments, in the consolidated statement of operations in
trading income, and in the consolidated statement of cash flows in cash flows
from operating activities. However, unrealized gains and losses with the same
counterparty are netted on the balance sheet to the extent allowed when
contracts are executed under legally enforceable master netting agreements.
ASSET AND LIABILITY MANAGEMENT ACTIVITIES
BAC uses various types of derivative financial instruments to manage its
interest rate and foreign currency exposures through specific strategies that
involve the hedging of future cash flows or of market values. When hedging
future cash flow exposures, the accrual method of accounting is used. Under the
accrual method, each net payment due to or owed under the derivative financial
instrument is recognized in net income during the period to which the
payment/receipt relates; there is no recognition on the balance sheet for
changes in the derivative's fair value. When hedging market value exposures, BAC
uses the deferral or fair value methods.
62
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Under the deferral method, gains or losses from the derivative financial
instrument are deferred on the balance sheet and recognized in net income in
conjunction with the recognition of the hedged item. Under the fair value
method, the derivative financial instrument is carried on the balance sheet at
fair value with changes in that value recognized in net income or stockholders'
equity in conjunction with the designated hedged item.
Hedge criteria include demonstrating how the hedge will reduce risk, identifying
the asset, liability, firm commitment, or anticipated transaction being hedged,
and citing the time horizon being hedged.
Deferral Method
BAC uses the deferral method when the carrying value of the hedged item is other
than fair value and the market value of the hedging instrument fulfills the
objectives of the hedge strategy.
INTEREST RATE CONTRACTS -- BAC accounts for futures and forward rate agreements
using the deferral method. Under the deferral method, risk reduction is assessed
at the enterprise level. For interest rate futures, hedge effectiveness is
assessed at the inception of the hedge and on an ongoing basis. There must be a
clear economic relationship between the price of the hedged item and the futures
contract and a high level of correlation between these prices during relevant
prior periods. If a high level of correlation is not being achieved on an
ongoing basis, hedge accounting will be terminated. For forward rate agreements,
hedge effectiveness at the inception of the hedge and on an ongoing basis is
assessed by matching the basis and terms of the hedging instruments with those
of the underlying exposure.
Deferred gains and losses on interest rate contracts used for hedging are
reported as adjustments to the carrying values of the hedged loans, deposits,
and long-term debt. The amortization of deferred gains and losses is reported in
the corresponding interest income and interest expense accounts. Initial margin
deposits related to exchange-traded instruments are reported in other assets.
BAC hedges anticipated transactions involving the replacement of deposits with
interest-bearing deposits using interest rate futures contracts. Realized and
unrealized gains and losses on these transactions are deferred and included in
the measurement of the subsequent transaction. For a hedge of an anticipated
transaction to qualify for hedge accounting, it must be probable that the
transaction will occur and the significant characteristics and expected terms of
the transaction must be identified.
FOREIGN EXCHANGE CONTRACTS -- To qualify for hedge accounting, a foreign
exchange contract must reduce risk at the level of the specific transaction.
Realized and unrealized gains and losses on instruments that hedge firm
commitments are deferred and included in the measurement of the subsequent
transaction; however, losses are deferred only to the extent of expected gains
on the future commitment. Realized and unrealized gains and losses on
instruments that hedge net capital exposure are recorded in stockholders' equity
as foreign currency translation adjustments.
Accrual Method
BAC uses the accrual method when the cash flows generated from the hedging
instrument fulfill the objectives of the hedge strategy. Under the accrual
method, interest income or expense on the hedging instrument is accrued and
recorded as an adjustment to the interest income or expense related to the
hedged item.
BAC accounts for certain interest rate swaps and purchased interest rate option
contracts (caps and floors) using the accrual method. Each of these hedging
instruments must reduce risk at the level of the specific transaction with
effectiveness expected at the inception of the hedge and on an ongoing basis.
For each of these hedging instruments, hedge effectiveness is assessed by
matching the basis and terms of the hedging instruments with those of the
underlying exposure. If a high level of correlation is not being achieved, hedge
accounting will be terminated.
Interest income or expense on derivative financial instruments accounted for
using the accrual accounting method is reported in interest income -- loans,
interest expense -- deposits, and interest expense -- long-term debt. Premiums
paid for interest rate options are deferred as a prepaid expense and are
amortized to interest income over the term of the option.
63
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Method
BAC uses the fair value method when the market value of the hedging instrument
fulfills the objectives of the hedge strategy, and the carrying value of the
hedged item is fair value. Market value for these instruments is determined
based on readily available market prices or by using pricing models where no
market price is available. Under the fair value method, realized and unrealized
gains and losses on both the hedged item and hedging instrument are recognized
throughout the period. Realized and unrealized gains and losses on the hedging
instrument are reflected in the same line as the hedged item.
BAC accounts for certain interest rate swaps and purchased equity option
contracts designated as hedges of available-for-sale debt and equity securities,
respectively, using the fair value method. Each of these hedging instruments
must reduce risk at the level of the specific transaction, with effectiveness
expected at the inception of the hedge and on an ongoing basis. There must be a
clear economic relationship between the price of the available-for-sale security
and the interest rate swap or equity instrument underlying the purchased equity
option contract as well as a high level of correlation between these prices
during relevant prior periods. If a high level of correlation is not being
achieved, hedge accounting will be terminated. Changes in the market values of
the interest rate swaps, exclusive of net interest accruals, are reported in
stockholders' equity on a net-of-tax basis. The accrual of interest payable and
interest receivable on the interest rate swaps is reported in interest income --
available-for-sale securities. Changes in the market values of the purchased
equity options, exclusive of the time value of the option, are reported in
stockholders' equity on a net-of-tax basis. The time values of the options are
deferred as a prepaid expense and are amortized to interest income for
available-for-sale securities over the term of the option.
The following policies are followed for all derivative financial instruments
qualifying for hedge accounting treatment. If at any time a derivative financial
instrument no longer qualifies for hedge accounting treatment, it must be
adjusted to fair value on a prospective basis and any deferred gain or loss
associated with the hedging instrument is amortized over the original hedge
period. When an anticipated transaction is no longer likely to occur, any
deferred gain or loss associated with the hedging instrument is recognized
immediately in the income or expense account related to the hedged item. If the
item being hedged matures or is sold, extinguished, or terminated, hedge
accounting is terminated. In this situation, any deferred gain or loss
associated with the hedging instrument is treated as part of the carrying value
of the item being hedged and, therefore, considered in calculating the gain or
loss on the matured, sold, extinguished, or terminated item. If the related
derivative contract is not terminated, it must be accounted for at market value
on a prospective basis.
Foreign Currency Translation
Assets, liabilities, and operations of foreign branches and subsidiaries are
recorded based on the functional currency of each entity. For the majority of
the foreign operations, the functional currency is the local currency, in which
case the assets, liabilities, and operations are translated, for consolidation
purposes, at current exchange rates from the local currency to the reporting
currency, the U.S. dollar. The resulting gains or losses are reported as a
component of retained earnings within stockholders' equity on a net-of-tax
basis. When the foreign entity is not a free-standing operation or is in a
hyperinflationary economy, the functional currency used to measure the financial
statements of a foreign entity is the U.S. dollar. In these instances, the
resulting gains and losses are included in other income.
Provision for Income Taxes
The parent files a consolidated U.S. federal income tax return and consolidated
or combined returns for certain states, including California. State, local, and
foreign income tax returns are filed according to the taxable activity of each
unit.
The liability method of accounting is used for income taxes. Under the liability
method, deferred tax assets and liabilities are recognized for the expected
future tax consequences of existing differences between financial reporting and
tax reporting bases of assets and liabilities, as well as for operating losses
and tax credit carryforwards, using enacted tax laws and rates. Deferred tax
expense represents the net change in the deferred tax asset or liability balance
during the year. This amount, together with income taxes currently payable or
refundable for the current year, represents the total income tax expense for the
year.
64
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Employee Compensation Plans
BAC accounts for compensation expense related to stock-based compensation plans
using the intrinsic value method. Under the intrinsic value method, compensation
expense is determined based on the excess, if any, of the market prices of BAC's
common stock at the measurement dates over the exercise prices of the awards
under those plans.
Earnings per Common Share
Effective December 15, 1997, BAC adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS No. 128). SFAS No. 128 establishes
new requirements for computing and presenting earnings per share. Under the new
requirements, the method previously used to compute earnings per share is
changed and all prior periods presented must be restated to conform to meet the
new requirements. The new requirements eliminate primary earnings per share and
earnings per common share, assuming full dilution, and require the presentation
of earnings per common share and diluted earnings per common share. As a result,
under the new requirements, earnings per common share excludes any dilutive
effect of stock options and warrants. Also, the dilutive effect of stock options
and warrants used to compute diluted earnings per common share is based on the
average market price of BAC's common stock for the period.
2 Nature of Operations
BAC, through its subsidiaries, provides banking and various other financial
services throughout the U.S. and in selected international markets to consumers
and business customers, including corporations, governments, and other
institutions. BAC segregates its operations into five major business sectors --
Consumer Banking, U.S. Corporate and International Banking, Middle Market
Banking, Commercial Real Estate Services, and Wealth Management, ranked, for the
purpose of the following discussion, in order of their contribution to net
income in 1997.
Consumer Banking provides a full array of deposit and loan products to
individuals and small businesses through traditional and in-store branches,
ATMs, telephones, personal computers, and other delivery channels throughout
nine western states. It also provides credit card, home mortgage, manufactured
housing financing, and consumer financing products throughout the U.S., and a
range of consumer banking products and services in Hong Kong, Macau, India,
Taiwan, Singapore, and the Philippines.
U.S. Corporate and International Banking provides credit and capital-raising
services, trade finance, cash management, investment banking, capital markets
products, and financial advisory services to large public- and private-sector
institutions that are part of the global economy. It has offices in the U.S. and
37 other countries and territories in North and South America, Asia, Europe,
Africa, and the Middle East.
Middle Market Banking provides a full range of financial products and services
throughout the West and the Midwest to businesses with annual revenues between
$5 million and $500 million.
Commercial Real Estate Services provides credit and other financial services to
a variety of real estate market segments, including developers, investors,
pension fund advisors, real estate investment trusts, and property managers.
Regional clients are served throughout California and in eight other states.
National clients, such as publicly traded corporations and private entities, are
served through offices in California.
Wealth Management encompasses a number of strategically significant businesses
serving individuals and institutions with sophisticated financial planning and
management needs. The range of capabilities represented in Wealth Management
include institutional investment management supporting BAC's corporate and
commercial banking relationships, private banking, investment management, and
trust services for high-net-worth clients both in the U.S. and internationally.
3 Supplemental Disclosure of Cash Flow Information
During the years ended December 31, 1997, 1996, and 1995, BAC made interest
payments on deposits and other interest-bearing liabilities of $8,689 million,
$8,039 million, and $7,361 million, respectively, and made income tax payments
of $1,114 million, $1,324 million, and $1,342 million, respectively.
During the years ended December 31, 1997, 1996, and 1995, there were
foreclosures of loans with carrying values of $219 million, $360 million, and
$520 million, respectively. Loans made to facilitate the sale of OREO totaled
$12 million, and $8 million during the years ended December 31, 1996, and 1995,
respectively.
65
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
4 Acquisition
On October 1, 1997, BAC acquired Robertson, Stephens & Company Group, L.L.C.
(Robertson Stephens), a San Francisco-based investment banking and investment
management firm. The acquisition involved a cash transaction consisting of an
initial payment of $245 million to the equity-owning partners of Robertson
Stephens, up to $225 million of compensation over a three-year period to certain
Robertson Stephens equity-owning partners, subject to continued employment, and
up to $70 million to be distributed from a cash retention pool as compensation
in the form of awards vesting over a four-year period. The acquisition was
accounted for by the purchase method of accounting.
5 Restrictions on Cash and Due from Banks
BAC's banking subsidiaries are required to maintain reserves with the Federal
Reserve Bank. Reserve requirements are based on a percentage of deposit
liabilities. The average reserves required for 1997 and 1996 were $2,920 million
and $3,740 million, respectively.
6 Securities Purchased Under Resale Agreements and Securities Sold Under
Repurchase Agreements
BAC enters into purchases and sales of securities, primarily U.S. government and
federal agency, under agreements to resell and repurchase substantially
identical securities. In 1997, the yearly averages of securities purchased under
resale agreements and securities sold under repurchase agreements, based on
daily balances, were $10 billion and $11.6 billion, respectively, and the
maximum amounts outstanding at any month end during the year were $13.2 billion
and $15.1 billion, respectively.
During 1997, the underlying securities purchased under resale agreements were
delivered into BAC's account at the Federal Reserve Bank of San Francisco or
into a third-party custodian's account that recognizes BAC's rights and interest
in these securities.
7 Available-For-Sale and Held-to-Maturity Securities and Trading Activities
The following is a summary of available-for-sale and held-to- maturity
securities:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Available-for-Sale Securities
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in millions) Cost Gains Losses Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury and other government
agency securities $ 1,435 $ 33 $ 2 $ 1,466
Mortgage-backed securities 7,359 151 3 7,507
Foreign governments 1,930 3 78 1,855
Equity securities 330 114 10 434
Corporate and other debt securities 1,503 22 1 1,524
- ------------------------------------------------------------------------------------------
$12,557 $ 323 $ 94 $12,786
DECEMBER 31, 1996
U.S. Treasury and other government
agency securities $ 1,505 $ 6 $ 17 $ 1,494
Mortgage-backed securities 6,591 70 39 6,622
Foreign governments 2,365 36 132 2,269
Equity securities 177 121 1 297
Corporate and other debt securities 1,421 13 3 1,431
- ------------------------------------------------------------------------------------------
$12,059 $ 246 $ 192 $12,113
- ------------------------------------------------------------------------------------------
<CAPTION>
Held-to-Maturity Securities
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in millions) Cost Gains Losses Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U.S. Treasury and other government
agency securities $ 16 $ -- $ -- $ 16
Mortgage-backed securities 1,877 41 2 1,916
State, county, and municipal securities 306 13 1 318
Foreign governments 1,105 51 35 1,121
Corporate and other debt securities 363 18 8 373
- ------------------------------------------------------------------------------------------
$3,667 $ 123 $ 46 $3,744
DECEMBER 31, 1996
U.S. Treasury and other government
agency securities $ 19 $ -- $ -- $ 19
Mortgage-backed securities 2,163 31 15 2,179
State, county, and municipal securities 423 14 6 431
Foreign governments 1,160 9 261 908
Corporate and other debt securities 373 21 11 383
- ------------------------------------------------------------------------------------------
$4,138 $ 75 $ 293 $3,920
- ------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
During the years ended December 31, 1997, 1996 and 1995, BAC sold available-for-
sale securities for aggregate proceeds of $1,968 million, $1,985 million, and
$2,509 million, respectively. These sales resulted in gross realized gains of
$127 million, $91 million, and $268 million, and gross realized losses of $11
million, $30 million, and $234 million in 1997, 1996, and 1995, respectively.
The following is a summary of the contractual maturities of available-for-sale
debt securities at December 31, 1997. These amounts exclude equity securities,
which have no contractual maturities:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized Fair
(in millions) Cost Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 1,275 $ 1,289
Due after one year through five years 718 713
Due after five years through ten years 2,015 2,057
Due after ten years 8,219 8,293
- --------------------------------------------------------------------------------
$ 12,227 $ 12,352
</TABLE>
- --------------------------------------------------------------------------------
The following is a summary of the contractual maturities of held-to-maturity
securities at December 31, 1997:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized Fair
(in millions) Cost Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 295 $ 296
Due after one year through five years 285 290
Due after five years through ten years 830 855
Due after ten years 2,257 2,303
- --------------------------------------------------------------------------------
$ 3,667 $ 3,744
</TABLE>
- --------------------------------------------------------------------------------
Certain securities, such as mortgage-backed securities, may not become due at a
single maturity date. Those mortgage-backed securities with no specified
maturities are included as having contractual maturities of greater than ten
years for purposes of the tables above. Issuers may have the right to call or
prepay obligations with or without call or prepayment penalties. This right may
cause actual maturities to differ from the contractual maturities presented in
the summaries above.
Certain assets were pledged to collateralize U.S. government and public
deposits, trust and other deposits, and repurchase agreements. These assets,
primarily trading, available-for-sale, and held-to-maturity securities, had
carrying values of $15,052 million and $11,477 million at December 31, 1997 and
1996, respectively.
During the year ended December 31, 1997, trading income included a net
unrealized holding loss of $15 million. For the years ended December 31, 1996
and 1995, trading income included net unrealized holding gains on trading
securities of $1 million and $37 million, respectively. These amounts exclude
the net unrealized trading results of the parent's securities
broker/dealer subsidiary (Section 20 subsidiary).
During the fourth quarter of 1995, the Financial Accounting Standards Board
allowed financial statement preparers a one-time opportunity to reassess the
classifications of securities accounted for under Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." As a result of this reassessment, BAC reclassified $2.1
billion of held-to-maturity securities to available-for-sale securities. In
connection with this reclassification, gross unrealized gains of $28 million and
gross unrealized losses of $42 million were recorded in available-for-sale
securities and in stockholders' equity (on a net-of-tax basis).
8 Other Debt Restructurings
Restructured loans as described in Note 9 of the Notes to Consolidated Financial
Statements on the following page exclude other debt restructurings totaling
$1,384 million and $1,685 million at December 31, 1997 and 1996, respectively,
with countries that were experiencing liquidity problems at the time of
restructuring. These amounts include securities and loans received in connection
with formal debt restructurings. The majority of these instruments are
classified as either available-for-sale or held-to-maturity securities.
Included in other debt restructurings at December 31, 1997 and 1996, were $1,228
million and $1,456 million, respectively, of par bonds issued by the governments
of Mexico and Venezuela in 1990, and the government of Uruguay in 1991. The face
values of these par bonds at December 31, 1997 and 1996 were $1,494 million and
$1,607 million, respectively. The majority of the Mexican par bonds have a fixed
annual interest rate of 6.25 percent, and the Venezuelan and Uruguayan par bonds
both have fixed annual interest rates of 6.75 percent. The principal of all of
these par bonds is collateralized by zero-coupon U.S. Treasury securities, which
at maturity, will have redemption values equal to the face values of the par
bonds. The market value of the par bonds totaled $1,260 million at December 31,
1997. The fair value of the U.S. Treasury securities collateralizing the
principal of the par bonds totaled $394 million at December 31, 1997.
Also included in the aggregate other debt restructurings discussed above were
$156 million and $229 million at December 31, 1997 and 1996, respectively,
related to other restructuring transactions with borrowers in Venezuela, Poland,
the Philippines, Mexico, Brazil, Ecuador and Panama.
Interest income foregone on these other debt restructurings was not significant
in 1997 or 1996.
67
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BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
9 Loans
Loans are presented net of unearned income of $2,534 million and $1,636 million
at December 31, 1997 and 1996, respectively.
The following is a summary of loans:
- --------------------------------------------------------------------------------
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
DOMESTIC
Consumer:
Residential first mortgages $ 31,749 $ 37,459
Residential junior mortgages 14,847 14,743
Other installment 18,418 16,979
Credit card 6,697 8,707
Other individual lines of credit 1,937 1,948
Other 461 401
- --------------------------------------------------------------------------------
74,109 80,237
Commercial:
Commercial and industrial 36,602 33,404
Loans secured by real estate 12,897 12,488
Financial institutions 3,485 3,109
Lease financing 2,892 2,542
Loans for purchasing or carrying securities 2,668 1,941
Construction and development loans
secured by real estate 2,206 2,252
Agricultural 1,824 1,696
Other 1,896 1,270
- --------------------------------------------------------------------------------
64,470 58,702
138,579 138,939
FOREIGN
Commercial and industrial 18,484 16,394
Banks and other financial institutions 3,904 3,958
Governments and official institutions 840 970
Other 5,304 5,154
- --------------------------------------------------------------------------------
28,532 26,476
$167,111 $165,415
- --------------------------------------------------------------------------------
The following is a summary of loans considered to be impaired and the related
interest income:
- --------------------------------------------------------------------------------
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
Recorded investment in impaired loans
not requiring an allowance for credit losses/a/ $259 $ 412
Recorded investment in impaired loans requiring
an allowance for credit losses 480 439
- --------------------------------------------------------------------------------
Total recorded investment in impaired loans/b/ $739 $ 851
- --------------------------------------------------------------------------------
December 31
1997 1996 1995
- --------------------------------------------------------------------------------
Average recorded investment in impaired loans $760 $1,120 $1,361
Interest income recognized/c/ 50 50 80
- --------------------------------------------------------------------------------
/a/ These loans do not require an allowance for credit losses since the values
of the impaired loans equal or exceed the recorded investments in the loans.
/b/ These amounts were evaluated using the following measurement methods: For
1997, $363 million was evaluated using the present value of the loan's
expected future cash flows and $376 million using the fair value of the
collateral. For 1996, $403 million was evaluated using the present value of
the loan's expected future cash flows, $422 million using the fair value of
the collateral, and $26 million using the loan's observable market value.
/c/ All interest income recognized on these loans is recorded when cash is
received.
Restructured loans, excluding the other debt restructurings described in Note 8
of the Notes to Consolidated Financial Statements on page 67, were $274 million
and $302 million at December 31, 1997 and 1996, respectively. Interest income
foregone on these loans was not significant in 1997 or 1996.
Previously restructured loans of $40 million and $29 million were on nonaccrual
status at December 31, 1997 and 1996, respectively.
10 Allowance for Credit Losses
The following is a summary of changes in the allowance for credit losses. This
reconciliation reflects activity related to all loans. The allowance for credit
losses on impaired loans was $81 million at December 31, 1997.
- --------------------------------------------------------------------------------
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
Balance, beginning of year $3,523 $3,554 $3,690
Credit losses 1,305 1,325 1,011
Credit loss recoveries 404 407 422
- --------------------------------------------------------------------------------
Net credit losses 901 918 589
Provision for credit losses 950 885 440
Other net additions (deductions) (72)/a/ 2 13
- --------------------------------------------------------------------------------
Balance, End of Year $3,500 $3,523 $3,554
- --------------------------------------------------------------------------------
/a/ Includes allowance for credit losses associated with the sale of SPFS and
Bank of America Hawaii of $60 million and $8 million, respectively.
68
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
11 Premises and Equipment
The following is a summary of premises and equipment:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Premises, including capitalized leases $2,790 $3,060
Equipment and furniture, including capitalized leases 3,210 3,072
Leasehold improvements 1,228 888
Land 466 489
- --------------------------------------------------------------------------------
7,694 7,509
Less: Accumulated depreciation and amortization 3,814 3,522
- --------------------------------------------------------------------------------
$3,880 $3,987
- --------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1997,
1996, and 1995 was $586 million, $593 million, and $552 million, respectively.
12 Deposits
The aggregate amount of time deposit accounts exceeding $100,000, was
approximately $46,686 million and $50,182 million at December 31, 1997 and 1996,
respectively.
At December 31, 1997, the scheduled maturities for time deposits were as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in millions)
- --------------------------------------------------------------------------------
<S> <C>
Due in 1998 $63,662
Due in 1999 2,812
Due in 2000 1,286
Due in 2001 520
Due in 2002 481
Thereafter 264
- --------------------------------------------------------------------------------
$69,025
</TABLE>
- --------------------------------------------------------------------------------
13 Long-Term Debt
The following is a summary of long-term debt. The maturity distribution is based
upon contractual maturities or earlier dates due to call notices issued.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
1997 1996
----------------------------------------------------------
Various Various
Fixed-Rate Floating-Rate
Debt Debt
(in millions) Obligations Obligations Total Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE PARENT
Senior Debt:
Due in 1997 $ -- $ -- $ -- $1,692
Due in 1998 219 133 352 352
Due in 1999 215 392 607 1,960
Due in 2000 16 1,580 1,596 1,596
Due in 2001 718 932 1,650 1,650
Due in 2002 109 706 815 316
Thereafter 205 291 496 502
- --------------------------------------------------------------------------------
1,482 4,034 5,516 8,068
Subordinated Debt:
Due in 1998 52 -- 52 53
Due in 2000 417 -- 417 419
Due in 2001 776 30 806 812
Due in 2002 1,837 26 1,863 1,860
Thereafter 3,587 323 3,910 3,015
- --------------------------------------------------------------------------------
6,669 379 7,048 6,159
Total parent 8,151 4,413 12,564 14,227
SUBSIDIARIES
Senior Debt:
Due in 1997 -- -- -- 15
Due in 1998 223 42 265 213
Due in 1999 3 -- 3 --
Due in 2000 -- 79 79 84
Due in 2001 -- -- -- 420
Due in 2002 142 -- 142 --
Thereafter 28 47 75 9
- --------------------------------------------------------------------------------
396 168 564 741
Subordinated Debt:
Due in 1997 -- -- -- 19
Due in 1998 10 -- 10 10
Due in 1999 11 -- 11 11
Due in 2000 12 -- 12 12
Due in 2001 308 -- 308 309
Thereafter 100 -- 100 101
- --------------------------------------------------------------------------------
441 -- 441 462
Total subsidiaries 837 168 1,005 1,203
- --------------------------------------------------------------------------------
$ 8,988 $ 4,581 $13,569 $15,430
- --------------------------------------------------------------------------------
</TABLE>
BAC's fixed-rate long-term debt of $8,988 million at December 31, 1997 matures
at various dates through 2015. At both December 31, 1997 and 1996, the interest
rates on fixed-rate long-term debt ranged from 5.55% to 11.50%. These
obligations were denominated primarily in U.S. dollars.
69
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
BAC has entered into off-balance-sheet financial instruments, primarily interest
rate swaps, with notional amounts of approximately $4 billion and $7 billion at
December 31, 1997 and 1996, respectively, to change its interest rate exposure
from fixed to floating rate. At December 31, 1997 and 1996, the weighted average
interest rates on fixed-rate long-term debt, including the effects of interest
rate swaps, were 7.66% and 7.33%, respectively.
BAC's floating-rate long-term debt of $4,581 million at December 31, 1997
matures at various dates through 2003. The majority of the floating rates are
based on three- and six-month London InterBank Offer Rate (LIBOR). At December
31, 1997 and 1996, the interest rates on floating-rate long-term debt ranged
from 5.75% to 7.91% and from 5.26% to 7.54%, respectively. These obligations
were denominated primarily in U.S. dollars.
BAC has entered into off-balance-sheet financial instruments, primarily futures,
with notional amounts of approximately $1 billion and $6 billion at December 31,
1997 and 1996, respectively, to reduce the interest rate risk by shortening the
repricing profile on floating-rate debt that reprices within one year. At
December 31, 1997 and 1996, the weighted average interest rates on floating-rate
long-term debt were 6.07% and 5.74%, respectively. The effect of futures on
floating rate long-term debt interest rates was not material.
At December 31, 1997 and 1996, $2,837 million and $3,702 million, respectively,
of long-term debt was redeemable at par at the option of the parent on dates
ranging from February 27, 1998 through February 21, 2001.
At December 31, 1997, BAC had a $1.65 billion long-term line of credit that
expires in 2001. There were no draw-downs at December 31, 1997, and the interest
rate on draw-downs is based on current prime or LIBOR rates.
14 Subordinated Capital Notes
The following is a summary of subordinated capital notes as recorded on the
Balance Sheet included in long-term debt by the parent. These notes are
subordinate to senior indebtedness of the parent and qualify as Tier 2
risk-based capital under
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
9.75% Notes due 1999 $254 $256
Auction Rate Notes due 1999 99 99
- --------------------------------------------------------------------------------
$353 $355
- --------------------------------------------------------------------------------
</TABLE>
Federal Reserve Board guidelines for assessing capital
adequacy.
Effective May 17, 1996, the Auction Rate Notes bear interest as follows: $1
million bears interest at a fixed rate of 6.647% per annum, while the remaining
$98 million bears interest at a floating rate of 0.50% over LIBOR per annum
through the maturity date.
At the option of the parent, the Auction Rate Notes may be exchanged for common
stock, perpetual preferred stock, or other capital securities acceptable to the
Federal Reserve Board having a market price equal to the principal amount of the
notes or, under certain circumstances, may be redeemed in whole or in part for
cash. As of December 31, 1997, proceeds from issuances of common and preferred
stock of $350 million have been dedicated to fully retire or redeem subordinated
capital notes.
15 Corporation Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Junior Subordinated Deferrable Interest
Debentures of the Corporation (Trust Preferred Securities)
The trust preferred securities are issued by trusts all of whose outstanding
common securities are owned by the parent. Such common securities represent an
aggregate 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 (the Debentures). In addition, the parent has entered
into an expense agreement with each 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 trust preferred securities. Each
issue of the Debentures has an interest rate equal to the corresponding trust
preferred securities distribution rate. The parent has the right to defer
payment of interest on the Debentures at any time or from time to time for a
period not exceeding the extension period described in the table below with
respect to each deferral period, provided that no extension period may extend
beyond the stated maturity of the relevant Debentures. During any such extension
period, distributions on the trust preferred securities will also be deferred
and the parent's ability to pay dividends on its common and preferred stock will
be restricted. The Debentures are redeemable prior to stated maturity at the
parent's option during the redemption periods at the redemption prices described
below plus accrued interest to the redemption dates. The trust preferred
securities are subject to mandatory redemption upon repayment of the related
Debentures at their stated maturity dates or their earlier redemption at a
redemption price equal to their liquidation amount plus accrued distributions
to the date fixed for redemption and the premium, if any, paid by the parent
upon concurrent repayment of the related Debentures.
The parent has issued guarantees for the payment of distributions and payments
on liquidation or redemption of the trust preferred securities, but only to the
extent of funds held by the relevant trust. The guarantees are junior
subordinated obligations of the parent. In 1997 and 1996, distributions and
amortization of deferred issuance costs on all trust preferred securities
totaling $144 million and $7 million, respectively, were included in noninterest
expense in the consolidated statement of operations.
70
[CAPTION]
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate Aggregate
Liquidation Liquidation Aggregate
Amount of Amount of Principal Stated Per Annum Interest
Trust Preferred Common Amount of Maturity of Interest Rate Payment
(dollar amounts in thousands) Securities Securities Debentures Debentures of Debentures Dates
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NAME OF TRUST
BankAmerica Institutional Capital A $450,000 $ 13,918 $ 463,918 12/31/26 8.07% 6/30, 12/31
BankAmerica Institutional Capital B 300,000 9,279 309,279 12/31/26 7.70 6/30, 12/31
BankAmerica Capital I 300,000 9,279 309,279 12/31/26/d/ 7.75 3/31, 6/30,
9/30, 12/31
BankAmerica Capital II 450,000 13,918 463,918 12/15/26 8.00 6/15, 12/15
BankAmerica Capital III 400,000 12,372 412,372 1/15/27 LIBOR 1/15, 4/15,
plus 0.57% 7/15, 10/15
- ---------------------------------------------------------------------------------------------------------------------------
Total $1,900,000/g/ $ 58,766 $1,958,766
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------
Extension Redemption
(dollar amounts in thousands) Period Period
- ----------------------------------------------------------------------------
<S> <C> <C>
NAME OF TRUST
BankAmerica Institutional Capital A 10 semi- On or after
annual periods 12/31/06/ab/
BankAmerica Institutional Capital B 10 semi- On or after
annual periods 12/31/06/bc/
BankAmerica Capital I 20 quarters On or after
12/20/01/e/
BankAmerica Capital II 10 semi- On or after
annual periods 12/15/06/bf/
BankAmerica Capital III 20 quarters On or after
1/15/02/e/
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
/a/ The Debentures may be redeemed on or after December 31, 2006 and prior to
December 31, 2007 at 104.0350% of the principal amount, and thereafter at
prices declining to 100% on December 31, 2016 and thereafter.
/b/ The parent may redeem the Debentures prior to the indicated redemption
period upon the occurrence of certain events relating to tax treatment of
the related trust or the Debentures or relating to capital treatment of the
trust preferred securities at a redemption price calculated by a formula,
which redemption price shall be at least equal to the principal amount of
the Debentures.
/c/ The Debentures may be redeemed on or after December 31, 2006 and prior to
December 31, 2007 at 103.7785% of the principal amount, and thereafter at
prices declining to 100% on December 31, 2016 and thereafter.
/d/ At the option of the parent, the stated maturity may be shortened to a date
not earlier than December 20, 2001 or extended to a date not later than
December 31, 2045, in each case if certain conditions are met.
/e/ The parent may redeem the Debentures (i) during the indicated redemption
period or (ii) upon the occurrence of certain events relating to tax
treatment of the trust or the Debentures or relating to capital treatment of
the trust preferred securities, prior to the indicated redemption period, in
each case, at a redemption price of 100% of the principal amount.
/f/ The Debentures may be redeemed on or after December 15, 2006 and prior to
December 15, 2007 at 103.9690% of the principal amount, and thereafter at
prices declining to 100% on December 15, 2016 and thereafter.
/g/ Excludes $27 million of deferred issuance costs.
The table above is a summary of the outstanding trust preferred securities
and Debentures.
The parent's obligations under each series of Debentures, the related junior
subordinated indenture, the related trust agreement, the related expense
agreement, and the related guarantee taken together constitute a full and
unconditional guarantee by the parent of each trust's obligations under the
relevant trust preferred securities.
The parent is required by the Federal Reserve to maintain certain levels of
capital for bank regulatory purposes. The Federal Reserve has determined 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. Such Tier 1 capital treatment, together with
the parent's ability to deduct, for federal income tax purposes, interest
payable on the related Debentures, provide the parent with a more cost-effective
means of obtaining capital for bank regulatory purposes than if the parent were
to issue preferred stock.
During 1997 and 1996, the trusts issued trust preferred securities, net of
deferred issuance costs, of $396 million and $1,477 million, respectively.
16 Stock Repurchase Program
During the first quarter of 1997, BAC's Board of Directors amended the existing
stock repurchase program. The amended program authorized the parent to buy back
up to an additional $3 billion of its common stock by the end of 1998 and to buy
back or redeem up to an additional $1 billion of its preferred stock by the end
of 1998.
During the year ended December 31, 1997, the parent repurchased 31.7 million
shares of its common stock under the amended stock repurchase program at an
average per-share price of $64.00. These transactions reduced stockholders'
equity by $2,025 million.
During the year ended December 31, 1996, the parent repurchased 34 million
shares of its common stock under the amended and prior stock repurchase programs
at an average per-share price of $39.70. These transactions reduced
stockholders' equity by $1,351 million.
During the year ended December 31, 1995, the parent repurchased 33.2 million
shares of its common stock in connection with a prior program at an average per-
share price of $26.92, which reduced stockholders' equity by $894 million.
During the year ended December 31, 1997, the parent redeemed preferred stock
under the amended stock repurchase program, reducing stockholders' equity by
$1,628 million.
71
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 1996, the parent redeemed preferred stock
under the amended and prior stock repurchase programs, reducing stockholders'
equity by $399 million. During the year ended December 31, 1995, the parent
redeemed preferred stock under a prior stock repurchase program, reducing
stockholders' equity by $206 million.
The remaining buyback and redemption authorities for common and preferred stock
totaled $1.8 billion and $0.2 billion, respectively, at December 31, 1997.
17 Preferred Share Purchase Rights and Common Stock Warrants
On April 11, 1988, the Board of Directors of the parent declared a dividend of
one preferred share purchase right (a Right) for each outstanding share of the
parent's common stock as of April 22, 1988 (the Rights Agreement). While the
Rights Agreement is in effect, every share of common stock issued before the
Rights become effective also represents a Right. Each Right entitles the holder
to buy from the parent, until the earlier of April 22, 1998 or the redemption of
the Rights, one two-hundredth of a share of Cumulative Participating Preferred
Stock, Series E, at an exercise price of $25.00 per Right (subject to
adjustment). The Rights will not be exercisable or transferable apart from the
parent's common stock until certain events occur pertaining to a person or group
acquiring or announcing the intention to acquire 20 percent or more of the
parent's outstanding common stock. Under specified circumstances, all of which
relate to a potential acquisition of the parent, a Right may: (i) become a right
to purchase shares of an acquiring company at half of the then-market price,
(ii) become a right to purchase the parent's common stock at half of the
then-market price or (iii) be exchanged by the parent for one share of common
stock or one two-hundredth of a share of Preferred Stock, Series E, or an
equivalent preferred share. The Board of Directors may redeem the Rights at a
price of $0.0005 per Right (rounded as to each holder to the nearest $0.01) at
any time prior to the acquisition by a person or group of 20 percent or more of
the outstanding common stock of the parent. Under other specified conditions,
the Rights may be automatically redeemed. The Rights are excluded from the
computation of earnings per common share. Certain adjustments were made in
accordance with the terms of the Rights to reflect a two-for-one stock split
effective June 2, 1997.
At December 31, 1996, common stock warrants outstanding totaled 105,546, which
were exercised prior to or expired on October 22, 1997. These warrants gave the
holder the right to purchase shares of common stock of the parent at a price of
$8.75 per share, subject to adjustment in certain events. The number of warrants
and the purchase price have been restated to reflect a two-for-one stock split
effective June 2, 1997.
18 Stock Split
On May 22, 1997, the stockholders of BAC approved a two-for one stock split,
along with an increase in the authorized number of shares of common stock from
700 million to 1.4 billion shares. The stock split was effective for
stockholders of record at the close of business on June 2, 1997. The stock split
did not cause any changes in the common stock's stated par value per share of
$1.5625 or in total stockholders' equity. A total of 387,314,462 shares of
common stock were issued in connection with the split, including 37,364,985
shares associated with shares held in treasury. As a result of the stock split,
$605 million was reclassified from additional paid-in capital to common stock.
19 Preferred Stock
The parent is authorized to issue, in one or more series, 70,000,000 shares of
preferred stock. The parent's outstanding preferred shares are nonvoting except
in certain limited circumstances. Dividends are cumulative and are payable
quarterly on February 28, May 31, August 31, and November 30. The shares are
redeemable at the option of the parent during the redemption period and at the
redemption price per share noted in the following table plus accrued and unpaid
dividends to the redemption date. Holders of the preferred shares have dividend
and liquidation preferences senior to those of holders of the parent's common
stock.
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 of $0.28125 per share.
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 of $0.44201 per share.
Additionally in 1997, the parent redeemed the following Cumulative Preferred
Stock series, each share represented by depositary shares (representing a
one-twentieth interest in a corresponding share of preferred stock) at a price
of $500.00 per share of preferred stock on the dates indicated: 8.16% Series L,
798,020 preferred shares, July 13, 1997; 7 7/8% Series M, 696,847 preferred
shares, September 30, 1997; and 8 1/2% Series N, 469,273 preferred shares,
December 15, 1997. These redemptions reduced stockholders' equity by
$982 million. As to the accrued dividend per share of preferred stock paid at
the redemption date, the following per share amounts were paid to the holders of
record: Series L, $4.76; Series M, $3.1718; and Series N, $1.6528.
72
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Original Shares Dividend
Shares Outstanding at Stated Value Per Share Redemption Price
Preferred Stock Series Issued December 31, 1997 Per Share Per Annum Redemption Period Per Share
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Adjustable:
Series A 5,178,000 5,178,000 $ 50.00 $ 3.25/a/ On or after 11/30/87 $ 50.00
Series B 3,546,100 3,546,100 100.00 6.00/b/ On or after 2/28/88 100.00
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ For the Cumulative Adjustable Preferred Stock, Series A, the dividend is
adjusted quarterly, and is 2.0% lower than the highest of three U.S.
Treasury rates, but is no lower than 6.5% and no greater than 14.5% per
annum.
/b/ For the Cumulative Adjustable Preferred Stock, Series B, the dividend is
adjusted quarterly, and is 4.0% lower than the highest of three U.S.
Treasury rates, but is no lower than 6.0% and no greater than 12.0% per
annum.
On March 31, 1996, the parent redeemed all 400,000 outstanding preferred shares
of its 11% Preferred Stock, Series J. This transaction reduced stockholders'
equity by $218 million. The shares were represented by 8 million depositary
shares, each representing a one-twentieth interest in a corresponding share of
preferred stock. The redemption price was $527.50 per share of preferred stock.
On April 16, 1996, the parent redeemed all 7,250,000 outstanding shares of its
9 5/8% Cumulative Preferred Stock, Series F, reducing stockholders' equity by
$181 million. The redemption price was equal to the stated value of $25.00 per
share, plus accrued and unpaid dividends of $0.30747 per share.
The table above summarizes the shares of preferred stock outstanding at December
31, 1997.
20 Capital Requirements
The parent and its domestic banking subsidiaries are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can result in certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on BAC's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
BAC's banking subsidiaries must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities, and certain off-balance-
sheet items as calculated under regulatory accounting practices. The
quantitative measures established by regulation to ensure capital adequacy
require financial institutions to maintain minimum amounts and ratios, as set
forth in the table on page 74, of total and Tier I capital to risk-weighted
assets and of Tier I capital divided by average total assets. The table
presented on page 74 includes BAC and its largest banking subsidiary, Bank of
America NT&SA, at December 31, 1997 and 1996. At December 31, 1997, the
calculation of BAC's risk-based capital amounts and ratios includes its
securities broker/dealer subsidiary to reflect the Federal Reserve Board's
October 31, 1997 modifications to the risk-based capital regulations that apply
to bank holding companies engaged in securities underwriting and dealing
activities through Section 20 subsidiaries. At December 31, 1996, amounts and
ratios excluded the effects of its Section 20 subsidiary. At December 31, 1996,
this exclusion reduced Tier 1 capital by $137 million, and total risk-based
capital by $339 million. This resulted in reducing the Tier 1 capital ratio and
total risk-based capital ratio by 1 basis point and 6 basis points,
respectively.
During 1997, Bank of America (BofA) Illinois, BofA Alaska, N.A., BofA Arizona,
BofA Nevada, BofA New Mexico, N.A., BofA Trust Company of Florida, N.A., and
BofA NW, National Association (BANW) were merged into the bank and are reflected
in its December 31, 1997 risk-based capital components. The bank's 1996 risk-
based capital amounts and ratios did not include these respective subsidiaries.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
As of December 31, 1997 and 1996, all of BAC's depository institution
subsidiaries met the well-capitalized requirements under the regulatory
framework for prompt corrective action. To be categorized as well capitalized, a
financial institution must maintain minimum total risk-based capital, Tier I
risk-based capital, and leverage ratio as set forth in the table on the next
page. There are no conditions or events that have occurred since December 31,
1997 that management believes would change these categorizations.
On an ongoing basis, BAC evaluates and modifies its mix of capital sources,
including debt, equity, and off-balance-sheet financing arrangements, taking
into consideration various factors. Such factors include regulatory capital
targets, as well as the cost of capital, which are influenced by prevailing
interest rates and credit risk. BAC's capital mix may vary from time to time in
response to changes in these factors.
73
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Risk-Based Capital--Actual and Minimum Amounts and Ratios
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
--------------------------------------------------------------------------------------------------
Total Tier 1 Total Tier 1
Risk-Based Risk-Based Leverage Risk-Based Risk-Based Leverage
(dollar amounts in millions) Capital Capital Ratio Capital Capital Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANKAMERICA CORPORATION
Actual $26,554 11.56% $17,291 7.53% $17,291 6.81% $25,880 11.79% $17,044 7.77% $17,229 7.44%
Minimum adequately capitalized 18,376 8.00 9,188 4.00 10,159 4.00 17,559 8.00 8,779 4.00 9,257 4.00
Minimum well capitalized 22,971 10.00 13,782 6.00 12,698 5.00 21,948 10.00 13,169 6.00 11,571 5.00
BANK OF AMERICA NT&SA
Actual 23,576 11.28 15,660 7.49 15,660 6.93 16,521 10.96 10,701 7.10 10,701 6.18
Minimum adequately capitalized 16,722 8.00 8,361 4.00 9,036 4.00 12,064 8.00 6,032 4.00 6,922 4.00
Minimum well capitalized 20,903 10.00 12,542 6.00 11,294 5.00 15,080 10.00 9,048 6.00 8,652 5.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21 Lease Commitments
BAC leases certain premises and equipment under noncancelable agreements
expiring between the years 1998 and 2035.
The following is a summary of future minimum rental commitments for
noncancelable leases at December 31, 1997, which do not include minimum sublease
rental income of $6 million for capital leases and $102 million for operating
leases:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital Operating
(in millions) Leases Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1998 $ 6 $ 283
1999 6 264
2000 75 238
2001 4 216
2002 4 202
Thereafter 12 1,209
- --------------------------------------------------------------------------------
Total minimum lease payments $107 $2,412
Amount representing interest (32)
- ----------------------------------------------------
Present Value of Net Minimum
Capital Lease Payments $ 75
- --------------------------------------------------------------------------------
</TABLE>
Total rental expense was $366 million in 1997, $375 million in 1996, and
$359 million in 1995.
22 Income Taxes
The significant components of the provision for income taxes are as follows:
- --------------------------------------------------------------------------------
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
PROVISION FOR (BENEFIT FROM)
INCOME TAXES
Current:
Federal $ 763 $ 869 $1,091
State and local 139 161 305
Foreign 520 265 239
- --------------------------------------------------------------------------------
1,422 1,295 1,635
Deferred:
Federal 516 419 268
State and local 184 175 29
Foreign (6) 11 (29)
- -------------------------------------------------------------------------------
694 605 268
- -------------------------------------------------------------------------------
$2,116 $1,900 $1,903
- -------------------------------------------------------------------------------
74
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred income tax assets and liabilities at
December 31, 1997 and 1996 are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED INCOME TAX ASSETS
Allowance for credit losses $ 1,475 $ 1,534
Accrued expenses 209 237
Tax carryovers/a/ 67 84
Other 462 528
Valuation allowance for deferred
income tax assets/a/ (67) (75)
- --------------------------------------------------------------------------------
Total deferred income tax assets 2,146 2,308
DEFERRED INCOME TAX LIABILITIES
Lease financing (2,166) (1,698)
Identifiable intangible assets (464) (545)
Securities valuation (428) (483)
Employee benefit plans (119) (205)
Accumulated tax depreciation in excess of
book depreciation (187) (227)
Deferred gains and installment sales (169) (122)
Mortgage servicing assets (154) (59)
Other (370) (187)
- ------------------------------------------------------------------------------
Total deferred income tax liabilities (4,057) (3,526)
- ------------------------------------------------------------------------------
Net Deferred Income Tax Liabilities $(1,911) $(1,218)
- ------------------------------------------------------------------------------
</TABLE>
/a/ The valuation allowance for deferred income tax assets relates primarily to
net operating loss carryovers of foreign subsidiaries and pre-acquisition
tax carryovers associated with the Security Pacific Corporation and
Continental Bank Corporation mergers. Utilization of these carryovers is
subject to various limitations. The valuation allowance was established
since BAC may not realize all of the tax benefit of these carryovers as a
result of the related limitations. If BAC determines that it will realize
the pre-acquisition carryover tax benefits in the future, the corresponding
reduction in the valuation allowance will decrease goodwill instead of tax
expense.
Management believes that BAC will fully realize its total deferred income
tax assets as of December 31, 1997 based upon BAC's recoverable taxes from
prior carryback years, its total deferred income tax liabilities, and its
current level of operating income.
The valuation allowance for deferred income tax assets was $67 million and
$75 million at December 31, 1997 and 1996, respectively. In the future, the
recognition of deferred tax assets subject to the valuation allowance may
result in a reduction to goodwill of up to $25 million.
The reconciliation of the provision for income taxes computed at the U.S.
statutory income tax rate to pretax income is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35% 35% 35%
State and local income taxes,
net of federal tax effect 4 5 5
Other, net 1 -- 2
- --------------------------------------------------------------------------------
Effective Tax Rate 40% 40% 42%
- --------------------------------------------------------------------------------
</TABLE>
In 1997 and 1996, deferred tax liabilities of $86 million and $21 million,
respectively, relating to net unrealized gains on available-for-sale securities
were recorded directly to stockholders' equity.
At December 31, 1997, federal income taxes had not been provided on $350
million of undistributed earnings of foreign subsidiaries earned prior to 1987
that have been reinvested for an indefinite period of time. If the undistributed
earnings were distributed, credits for foreign taxes paid on such earnings and
for the related foreign withholding taxes payable upon remittance, would be
available to offset $70 million of the $150 million resulting tax expense.
Subsequent to 1986, federal taxes are provided on earnings of foreign
subsidiaries as a result of a tax law change.
BAC provided tax expense of $46 million, $24 million, and $13 million on net
securities gains in 1997, 1996, and 1995, respectively.
23 Employee Benefit Plans
Defined Benefit Plans
During 1997, the majority of salaried U.S. employees within BAC were covered
under the BankAmerica Pension Plan (the Pension Plan), a defined benefit cash
balance plan.
Pension Plan benefits are based on length of service, level of compensation, and
a specified interest rate. Effective January 1, 1996, the benefit formula of the
Pension Plan was amended so that eligible participants accrue benefits called
pay-based credits, of 7 percent of annual qualified earnings over one-half of
the Social Security wage base. Contributions are made by BAC and are based on
actuarial computations of the amount sufficient to fund the current service cost
plus amortization of the unfunded actuarial accrued liability. Contributions are
determined in accordance with Internal Revenue Service funding requirements and
are invested in diversified portfolios.
BAC maintains certain nonqualified, nonfunded defined benefit retirement plans.
The related retirement benefits are paid from BAC's assets. Certain non-U.S.
employees within BAC are covered by noncontributory defined benefit pension
plans that BAC funds based primarily on local laws. The assumptions used in
computing the present value of the accumulated benefit obligation, the projected
benefit obligation, and net pension expense for the non-U.S. plans are
substantially consistent with those assumptions used for the U.S. plans, given
local conditions.
75
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation between the funded status of all defined
benefit plans and amounts included in BAC's consolidated balance sheet:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
PREPAID PENSION COST
Plan assets at fair value, primarily listed
stocks and bonds $3,669 $3,385
Less: Actuarial present value of projected
benefit obligation 3,206 2,971
- --------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation 463 414
Unrecognized net loss 87 151
Unrecognized prior service cost 33 41
Unrecognized net transition obligation 15 15
Additional minimum liability (2) (3)
- --------------------------------------------------------------------------------
Prepaid Pension Cost $ 596 $ 618
ACTUARIAL PRESENT VALUE
OF BENEFIT OBLIGATION
Vested benefit obligation $2,843 $2,697
Accumulated benefit obligation 3,124 2,902
- --------------------------------------------------------------------------------
</TABLE>
The following is a summary of the components of net pension expense:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned
during the year $ 91 $ 85 $ 98
Interest cost on projected benefit obligation 207 188 200
Net amortization and deferral 283 195 399
Effect of actual return on plan assets (520) (408) (631)
- --------------------------------------------------------------------------------
Net Pension Expense $ 61 $ 60 $ 66
- --------------------------------------------------------------------------------
</TABLE>
A summary of the assumptions used in computing the present value of the
accumulated benefit obligation, the present value of the projected benefit
obligation, and the net pension expense for the U.S. plans follows. The discount
rate used in determining benefit obligations at year end reflects the
approximate yield on high quality fixed-income securities taking into account
the duration of the projected benefit obligation. The discount rate used in
determining net pension expense is based on assumptions used for the previous
year-end measurement of the benefit obligation.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate in determining expense 7.25% 6.50% 8.50%
Discount rate in determining benefit
obligations at year end 6.50 7.25 6.50
Rate of increase in future compensation
levels for determining expense/a/ NA 5.00 5.50
Rate of increase in future compensation
levels for determining benefit obligations
at year end/a/ NA NA 5.00
Expected long-term rate of return
on assets 8.50 8.00 9.75
Account growth interest rate in
determining expense 6.75 6.00 6.75
Account growth interest rate in
determining benefit obligations at year end 6.00 6.75 6.00
- --------------------------------------------------------------------------------
</TABLE>
/a/ Rates are attributable to the Seafirst Corporation Retirement Plan (the
Seafirst Plan) since this is the only U.S. defined benefit final average pay
plan as of January 1, 1995. Effective December 31, 1995, the Seafirst Plan
was merged into the Pension Plan.
NA - Not applicable
Defined Contribution Plans
During 1997, the majority of salaried U.S. employees within BAC were eligible
to participate in the BankAmerica 401(k) Investment Plan (the 401(k) Plan). This
plan provides tax-deferred investment opportunities to salaried employees who
have completed a required length of service. Employees may contribute to the
plan up to certain limits prescribed by the Internal Revenue Service. A portion
of these contributions is matched by BAC. Contributions are invested at the
direction of the participant. Effective January 1, 1996, the 401(k) Plan was
amended to provide employees with pay-based credits. The pay-based credits are
equal to 3 percent or 7 percent of an eligible employee's annual qualified
earnings up to one-half of the Social Security wage base, depending upon the
employee's age or length of service.
BAC maintains certain nonqualified defined contribution retirement plans. The
related retirement benefits are paid from BAC's assets. In addition, certain
non-U.S. employees within BAC are covered under defined contribution pension
plans that are separately administered in accordance with local laws.
Aggregate contributions for all defined contribution plans were $169 million,
$175 million, and $93 million in 1997, 1996, and 1995, respectively. The
increase of $82 million in 1996 was primarily attributable to the aforementioned
amendment regarding pay-based credits. Certain employer and employee
contributions to the plans are used to purchase BAC's common stock at prices
that approximate market values. Contributions, including dividends, to the plans
were used to purchase 529,302 shares for $34 million in 1997, 761,094 shares for
$30 million in 1996, and 591,890 shares for $16 million in 1995. Sales by the
plans of BAC's common stock were 467,329 shares for $32 million in 1997, 581,146
shares for $26 million in 1996, and 1,687,176 shares for $45 million in 1995.
The plans held 30,268,651 shares, 31,336,418 shares, and 31,988,306 shares
of BAC's common stock at December 31, 1997, 1996, and 1995, respectively.
76
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Employee Stock Plans
BAC offers shares of its common stock under three compensation plans: 1992
Management Stock Plan (the management stock plan), Performance Equity Program
(PEP), and Take Ownership!(TM) The BankAmerica Global Stock Option Program (Take
Ownership!).
BAC offers shares of its common stock to certain key employees through options
or restricted stock under the management stock plan. BAC was authorized to grant
up to 10,658,006 and 11,023,416 shares of common stock in 1997 and 1996,
respectively, under the management stock plan.
Shares are offered by the management stock plan under three types of options:
nonqualified stock options, performance stock options, and incentive stock
options. The shares under option generally vest ratably over three years. In
addition, the shares under option generally become exercisable not earlier than
six months and not later than ten years after the date the options are granted.
Options awarded before August 5, 1991 to principal officers of BAC are subject
to certain restrictions and also constitute stock appreciation rights (SARs)
equal to the number of shares covered by the options. These SARs are exercisable
for the difference between the option price and the current market price of the
stock at the time of exercise. The difference can be received in cash or in
shares. SARs, which are included in options for purposes of this disclosure, are
exercisable under the same terms as the related stock options.
Under the management stock plan, BAC also awards restricted stock to certain key
employees. Generally, the stock is not released until the employee has completed
a continuous service requirement specified in the award agreement. During 1997,
BAC awarded 1,058,456 restricted shares with a weighted-average fair value at
the date of grant of $73.34 per share. BAC awarded 1,137,252 restricted shares
during 1996 which had a weighted-average fair value at the date of grant of
$41.46 per share. In addition, in 1994 and 1995, shares of restricted stock were
awarded under a three-year performance share program. There were no restricted
shares awarded in 1996 and 1997 under the performance share program. Generally,
these shares vested in three installments as the price of BAC common stock
attained the specified targets. In 1996, the final installment of 302,000 of
these shares vested. Shares of restricted stock outstanding under the management
stock plan were 3,608,440 and 4,165,504 at December 31, 1997 and 1996,
respectively.
Effective May 22, 1997, BAC adopted PEP under which BAC offers shares of its
common stock to certain key employees. Two types of awards can be made under
PEP: market price options and premium price options. Under PEP, BAC is
authorized to grant up to 11,400,000 shares of common stock. The market price
options become exercisable ratably over three years and generally have a maximum
term of ten years after the date the options are granted. The premium price
options generally are exercisable not earlier than three years and not later
than ten years after the date the options are granted. Furthermore, the premium
price options only become exercisable when BAC's common stock price increases
significantly to specified threshold levels within given time frames. Limited
SARs may be awarded in conjunction with premium price options and become
exercisable upon a change in control.
Effective October 1, 1996, BAC adopted Take Ownership! which covers
substantially all of its employees. Under Take Ownership!, BAC is authorized to
grant options, or SARs in certain foreign locations, to its employees for up to
70,200,000 shares of common stock. SARs are generally exercisable under the same
terms as options. The shares granted under Take Ownership! vest ratably over
three years and have a maximum term of five years after the date of grant. As of
December 31, 1997, 28,013,806 options were outstanding under this program.
Both stock options and restricted stock are granted by the Executive Personnel
and Compensation Committee of the Board of Directors. Shares available for grant
under the management stock plan, through either stock options or restricted
stock, were 7,139,419 and 4,263,778 at December 31, 1997 and 1996, respectively.
Under PEP, 523,750 shares were available for grant at December 31, 1997. In
addition, shares available for grant under Take Ownership! were 41,393,705 and
60,015,960 at December 31, 1997 and 1996, respectively. Shares subject to
options that are canceled, except for those converted in connection with the
Security Pacific Corporation and Continental Bank Corporation mergers, become
available for future grants.
The following is a summary of options outstanding and exercisable at
December 31, 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Options Outstanding/a/ Options Exercisable/a/
---------------------------------------------------------------------------------------
Shares Weighted-Average Shares
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at End of Year Contractual Life Exercise Price at End of Year Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.35 to $35.75 19,482,673 5.69 $22.92 16,107,745 $22.15
$41.34 to $72.00 29,589,079 6.07 52.71 4,712,010 44.70
$73.53 to $108.00 24,171,420 7.46 81.43 -- --
- -------------------------------------------------------------------------------------------------------------------------
Total 73,243,172 6.43 $54.26 20,819,755 $27.26
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes outstanding and exercisable options under former plans.
No additional options can be granted under these former plans.
77
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of changes in the options for all of the employee
stock plans:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31/a/
1997 1996/b/
---------------------------------------------------------
Weighted-Avg. Weighted-Avg.
Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
beginning
of year 45,180,386/b/ $31.44/b/ 36,251,348 $21.44
Granted 40,896,039 73.05 18,740,750 44.89
Exercised (8,499,494) 24.09 (8,734,398) 18.54
Forfeited (4,331,690) 52.71 (1,077,314) 33.72
Expired (2,069) 20.15 -- --
- --------------------------------------------------------------------------------
Balance,
End of
Year 73,243,172 $54.26 45,180,386 $31.44
Exercisable
at end of
year 20,819,755 $27.26 18,211,016 $20.53
- ------------------------------------------------------------------------------
</TABLE>
/a/ Includes outstanding and exercisable options under former plans. No
additional options can be granted under these former plans.
/b/ Restated to reflect a two-for-one stock split effective June 2, 1997.
Compensation expense related to employee stock plans calculated using the
intrinsic value method was $63 million and $50 million in 1997 and 1996,
respectively. The table below reflects BAC's pro forma net income, earnings per
common share, and diluted earnings per common share as if compensation expense
for BAC's stock plans had been determined based on the fair value at the grant
dates for awards under those plans. Since pro forma compensation expense relates
to all periods over which the awards vest, the initial impact of pro forma
compensation expense on pro forma net income may not be representative of
compensation expense in subsequent years, when the effect of the amortization of
multiple awards would be reflected.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRO FORMA RESULTS
- --------------------------------------------------------------------------------
Year Ended December 31
(in millions, except per share data) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $3,106 $2,844 $2,655
Earnings per common share/b/ 4.30 3.68/a/ 3.27/a/
Diluted earnings per common share/b/ 4.21 3.62/a/ 3.24/a/
- --------------------------------------------------------------------------------
</TABLE>
/a/ Restated to reflect a two-for-one stock split effective June 2, 1997.
/b/ Reflects the adoption of SFAS No. 128 including the restatement of prior
year.
Fair values of the options were estimated at the date of grant using a
variation of the Black-Scholes option pricing model, which includes the
following assumptions used for the stock options awarded during 1997 and 1996,
respectively: risk-free weighted average interest rate of 6.23 percent and 5.95
percent; weighted average dividend yield of 2.96 percent and 3.23 percent;
weighted average expected volatility of 24.5 percent and 20.80 percent; expected
option life for the management stock plan of 4.3 and 4.5 years; expected option
life for PEP of 6.9 years and expected life for Take Ownership! of 2.6 and 2.6
years.
Except for the premium price options awarded under PEP, the weighted-average
grant date fair values of the options granted during 1997 and 1996 were $12.09
and $7.53 per share, respectively. The weighted-average grant date fair values
of the premium price options granted under PEP during 1997 was $8.01 per share.
Generally, the exercise price of each option equals the market price of BAC's
common stock on the date of grant with the exception of premium price options
which have exercise prices significantly above the market price of BAC's common
stock on the date of grant. Expiration dates ranged from January 20, 1998 to
December 4, 2007 for options outstanding at December 31, 1997.
Postretirement Health Care and Life Insurance Benefits
BAC provides certain defined health care and life insurance benefits under plans
for retired U.S. employees. Retiree health care benefits are offered under
self-insured arrangements, as well as through various health maintenance
organizations. The contributions of BAC are expressed as a fixed dollar amount.
The cost of monthly coverage each year for retirees is equal to the difference
between the projected total cost of coverage for the year and the fixed dollar
amount. BAC's policy is to fund the cost of medical benefits in amounts
determined at the discretion of management. Employer contributions are invested
in diversified portfolios, including fixed income and equity investments.
The assumed discount rates used to measure the accumulated postretirement
benefit obligation were 6.50 percent and 7.25 percent at December 31, 1997 and
1996, respectively. The expected long-term rates of return on plan assets used
in computing the net periodic postretirement cost were 8.50 percent, 8.00
percent, and 9.75 percent, for the years ended December 31, 1997, 1996, and
1995, respectively.
The following is a reconciliation between the funded status of all
postretirement benefit plans other than pensions and the amounts included in
BAC's consolidated balance sheet:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $510 $467
Fully eligible active plan participants 18 19
Other active plan participants 104 89
- --------------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation 632 575
Less: Plan assets at fair value, primarily
listed stocks and bonds 136 116
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 496 459
Less: Unrecognized net transition obligation 398 424
Unrecognized net gain (36) (61)
Unrecognized prior service benefit (3) (23)
- --------------------------------------------------------------------------------
Accrued Postretirement Benefit Cost $137 $119
- --------------------------------------------------------------------------------
</TABLE>
78
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The unrecognized net transition obligation is being amortized on a straight-line
basis over twenty years. The following is a summary of the components of net
periodic postretirement cost:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 5 $ 6 $ 6
Interest cost on accumulated
postretirement benefit obligation 40 40 49
Net amortization and deferral 33 28 37
Effect of actual return on plan assets (20) (12) (17)
- --------------------------------------------------------------------------------
Net Periodic Postretirement Cost $ 58 $ 62 $ 75
</TABLE>
- --------------------------------------------------------------------------------
24 Earnings per Common Share
Effective December 15, 1997, BAC adopted SFAS No. 128, "Earnings per Share." For
information regarding the adoption of SFAS No. 128, refer to Note 1 of the Notes
to Consolidated Financial Statements on pages 60-65.
Under the new requirements, BAC's computation of earnings per common and common
equivalent share is replaced by earnings per common share, which excludes any
dilutive effect of stock options and warrants outstanding during the period.
Earnings per common share is computed by dividing net income applicable to
common stock by the average number of common shares outstanding during the
period.
Also, under SFAS No. 128, BAC's computation of earnings per common and common
equivalent share, assuming full dilution, is replaced with diluted earnings per
common share. Diluted earnings per common share is computed by dividing net
income applicable to common stock by the average number of common shares
outstanding during the period including the dilutive effect of stock options and
warrants outstanding during the period. The dilutive effect of stock options and
warrants outstanding during the period is computed using the average market
price of BAC's common stock for the period.
Earnings per common share have been computed based on the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31
1997 1996/a/ 1995/a/
-------------------------------------------------------------------------------------
Diluted Diluted Diluted
(dollar amounts in millions, Earnings Per Earnings Per Earnings Per Earnings Per Earnings Per Earnings Per
except per share data) Common Share Common Share Common Share Common Share Common Share Common Share
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,210 $3,210 $2,873 $2,873 $2,664 $2,664
Less: Preferred stock dividends 100 100 185 185 227 227
- -----------------------------------------------------------------------------------------------------------------------------------
Net income applicable to common stock 3,110 3,110 2,688 2,688 2,437 2,437
Average number of common shares outstanding 699,189,176 699,189,176 722,373,206 722,373,206 741,963,186 741,963,186
Effect of dilutive options and warrants -- 20,587,405 -- 13,681,838 -- 9,148,652
- -----------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding
used to calculate earnings per common share 699,189,176 719,776,581 722,373,206 736,055,044 741,963,186 751,111,838
Earnings Per Common Share $ 4.45 $ 4.32 $ 3.72 $ 3.65 $ 3.28 $ 3.24
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Restated to reflect a two-for-one stock split effective June 2, 1997.
79
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
25 Off-Balance-Sheet Transactions
In the ordinary course of business, BAC enters into various types of
transactions that involve credit-related financial instruments and derivative
financial instruments that are not required to be recorded on the balance sheet.
Credit-related financial instruments are typically customer-driven, while
derivative financial instruments are entered into both with customers and for
BAC's own account in managing interest rate and foreign exchange risks.
In its effort to manage credit risk associated with derivative financial
instruments, BAC ensures that its off-balance-sheet portfolio is well
diversified, both in terms of instrument type and industry and customer
concentration. In addition, credit risk is managed through BAC's credit approval
process. It is also BAC's policy to execute legally enforceable master netting
agreements with its derivative financial instrument customers, which provide for
the netting of BAC's current positive and negative closeout exposures associated
with all individual transactions of those counterparties in the event of
default. To further mitigate off-balance-sheet credit exposures, BAC obtains
collateral where determined appropriate.
Credit-Related Financial Instruments
Credit-related financial instruments include commitments to extend credit,
standby letters of credit, and commercial letters of credit. Fees received from
credit-related financial instruments are recognized over the terms of the
contracts and are included in other fees and commissions in noninterest income.
Unfunded credit commitments at December 31, 1997 and 1996 totaled $171,924
million and $158,287 million, respectively, of which $16,806 million and $10,255
million related to foreign-based customers and $155,118 million and $148,032
million related to domestic-based customers. At both December 31, 1997 and 1996,
no domestic or foreign industry nor any individual foreign country comprised
more than 10 percent of total unfunded noncredit-card-related commitments. For a
summary of funded loan outstandings by type at December 31, 1997 and 1996, refer
to Note 9 of the Notes to Consolidated Financial Statements on page 68.
A summary of the contractual amounts of each significant class of
off-balance-sheet credit-related financial instruments outstanding appears in
the table 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>
- --------------------------------------------------------------------------------
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $ 35,920 $ 36,897
Other commitments to extend credit 114,771 100,234
Standby letters of credit (net of participations
sold: 1997 -- $3,300; 1996 -- $2,999) 18,888 17,092
Commercial letters of credit 2,345 4,064
- --------------------------------------------------------------------------------
</TABLE>
COMMITMENTS TO EXTEND CREDIT
Unutilized credit card lines are commitments to extend credit. These lines
generally are not secured and may be canceled by BAC after thirty-days written
notice to the customer. Many credit card customers are not expected to fully
draw down their total lines of credit and, therefore, the total contractual
amount of these lines does not necessarily represent future cash requirements.
Other commitments to extend credit represent agreements to extend credit to
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. Although they are
currently subject to drawdown, many of these commitments are expected to expire
or terminate without being funded. Of total other commitments to extend credit
at December 31, 1997, $53,591 million will expire in less than one year, $56,208
million from one to five years, and $4,972 million after five years. Generally,
other commitments are not secured, but, when required, collateral may include
cash, securities, and real estate.
STANDBY LETTERS OF CREDIT
A standby letter of credit (SBLC) represents an irrevocable obligation to pay a
third-party beneficiary in the event a customer fails to meet a financial or
performance obligation. BAC's determination of whether an SBLC is a financial or
performance obligation is based upon the contractual obligation which triggers
payment. When the contractual obligation is financial, such as securing bonds or
debt, the SBLC is classified as financial. When the contractual obligation is
performance-related, such as shipping a product or providing a service, then the
SBLC is classified as performance. Credit risk arises in these transactions from
the possibility that, if the SBLC has been drawn upon due to default of payment
or nonperformance, a customer may not be able to repay BAC. Historically, losses
associated with counterparty nonperformance on these instruments have been
immaterial.
80
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1997 and 1996, financial SBLCs totaled $14,530 million and
$12,720 million, respectively. Of the year-end 1997 balance, $9,156 million will
expire in less than one year, $4,797 million will expire in one to five years,
and $577 million will expire after five years.
At December 31, 1997 and 1996, performance SBLCs totaled $4,358 million and
$4,372 million, respectively. Of the year-end 1997 balance, $2,579 million will
expire in less than one year, $1,769 million will expire in one to five years,
and $10 million will expire after five years.
Fees received for SBLCs are recognized over the lives of the contracts and are
included in other fees and commissions in noninterest income. Generally, SBLCs
are not secured, but, when required, collateral may include cash and securities.
COMMERCIAL LETTERS OF CREDIT
Commercial letters of credit ensure payment by a bank to a third party for a
customer's foreign or domestic trade transactions. BAC's credit risk in these
transactions is limited by the face amount of the letter of credit, along with
the related collateral and the general duration of the contract.
Derivative Financial Instruments
Derivative financial instruments 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. 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.
A more detailed discussion regarding the accounting treatment for trading and
hedging derivative financial instruments and related unrealized gains and losses
may be found in Footnote 1 of the Notes to Consolidated Financial Statements on
pages 60 -- 65.
The table on the next page summarizes the notional and credit risk amounts for
each significant class of derivative financial instrument outstanding in BAC's
trading and asset and liability management portfolios.
Credit risk represents unrealized gains on derivative financial instruments. 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. In the aggregate for all contracts, credit risk totaled $10.9
billion at December 31, 1997.
The table on page 83 summarizes the average and year-end fair values of each
significant class of derivative financial instrument outstanding in BAC's
trading portfolio and the year-end fair values for each significant class of
derivative financial instrument 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.
81
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTIONAL AND CREDIT RISK AMOUNTS FOR DERIVATIVE FINANCIAL INSTRUMENTS
HELD OR ISSUED FOR TRADING PURPOSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 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 $ 463,295 $ 1,828/b/ $442,160 $ 2,968/b/
Futures and forward rate contracts:
Commitments to purchase 112,562 69 138,381 34
Commitments to sell 145,158 50 182,065 280
Written options 27,191 --/c/ 32,679 --/c/
Purchased options 36,522 395 40,805 373
- ------------------------------------------------------------------------------------------------
Total interest rate contracts 784,728 2,342 836,090 3,655
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 575,761 6,530 612,767 2,670
Written options 31,748 --/c/ 24,840 --/c/
Purchased options 30,330 520 23,272 319
Currency swaps 29,063 1,450 27,589 951
- ------------------------------------------------------------------------------------------------
Total foreign exchange contracts 666,902 8,500 688,468 3,940
Stock Index Options and Commodity Contracts 4,349 87 1,561 87
- ------------------------------------------------------------------------------------------------
Total $1,455,979/d/ $ 10,929 $1,526,119/e/ $ 7,682
- ------------------------------------------------------------------------------------------------
</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 the trading portfolio
include intercompany hedging-related contracts of $6.5 billion and $0.7
billion, respectively. Foreign exchange contracts in the trading portfolio
include $4.2 billion of intercompany hedging-related contracts.
/e/ Interest rate swaps and interest rate options in the trading portfolio
include intercompany hedging-related contracts of $13.9 billion and $0.7
billion, respectively. Foreign exchange contracts in the trading portfolio
include $2.4 billion of intercompany hedging-related contracts.
- --------------------------------------------------------------------------------
NOTIONAL AND CREDIT RISK AMOUNTS FOR DERIVATIVE FINANCIAL INSTRUMENTS
HELD OR ISSUED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 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 $ 48,704 $ 167 $ 46,445 $ 128
Futures and forward rate contracts 89,650 -- 58,467 --
Purchased options 17,959 49 10,957 81
- -----------------------------------------------------------------------------------------------
Total interest rate contracts 156,313 216 115,869 209
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 3,756 -- 1,746 --
Currency swaps 771 -- 673 --
- -----------------------------------------------------------------------------------------------
Total foreign exchange contracts 4,527 -- 2,419 --
Total $ 160,840/b/ $ 216 $118,288/c/ $ 209
- -----------------------------------------------------------------------------------------------
</TABLE>
/a/ Credit risk represents current replacement cost after the effects of master
netting agreements.
/b/ Interest rate swaps and interest rate options in the asset and liability
management portfolio include intercompany hedging-related contracts of $6.5
billion and $0.7 billion, respectively. Foreign exchange contracts in the
asset and liability management portfolio include $4.2 billion of
intercompany hedging-related contracts.
/c/ Interest rate swaps and interest rate options in the asset and liability
management portfolio include intercompany hedging-related contracts of $13.9
billion and $0.7 billion, respectively. Foreign exchange contracts in the
asset and liability management portfolio include $2.4 billion of
intercompany hedging-related contracts.
82
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------------------------------------
Average Fair Value Year-End Average Fair Value Year-End
(in millions) For the Year Ended/a,b/ Fair Value/b/ For the Year Ended/a,b/ Fair Value/b/
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps:
Assets $ 2,280 $ 1,828 $ 2,956 $ 2,968
Liabilities (1,999) (1,603) (2,661) (2,820)
Futures and forward rate contracts:
Assets 150 119 335 314
Liabilities (131) (78) (331) (329)
Written options (283) (302) (221) (300)
Purchased options 303 395 307 373
- --------------------------------------------------------------------------------------------------------------------------------
Total interest rate contracts 320 359 385 206
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts:
Assets 4,454 6,530 2,358 2,670
Liabilities (4,370) (6,521) (2,709) (2,842)
Written options (640) (731) (333) (369)
Purchased options 504 520 283 319
Currency swaps:
Assets 1,154 1,450 1,137 951
Liabilities (962) (1,199) (1,308) (937)
- --------------------------------------------------------------------------------------------------------------------------------
Total foreign exchange contracts 140 49 (572) (208)
STOCK INDEX OPTIONS AND COMMODITY CONTRACTS
Assets 67 87 58 87
Liabilities (61) (68) (25) (36)
- --------------------------------------------------------------------------------------------------------------------------------
Total stock index options and commodity contracts 6 19 33 51
Total $ 466 $ 427 $ (154) $ 49
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Average fair value amounts are calculated based on monthly balances.
/b/ For a description of fair value methodologies, refer to Note 26 of the Notes
to Consolidated Financial Statements on pages 86 -- 88.
- --------------------------------------------------------------------------------
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD
OR ISSUED FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997/a,b/ 1996/a,b/
- --------------------------------------------------------------------------------
<S> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $(325) $(369)
Futures and forward rate contracts (16) (26)
Purchased options 42 (4)
- --------------------------------------------------------------------------------
Total interest rate contracts (299) (399)
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts -- --
Currency swaps (133) (63)
- --------------------------------------------------------------------------------
Total foreign exchange contracts (133) (63)
Total $(432) $(462)
- --------------------------------------------------------------------------------
</TABLE>
/a/ For a description of fair value methodologies, refer to Note 26 of the Notes
to Consolidated Financial Statements on pages 86 -- 88.
/b/ Bracketed amounts reflect net liability positions.
83
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
INTEREST RATE AND CURRENCY SWAPS
Interest rate swaps are contractual agreements between two parties to exchange
periodic payments in the same currency, each of which is computed on a different
interest rate basis, on a specified notional amount. Most interest rate swaps
involve the net exchange of payments calculated as the difference between fixed
and floating interest rate payments. Currency swaps, in their simplest form, are
contractual agreements that involve the exchange of both periodic and final
amounts in two different currencies. Exposure to loss on both types of swap
contracts will increase or decrease over their respective lives as a function of
maturity dates, interest and foreign exchange rates, and timing of payments.
INTEREST RATE FUTURES, FORWARD, AND OPTION CONTRACTS
Interest rate futures are exchange-traded instruments and represent commitments
to purchase or sell a designated security or money market instrument at a
specified future date and price. Interest rate forward agreements are
over-the-counter contracts where two parties agree on an interest rate and tenor
that will become a reference point in determining, in concert with an agreed
notional principal amount, a net payment to be made by one party to the other,
depending on what market rate in fact prevails at a future point in time.
Interest rate options, which primarily consist of caps and floors, are interest
rate protection instruments that involve the obligation of the seller to pay the
buyer an interest rate differential in exchange for a premium paid by the buyer.
This differential represents the difference between current interest rates and
an agreed-upon rate applied to a notional amount. Exposure to loss on all
interest rate contracts will increase or decrease over their respective lives as
interest rates fluctuate. For interest rate futures and exchange-traded option
contracts, BAC's exposure to off-balance-sheet credit risk is limited, as these
transactions are executed on organized exchanges that assume the obligations of
counterparties and generally require security deposits and daily settlement of
margins.
FOREIGN EXCHANGE CONTRACTS
Foreign exchange contracts, which include spot, forward and futures contracts,
represent agreements to exchange the currency of one country for the currency of
another country at an agreed-upon price, on an agreed-upon settlement date.
Foreign exchange option contracts are similar to interest rate option contracts,
except that they are based on currencies, rather than interest rates. Exposure
to loss on these contracts will increase or decrease over their respective lives
as currency exchange and interest rates fluctuate. For exchange-traded foreign
exchange contracts, BAC's exposure to off-balance-sheet credit risk is limited,
as these transactions are executed on organized exchanges that assume the
obligations of counterparties and generally require security deposits and daily
settlement of margins.
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 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.
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 the respective products have been allocated into three broad
functional categories: interest rate products, foreign exchange contracts, and
debt instruments trading. Trading-related income from interest rate products
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.
Trading-related income from foreign exchange contracts 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 (including securities in emerging markets), mortgage-backed
securities, municipal bonds, and corporate debt.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TRADING-RELATED INCOME
- --------------------------------------------------------------------------------
Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TRADING INCOME
Interest rate products $ 25 $ 56 $ 67
Foreign exchange contracts 444 316 303
Debt instruments 223 258 157
- --------------------------------------------------------------------------------
$ 692 $ 630 $ 527
OTHER TRADING-RELATED INCOME/a/
Interest rate products $ 43 $ 31 $ 30
Foreign exchange contracts 7 20 28
Debt instruments 219 208 152
- --------------------------------------------------------------------------------
$ 269 $ 259 $ 210
- --------------------------------------------------------------------------------
</TABLE>
/a/ Primarily includes the net interest revenue associated with the respective
products.
Asset and Liability Management Activities
BAC uses derivative financial instruments to manage interest rate risk related
to designated assets and liabilities, primarily fixed rate and adjustable rate
residential mortgages, long-term debt, and deposits. Foreign exchange derivative
financial instruments are used to hedge net capital exposure and foreign
currency exposures.
84
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
One strategy that BAC employs in managing interest rate risk is the use of
interest rate swaps to modify the interest rate characteristics of designated
categories of assets and liabilities. For example, BAC may enter into an
interest rate swap to alter cash flows on its long-term debt from fixed to
floating rate in an effort to reduce gap mismatches.
Another hedging strategy used by BAC is the purchase of options to protect
against significant loss due to extreme interest rate movements. For example,
BAC may purchase interest rate floors on its adjustable rate mortgage portfolio
to reduce the risk of loss from a rapid or prolonged decline in interest rates.
In addition, BAC may use interest rate swaps to hedge against market value
fluctuations of available-for-sale securities.
The above hedging strategies would be rendered ineffective if BAC disposes of
the underlying product being hedged or if certain unexpected events occur. In
addition, BAC may terminate its hedging-related contracts in reaction to certain
events or circumstances. The deferred gains or losses on terminated contracts
recorded in BAC's consolidated balance sheet at December 31, 1997 and 1996, and
the amortization of such amounts for the years 1997 and 1996 were not
significant.
The table below summarizes the expected or contractual maturities and weighted
average interest rates associated with amounts to be received or paid on BAC's
interest rate swaps used to manage asset and liability interest rate exposure at
- --------------------------------------------------------------------------------
Asset and Liability Management Interest Rate Swaps/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997
Greater Greater Greater Greater Greater Greater
than than than than than than
(dollar amounts in billions) 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-10 years 10 years Total/c/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECEIVE FIXED/b/
Notional amount $ 1.5 $ 1.9 $ 1.6 $ 2.0 $ 2.0 $12.8 $ 2.0 $23.8
Weighted average receive rate 6.68% 6.52% 6.44% 7.07% 7.02% 6.47% 6.60% 6.59%
PAY FIXED/b/
Notional amount $ 3.7 $ 4.9 $ 5.3 $ 2.3 $ 1.1 $ 4.4 $ 1.3 $23.0
Weighted average pay rate 6.19% 6.33% 7.03% 6.99% 7.24% 7.21% 7.20% 6.80%
FORWARD RECEIVE FIXED/d/
Notional amount -- -- -- -- -- $ 0.4 $ 0.7 $ 1.1
Weighted average receive rate -- -- -- -- -- 7.40% 6.46% 6.80%
FORWARD PAY FIXED/d/
Notional amount -- $ 0.2 $ 0.1 -- $ 0.1 $ 0.1 -- $ 0.5
Weighted average pay rate -- 6.16% 6.28% -- 8.95% 8.13% -- 7.14%
BASIS SWAPS/e/
Notional amount -- -- -- -- -- $ 0.3 -- $ 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total Notional Amount $48.7
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1996
Greater Greater Greater Greater Greater Greater
than than than than than than
(dollar amounts in billions) 0-1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-10 years 10 years Total/c/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RECEIVE FIXED/b/
Notional amount $ 4.4 $ 1.1 $ 1.3 $ 1.8 $ 1.7 $11.6 $ 3.6 $25.5
Weighted average receive rate 6.02% 6.69% 6.91% 6.35% 7.29% 6.62% 6.75% 6.58%
PAY FIXED/b/
Notional amount $ 2.4 $ 3.5 $ 1.8 $ 3.6 $ 2.4 $ 4.4 $ 0.1 $18.2
Weighted average pay rate 5.95% 6.19% 6.65% 6.97% 7.11% 7.16% 7.30% 6.72%
FORWARD RECEIVE FIXED/d/
Notional amount -- -- $ 0.8 $ 0.1 -- $ 0.4 -- $ 1.3
Weighted average receive rate -- -- 6.46% 5.62% -- 7.40% -- 6.68%
FORWARD PAY FIXED/d/
Notional amount -- -- $ 0.1 $ 0.7 -- $ 0.3 -- $ 1.1
Weighted average pay rate -- -- 6.55% 7.82% -- 8.14% -- 7.79%
BASIS SWAPS/e/
Notional amount -- -- -- -- -- $ 0.3 -- $ 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total Notional Amount $46.4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes intercompany swaps.
/b/ The variable rate side of substantially all receive fixed rate and pay fixed
rate swaps is based on the one-, three-, or six-month LIBOR. At December 31,
1997 and 1996, the one-, three-, and six-month LIBOR rates were 5.7188
percent and 5.5000 percent, 5.8125 percent and 5.6016 percent, and 5.8438
percent and 6.1250 percent, respectively.
/c/ Includes $1.4 billion and $1.0 billion of swaps with amortizing notional
amounts at December 31, 1997 and 1996, respectively.
/d/ Accrual of interest on forward swaps starts at a predetermined future date.
The majority of the forward swaps start accruing interest one to three years
after each reported year end.
/e/ Basis swaps are interest rate swaps in which both amounts paid and received
are based on floating LIBOR rates.
85
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996. These swaps have been designated as accounting
hedges and are used to modify the interest rate characteristics of certain
designated categories of assets and liabilities.
Approximately 56 percent of BAC's hedging-related interest rate futures and
forward rate agreements outstanding at December 31, 1997 mature within one year,
while approximately 83 percent of its hedging-related option contracts mature
between five and ten years. Approximately 75 percent of BAC's hedging-related
interest rate futures and forward rate agreements outstanding at December 31,
1996 matured within one year, while approximately 80 percent of its hedging-
related option contracts mature between five and ten years.
26 Fair Value of Financial Instruments
Management uses its best judgment in estimating the fair value of BAC's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates presented herein are not necessarily indicative of the amounts
BAC could have realized in a sales transaction at either December 31, 1997 or
1996. The estimated fair value amounts for 1997 and 1996 have been measured as
of their respective year ends, and have not been reevaluated or updated for
purposes of these consolidated financial statements subsequent to those
respective dates. As such, the estimated fair values of these financial
instruments subsequent to the respective reporting dates may be different than
the amounts reported at each year end. This disclosure of fair value amounts
does not include lease financing, MSA, intangibles, including core deposit
intangibles and credit card intangibles, or trust preferred securities.
The following information should not be interpreted as an estimate of the fair
value of the entire corporation since a fair value calculation is only required
for a limited portion of BAC's assets. Due to the wide range of valuation
techniques and the degree of subjectivity used in making the estimates,
comparisons between BAC's disclosures and those of other companies may not be
meaningful. The following methods and assumptions were used to estimate the fair
values of BAC's financial instruments at December 31, 1997 and 1996.
Financial Instruments Valued at Carrying Value
The respective carrying values of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash and due
from banks, interest-bearing deposits in banks, federal funds sold and
purchased, securities purchased and sold under resale and repurchase agreements,
trading account assets, customers' acceptance liability, accrued interest
receivable, other short-term borrowings, acceptances outstanding, accrued
interest payable, and certain other assets and liabilities that are considered
financial instruments. Carrying values were assumed to approximate fair values
for these financial instruments as they are short term in nature and their
recorded amounts approximate fair values or are receivable or payable on demand.
Available-for-Sale and Held-to-Maturity Securities
Fair value amounts of available-for-sale and held-to-maturity securities were
based on quoted market prices, if available. If quoted market prices did not
exist, fair values were estimated using book, cost, or appraised value.
Available-for-sale securities are carried at their aggregate fair value, while
held-to-maturity securities are carried at amortized cost. There were no
off-balance-sheet financial instruments that qualified as accounting hedges for
held-to-maturity securities at December 31, 1997 or 1996. For more information
on the fair value of these securities, refer to Note 7 of the Notes to
Consolidated Financial Statements on pages 66 -- 67.
Loans
The fair values of residential first mortgages were estimated using pricing
procedures that are similar to those used when these loans are sold in the
secondary market in the normal course of business. These pricing procedures use
current market rates for loans with similar characteristics and risk factors.
For residential junior mortgages, consumer installment loans, and other consumer
loans that do not reprice frequently, the fair values were estimated using
discounted cash flow models. The discount rates were based on current market
pricing for loans with similar characteristics and risk factors. Since
substantially all credit card loans, individual lines of credit, and other
variable rate consumer loans reprice frequently, with interest rates reflecting
current market pricing, the carrying values of these loans were assumed to
approximate their fair values.
The fair values of domestic commercial loans that do not reprice or mature
within relatively short time frames were estimated using discounted cash flow
models. The discount rates were based on current market interest rates for
similar types of loans, remaining maturities and credit ratings. For domestic
commercial loans that reprice within relatively short time frames, the carrying
values were used to approximate their fair values.
Substantially all of the foreign loans reprice within relatively short time
frames. Accordingly, for the majority of foreign loans, the carrying values were
assumed to approximate their fair values.
For purposes of these fair value estimates, the fair values of nonaccrual loans
were computed by deducting an estimated market discount from their carrying
values to reflect the uncertainty of future cash flows.
86
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
The fair values of commitments to extend credit were not significant at either
December 31, 1997 or 1996.
The aggregate fair value of loans excludes the effect of off-balance-sheet
financial instruments that qualify as accounting hedges. The fair value of these
hedges was $(23) million and $(8) million at December 31, 1997 and 1996,
respectively. The contract amount of these instruments was $18,066 million and
$12,545 million at December 31, 1997 and 1996, respectively.
Other Financial Instruments
For non-exchange-traded equity securities, which are included in other assets,
fair values were estimated using equity, cost, or appraised value. The carrying
values of all other components of other assets that are considered financial
instruments approximated their respective fair values, as they are short term in
nature or are receivable or payable on demand.
The following is a summary of previously described on-balance-sheet asset
financial instruments whose fair values differ from their carrying values for
either of the periods presented:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31
1997 1996
-----------------------------------------------
Carrying Fair Carrying Fair
(in millions) Value Value Value Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Held-to-maturity
securities $ 3,667 $ 3,744 $ 4,138 $ 3,920
Loans:
Domestic consumer:
Residential first mortgages 31,749 32,467 37,459 37,998
Other consumer loans 38,432 38,459 40,094 40,048
Domestic commercial 61,578 61,579 56,160 56,082
Foreign 27,196 27,168 25,053 25,019
- --------------------------------------------------------------------------------
Total loans $158,955 $159,673 $158,766 $159,147
Other financial
instruments 2,717 2,756 2,596 2,611
- --------------------------------------------------------------------------------
</TABLE>
Deposits
The fair values of domestic and foreign demand deposits, savings deposits, and
money market deposits without defined maturities were the amounts payable on
demand.
For domestic deposits with defined maturities, the fair values were estimated
using discounted cash flow models that apply market interest rates corresponding
to similar deposits and timing of maturities. For variable-rate deposits with
fixed repricing dates, the first repricing date was considered the maturity date
for purposes of the fair value calculation. For variable-rate deposits where BAC
has the contractual right to change rates, carrying value was assumed to
approximate fair value.
The carrying values of total foreign time deposits were assumed to approximate
their fair values since these deposits primarily had variable rates and repriced
within relatively short time frames.
The fair value of deposits excludes the fair value of off-balance-sheet
financial instruments that qualify as accounting hedges for the bank's deposits.
The fair value of these accounting hedges was $(334) million and $(478) million
at December 31, 1997 and 1996, respectively. The contract amount of these
financial instruments was $134,148 million and $93,083 million at December 31,
1997 and 1996, respectively.
Long-term Debt
The fair values of BAC's long-term debt instruments were calculated based on
quoted market prices. For those long-term debt issues where quoted market prices
were not available, a discounted cash flow model was used. The discount rates
were based on yield curves appropriate for the remaining maturities of the
instruments.
The fair value of long-term debt excludes the fair value of off-balance-sheet
financial instruments that qualify as accounting hedges for the parent's
long-term debt. The fair value of these hedges was $(120) million and $24
million at December 31, 1997 and 1996, respectively. The contract amount of
these financial instruments was $4,132 million and $12,660 million at December
31, 1997 and 1996, respectively.
Subordinated Capital Notes
The fair value of BAC's subordinated capital notes was calculated based on
quoted market prices.
The following is a summary of previously described on-balance-sheet liability
financial instruments whose aggregate fair values differ from their carrying
values for either of the periods presented:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31
1997 1996
- --------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in millions) Value Value Value Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
Deposits $172,037 $171,929 $168,015 $167,971
Long-term debt 13,569 14,002 15,430 15,754
Subordinated capital notes 353 362 355 368
- --------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
The following is a summary of the fair values of derivative financial
instruments outstanding. The fair value of exchange-traded derivative financial
instruments was based on quoted market prices or dealer quotes. Fair value of
non-exchange traded, or over-the-counter (OTC) derivative financial instruments
consisted of net unrealized gains and losses, accrued interest receivable or
payable, and premiums paid or received. These amounts were generally calculated
using discounted cash flow models based on current market yields for similar
types of instruments and the maturity of each instrument. The discount rates
were based on market interest rates and indices for similar derivative financial
instruments prevalent in the market. Refer to Note 25 of the Notes to
Consolidated Financial Statements on pages 80 -- 86 for more information
regarding off-balance-sheet transactions, including a summary of the fair values
for each significant class of derivative financial instrument outstanding in
BAC's trading and asset and liability management portfolios.
- --------------------------------------------------------------------------------
Fair Values of Derivative
Financial Instruments
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Trading $ 427 $ 49
Asset and Liability Management (432) (462)
- --------------------------------------------------------------------------------
</TABLE>
27 Restructuring Charge
BAC recorded a pre-tax restructuring charge of $280 million in the fourth
quarter of 1996 as a result of decisions to implement a number of restructurings
of its business activities. The charge covered approximately $196 million for
severance payments, $72 million for premises expense, primarily reflecting the
planned closure of 120 branches, and $12 million for other costs affected by the
actions. The severance payments will reflect an estimated reduction of 3,700
positions due to the restructuring of BAC's business activities. Management
expects that the projects relating to these restructurings will be completed by
the end of 1998.
During 1997, 1,836 positions were reduced, reflecting a remaining balance of
1,864 positions at December 31, 1997. Due to BAC's reorganization into Global
Retail and Wholesale Banks during 1997, BAC determined that $27 million of the
restructuring reserve primarily related to severance costs would not be
utilized.
The following is a summary of changes in the restructuring charge:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in millions) Severance Premises Other/a/ Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $196 $72 $12 $280
Payments (106) (30) (5) (141)
Unutilized restructuring accrual (17) (8) (2) (27)
- --------------------------------------------------------------------------------
Balance at December 31, 1997 $ 73 $34 $ 5 $112
- --------------------------------------------------------------------------------
</TABLE>
/a/ Includes equipment write-offs and other miscellaneous costs.
28 Special Deposit Assessment
On September 30, 1996, Congress passed legislation to recapitalize the Savings
Association Insurance Fund (SAIF) to 1.25 percent of insured deposits as
prescribed by the Federal Deposit Insurance Corporation Improvement Act. This
legislation imposed a one-time assessment on SAIF deposits held on March 31,
1995, lowered the rates on assessments paid to the SAIF, and widened the spread
of the rates between institutions. BAC recognized a charge of $82 million for
the year ended December 31, 1996 as a result of this assessment.
In addition, beginning January 1, 1997, Bank Insurance Fund (BIF) member
institutions began sharing in the cost of funding Financing Corporation (FICO)
interest payments. The cost of funding these interest payments will be in the
form of an assessment on both BIF and SAIF insured deposits. The assessment rate
will be lower for BIF deposits than for SAIF deposits. Actual rates will
fluctuate over time depending on the amount of deposits insured by the BIF and
SAIF at the time the assessment is made.
29 Legal Contingencies
Due to the nature of its business, BAC is subject to various threatened or
filed legal actions. Although the amount of the ultimate exposure, if any,
cannot be determined at this time, BAC, based upon the advice of counsel, does
not expect the final outcome of threatened or filed suits to have a material
adverse effect on its financial position.
30 BankAmerica Corporation (Parent Company Only)
The amount of funds available to the parent from its subsidiaries is limited by
restrictions placed on them by law and various debt covenants.
Under the U.S. National Bank Act and other federal laws, the parent's national
banking subsidiaries are subject to prohibitions on the payment of dividends in
certain circumstances and to restrictions on the amount that each can pay
without the prior approval of the Office of the Comptroller of the Currency.
Without the Comptroller's approval, dividends for a given year cannot exceed
each bank's retained net income (as defined by national banking laws) for that
year and retained net income from the preceding two years. In addition,
dividends may not be paid in excess of each bank's undivided profits, subject to
other applicable provisions of law. Based upon these laws, the bank could have
declared dividends for 1997 of $3,249 million and the parent's other national
banking
88
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
BankAmerica Corporation
(Parent Company Only) Year Ended December 31
(in millions) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividends from subsidiaries:
Banking $2,398 $1,964 $2,110
Nonbanking 694 460 153
Interest on subordinated notes
purchased from banking subsidiaries 335 310 316
Interest on advances to
nonbanking subsidiaries 210 239 239
Interest on deposits in banking
subsidiaries 238 192 231
Interest on available-for-sale securities 53 73 80
Net gain on available-for-sale securities 7 33 10
Other income 24 54 36
- --------------------------------------------------------------------------------
Total income 3,959 3,325 3,175
Interest on other short-term borrowings 75 89 76
Interest on long-term debt 916 966 1,007
Interest on subordinated capital notes 28 33 46
Interest on junior subordinated
deferrable interest debentures
issued to grantor trusts 147 7 --
Amortization of goodwill 30 31 30
Other expense 119 75 95
- --------------------------------------------------------------------------------
Total expense 1,315 1,201 1,254
Income before income taxes
and equity in undistributed
income of subsidiaries 2,644 2,124 1,921
Benefit from income taxes 141 105 158
Equity in undistributed income
of subsidiaries 425 644 585
- --------------------------------------------------------------------------------
Net Income $3,210 $2,873 $2,664
- --------------------------------------------------------------------------------
</TABLE>
See notes following the Statement of Cash Flows on page 90.
subsidiaries could have declared dividends of $450 million. At December 31,
1997, the unutilized dividends allowed under these laws for the bank and other
national banking subsidiaries were $899 million, and $450 million, respectively.
In addition, state-chartered nonmember banking subsidiaries are subject to
dividend limitations imposed by applicable federal or state law. State-chartered
nonmember banking subsidiaries could have declared dividends without state
approval of $8 million for 1997. At December 31, 1997, the unutilized dividends
allowed under these laws for the state-chartered nonmember banking subsidiaries
were $8 million.
The parent's subsidiary, Bank of America, FSB, is subject to regulatory
restrictions by the Office of Thrift Supervision on its payment of dividends.
Under these restrictions, Bank of America, FSB could have declared dividends
without regulatory approval of $267 million for 1997. At December 31, 1997, the
unutilized dividends allowed under these laws were $267 million.
The depository subsidiaries are also subject to certain restrictions of the
Federal Reserve Act on loans each subsidiary may extend to their parent
companies. Among other things, the aggregate of such loans may not exceed 10
percent of the sum of such subsidiary's capital stock and surplus. Such loans
must be secured by collateral with a value between 100 percent and 130 percent
of the loan, depending on the type of collateral. Under these restrictions, and
assuming the parent provided the collateral required, the bank, Bank of America
National Association, and other depository subsidiaries could have loaned to the
parent a maximum of $1,845 million, $157 million, and $249 million respectively,
at December 31, 1997.
The net assets of depository subsidiaries restricted from flowing to the parent
by legal limitations were $17,933 million at December 31, 1997.
- --------------------------------------------------------------------------------
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BankAmerica Corporation
(Parent Company Only) December 31
(in millions) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 2,510 $ 4,961
Available-for-sale securities 636 982
Investments in subsidiaries:
Banking 21,909 21,674
Nonbanking 1,812 1,563
Subordinated notes purchased from
banking subsidiaries 5,315 4,715
Advances to nonbanking subsidiaries 2,764 4,110
Accrued interest receivable 42 64
Goodwill 575 605
Other assets 731 720
- --------------------------------------------------------------------------------
Total Assets $36,294 $39,394
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings from subsidiaries $ 121 $ 130
Other short-term borrowings 694 1,552
Accrued interest payable 201 206
Other liabilities 565 665
Long-term debt 12,564 14,227
Subordinated capital notes 353 355
Junior subordinated deferrable interest
debentures issued to grantor trusts 1,959 1,546
- --------------------------------------------------------------------------------
Total liabilities 16,457 18,681
Stockholders' equity 19,837 20,713
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $36,294 $39,394
- --------------------------------------------------------------------------------
</TABLE>
See notes following the Statement of Cash Flows on page 90.
89
<PAGE>
BankAmerica Corporation 1997 Annual Report
CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statement of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
BankAmerica Corporation (Parent Company Only) Year Ended December 31
(in millions) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $3,210 $2,873 $2,664
Adjustments to net income to arrive at net cash provided by operating activities:
Benefit from deferred income taxes (47) (41) (43)
Equity in undistributed income of subsidiaries (458) (697) (613)
Amortization of goodwill 30 31 30
(Increase) decrease in accrued interest receivable 22 35 (36)
Increase (decrease) in accrued interest payable (5) 14 (1)
Increase (decrease) in current income taxes payable 265 (79) 53
Other, net (22) (198) 378
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,995 1,938 2,432
CASH FLOWS FROM INVESTING ACTIVITIES
Capital contributions to subsidiaries (1,027) (347) (182)
Capital returns from subsidiaries 1,354 673 108
Purchase of subordinated notes from banking subsidiaries (600) (135) (500)
Redemption of subordinated capital notes from banking subsidiaries -- 7 400
Activity in available-for-sale securities:
Sales proceeds 8 40 513
Purchases -- -- (54)
Maturities, prepayments, and calls 351 60 59
Maturities and prepayments of held-to-maturity securities -- -- 125
Cash used for acquisitions (255) -- --
Collections from subsidiaries 6,047 5,412 6,807
Advances to subsidiaries (4,701) (5,937) (6,597)
Other, net (13) 32 (55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 1,164 (195) 624
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings from subsidiaries 605 329 428
Payments on borrowings from subsidiaries (614) (341) (360)
Increase (decrease) in other short-term borrowings (925) 766 (267)
Proceeds from issuance of long-term debt 1,395 2,994 2,265
Principal payments and retirements of long-term debt and subordinated capital notes (3,060) (2,714) (2,591)
Net proceeds from issuance of junior subordinated
deferrable interest debentures issued to grantor trusts 396 1,477 --
Proceeds from issuance of common stock -- 83 151
Proceeds from issuance of treasury stock 223 99 --
Preferred stock repurchased (1,628) (391) (206)
Treasury stock purchased (2,039) (1,333) (926)
Common stock dividends (853) (780) (684)
Preferred stock dividends (100) (185) (227)
Other, net (10) 3 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (6,610) 7 (2,416)
Net increase (decrease) in cash and short-term investments (2,451) 1,750 640
Cash and short-term investments at beginning of year 4,961 3,211 2,571
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and Short-Term Investments at End of Year $2,510 $4,961 $3,211
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
General: For income and asset classification purposes, banking amounts include
the amounts for all of the parent's bank, bank holding company, and savings bank
subsidiaries. Certain amounts in prior periods have been reclassified to conform
to the presentation in the current year.
Balance Sheet: At December 31, 1997 and 1996, cash and short-term investments
included $2,487 million and $4,938 million, respectively, of interest-bearing
deposits with the bank.
Statement of Cash Flows: The statement of cash flows illustrates the change in
cash and short-term investments as disclosed in the Parent Company Only balance
sheet. Short-term investments have original maturities of three months or less
and are considered to be cash equivalents, respectively. During 1997 and 1995,
the parent received net income tax payments representing reimbursements from
subsidiaries of $359 million and $168 million, respectively. During 1996, the
parent made net income tax payments of $15 million. The parent made interest
payments on interest-bearing liabilities of $1,186 million, $1,109 million, and
$1,155 million in 1997, 1996, and 1995, respectively.
90
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
31 Performance by Geographic Area
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31/a/
-----------------------------------------------------------------------------------
Total Assets at Net Interest and Income Before
(in millions) Year December 31 Gross Income Noninterest Income Income Taxes Net Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic 1997 $208,227 $19,160 $12,964 $5,123 $3,070
1996 $203,123 $17,721 $12,104 $4,039 $2,394
1995 $190,549 $16,719 $11,575 $4,058 $2,349
- ---------------------------------------------------------------------------------------------------------------------------------
Asia 1997 24,084 1,866 825 (312) (218)
1996 21,654 1,786 930 359 224
1995 17,738 1,452 615 142 82
Europe, Middle East, and Africa 1997 20,741 1,653 564 192 143
1996 21,574 1,810 566 143 107
1995 20,762 1,616 507 170 109
Latin America and the Caribbean 1997 4,644 771 392 292 194
1996 2,878 617 335 190 121
1995 2,337 512 282 173 108
Canada 1997 2,463 135 52 31 21
1996 1,524 137 64 42 27
1995 1,060 87 29 24 16
- ---------------------------------------------------------------------------------------------------------------------------------
Total Foreign 1997 51,932 4,425 1,833 203 140
1996 47,630 4,350 1,895 734 479
1995 41,897 3,667 1,433 509 315
- ---------------------------------------------------------------------------------------------------------------------------------
BankAmerica Corporation 1997 $260,159 $23,585 $14,797 $5,326 $3,210
1996 $250,753 $22,071 $13,999 $4,773 $2,873
1995 $232,446 $20,386 $13,008 $4,567 $2,664
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ For comparability purposes, 1996 and 1995 amounts reflect BAC's allocation
methodologies at December 31, 1997.
Since BAC's operations are highly integrated, certain asset, liability,
income, and expense amounts must be allocated to arrive at total assets,
gross income, net interest and noninterest income, income before income
taxes, and net income. The underlying assumptions and principle allocations
used in the presentation above are as follows:
BAC identifies its geographic performance based upon the business unit in
which the assets are recorded and where the income is earned and the
expenses are incurred. In certain circumstances, units may transact business
with customers who are out of their immediate geographic area. For example,
a U.S. domiciled unit may have made a loan to a borrower who resides in
Latin America. In this instance, the loan and related income would be
included in domestic activities.
BAC's funds transfer pricing system allocates domestic sources of funds at
U.S. market rates based on the maturities of the funds. To the extent that
overseas units interact with U.S. operations, they are also included in the
funds transfer pricing system.
The allowance for credit losses is established by credit officers for each
portfolio segment. After the allowance has been established for portfolio
segments, credit management establishes an unallocated portion of the
allowance for credit losses, which is attributable to factors that cannot be
associated with a particular portfolio segment and is therefore
proportionally allocated to all portfolio segments. While management
allocates reserves to various portfolio segments, the allowance is general
in nature and is available for the entire portfolio.
Equity is assigned on a risk-adjusted basis taking into account goodwill and
tax-effected identifiable intangibles. Overhead is allocated based on each
geographic area's proportionally weighted income and expenses.
Each geographic area includes its respective tax liability. BAC allocates
federal and state taxes at its effective tax rates.
Translation losses, for those units in hyperinflationary economies, net of
hedging, totaled $27 million, $23 million, and $14 million in 1997, 1996,
and 1995, respectively. These amounts, which are reported in other
noninterest income, are included in the table above.
91
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
32 Quarterly Results (unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1997 Quarter Ended 1996 Quarter Ended
(in millions, except per share data) Dec 31 Sept 30 June 30 Mar 31/a/ Dec 31/a/ Sept 30/a/ June 30/a/ Mar 31/a/
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income $4,407 $4,451 $4,359 $4,240 $4,238 $4,206 $4,126 $4,089
Interest expense 2,300 2,257 2,165 2,066 2,108 2,054 1,967 1,943
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income 2,107 2,194 2,194 2,174 2,130 2,152 2,159 2,146
Provision for credit losses 220 260 250 220 220 235 250 180
Noninterest income 1,631 1,670 1,442 1,385 1,499 1,319 1,320 1,274
Noninterest expense 2,209 2,232 2,047 2,033 2,250 2,081 1,997 2,013
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,309 1,372 1,339 1,306 1,159 1,155 1,232 1,227
Provision for income taxes 497 553 540 526 412 472 509 507
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income $ 812 $ 819 $ 799 $ 780 $ 747 $ 683 $ 723 $ 720
Earnings per common share/b/ $ 1.15 $ 1.14 $ 1.10 $ 1.05 $ 0.98 $ 0.89 $ 0.94 $ 0.91
Diluted earnings per common share/b/ 1.12 1.11 1.07 1.03 0.96 0.87 0.92 0.90
STOCK DATA
Dividends per common share 0.305 0.305 0.305 0.305 0.27 0.27 0.27 0.27
Common stock price range:/a/
High 81 15/16 77 7/8 69 61 7/8 51 15/16 42 5/8 40 3/16 39 9/16
Low 66 1/4 64 9/16 49 9/16 47 11/16 41 1/16 36 34 7/8 29 3/8
Closing common stock price/c/ 73 73 5/16 64 9/16 50 7/16 49 7/8 41 1/16 37 7/8 38 3/4
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Share and per share amounts and stock prices have been restated to reflect a
two-for-one stock split effective June 2, 1997.
/b/ Reflects the adoption of SFAS No. 128 including the restatement of prior
years.
/c/ The principal market of BAC's common stock is the New York Stock Exchange;
the stock is also listed on the Chicago, Pacific, and London Stock
Exchanges. BAC delisted from the Tokyo Stock Exchange during the first
quarter of 1996. Price information represents quotations as reported in the
New York Stock Exchange consolidated transaction reporting system.
92
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
Corporate Information
Boards of Directors
BankAmerica Corporation and
Bank of America NT&SA
Members of the Boards of Directors spend a great many hours every year, both
attending Board and committee meetings and tending to BankAmerica business
between meetings. They make their diverse experience and expertise readily
available to senior management for the benefit of the corporation and its
shareholders.
As of February 2, 1998 Committees:
- --------------------------------------------------------------------------------
Joseph F. Alibrandi
Chairman of the Board, Executive
President and Chief Executive Officer Executive Personnel and
Whittaker Corporation Compensation
Simi Valley, California Nominating (Chair)
(aerospace/manufacturing
and communications)
Peter B. Bedford
Chairman of the Board Executive
and Chief Executive Officer Nominating
Bedford Property Investors, Inc. Public Policy (Chair)
Lafayette, California
(real estate investment trust)
Richard A. Clarke
Retired Chairman of the Board Auditing and Examining
and Chief Executive Officer
Pacific Gas and Electric Company
San Francisco, California
(gas and electric utility)
David A. Coulter
Chairman of the Board, President Executive
and Chief Executive Officer
BankAmerica Corporation
Bank of America NT&SA
Timm F. Crull
Retired Chairman Executive
Nestle USA, Inc. Executive Personnel and
Glendale, California Compensation (Chair)
(food and related products processing)
Kathleen Feldstein
President Executive
Economics Studies, Inc. Executive Personnel and
Belmont, Massachusetts Compensation
(economics consulting)
Donald E. Guinn
Chairman Emeritus Auditing and
Pacific Telesis Group Examining (Chair)
San Francisco, California
(telecommunications)
Frank L. Hope, Jr.
Consulting Architect Executive Personnel and
San Diego, California Compensation
(architecture) Nominating
Public Policy
Walter E. Massey
President Auditing and Examining
Morehouse College
Atlanta, Georgia
(education)
John M. Richman
Of Counsel Public Policy
Wachtell, Lipton, Rosen & Katz Nominating
Chicago, Illinois Auditing and Examining
(law firm)
Sanford R. Robertson
Chairman, Robertson Stephens Division Public Policy
BancAmerica Robertson Stephens
San Francisco, California
(investment banking)
Richard M. Rosenberg
Retired Chairman of the Board and Executive (Chair)
Chief Executive Officer
BankAmerica Corporation
Bank of America NT&SA
A. Michael Spence
Dean of the Graduate School of Business Executive
Stanford University Executive Personnel and
Stanford, California Compensation
(education)
Solomon D. Trujillo
President and Chief Executive Officer Auditing and Examining
U.S. West Communications Group
Denver, Colorado
(telecommunications)
Honorary Directors
BankAmerica Corporation
and Bank of America NT&SA
(nonvoting)
As of February 2, 1998
- -------------------------------------------------------------------------------
A. W. Clausen
Retired Chairman and Chief Executive Officer
BankAmerica Corporation
Bank of America NT&SA
Rudolph A. Peterson
Retired President and Chief Executive Officer
BankAmerica Corporation
Bank of America NT&SA
Advisor
BankAmerica Corporation
As of February 2, 1998
- ------------------------------------------------------------------------------
George S. Ishiyama
Senior Advisor
93
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
Principal Officers
BankAmerica Corporation
As of February 2, 1998
David A. Coulter*
Chairman of the Board, President and
Chief Executive Officer
Kathleen J. Burke*
Vice Chairman--Human Resources
H. Eugene Lockhart*
President, Global Retail Bank
Jack L. Meyers*
Vice Chairman--Risk Management
Michael J. Murray*
President, Global Wholesale Bank
Michael E. O'Neill*
Vice Chairman and Chief Financial Officer
Martin A. Stein*
Vice Chairman--Technology, Operations
and Payments
John J. Higgins
Executive Vice President and
Chief Accounting Officer
Bruce W. Mitchell
Executive Vice President and
General Auditor
Raymond R. Peters
Executive Vice President and Treasurer
James N. Roethe
Executive Vice President and
General Counsel
Cheryl A. Sorokin
Executive Vice President and Secretary
Joseph E. Vaez
Executive Vice President and Director of
Corporate Credit Examination Services
*Executive Officers of BankAmerica Corporation for Securities and Exchange
Commission reporting purposes.
Senior Management Council
As of February 2, 1998
Doyle L. Arnold
Corporate Strategy and Development
Charles Bell
Human Resources
Jeanine R. Brown
Consumer Deposits
Kathleen J. Burke
Vice Chairman--Human Resources
Christopher A. Callero
Deposit, Payment and Business Banking
Products
David A. Coulter
Chairman and Chief Executive Officer
Barbara J. Desoer
California Consumer
P. Gerald Doherty
Europe, Middle East and Africa/
Global Capital Markets
Paul M. Dorfman
Credit Policy and Risk Management
Jeremy G. Fair
U.S.-Canada Corporate
Marion R. Foote
Relationship Marketing
Stephen B. Galasso
Credit Card
Christine N. Garvey
Commercial Real Estate Services and OREO
William M. Goodyear
Midwest Banking/Global Private Banking
and Trust
Richard V. Harris
BankAmerica Leasing and Capital
John J. Higgins
Finance
James E. Hulihan, Jr.
Asia Retail Banking
James G. Jones
Consumer Credit and Card Services
Cheryl L. Kane
Technology Support Services
H. Eugene Lockhart
President, Global Retail Bank
Richard W. Madresh
BankAmerica Business Credit
Liam E. McGee
National Customer Support Services
Jack L. Meyers
Vice Chairman--Risk Management
Bruce W. Mitchell
Corporate Audit and Security Services
Robert P. Morrow III
Asia Wholesale Banking
Donald A. Mullane
Corporate Community Development
Kathryn L. Munro
Southwest Region
Michael J. Murray
President, Global Wholesale Bank
Michael E. O'Neill
Vice Chairman and Chief Financial Officer
Terry E. Perucca
Global Equity Investment
Raymond R. Peters
Corporate Treasury
Barbara L. Rambo
National Commercial Banking
Daniel P. Riley
Global Payment Services/
Wholesale Operations
John V. Rindlaub
Northwest Banking/Information
Technology Strategy
Arthur D. Ringwald
BankAmerica Mortgage
James N. Roethe
Legal--General Counsel
Federico Sacasa
Latin America
Frank A. Somers
Special Assets
Cheryl A. Sorokin
Corporate Relations/Corporate Secretary
Martin A. Stein
Vice Chairman--Technology, Operations
and Payments
Lewis W. Teel
Trading Exposure Control and Compliance
Joseph E. Vaez
Corporate Credit Examination Services
John W. Wheeler
BankAmerica Housing Services
Mary Wikstrom
National Call Center
M. Faye Wilson
Country Risk Evaluation
94
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
BankAmerica Corporate Governance Principles
The Board of Directors has adopted Corporate Governance Principles covering the
Role of the Board, Board Structure, Committees, Meetings, and other issues.
Below is a summary of some of the major points. Copies of the full text of the
Principles can be obtained by writing to the Corporate Secretary's Office at the
address listed on the inside back cover of this Annual Report.
Responsibility to Shareholders
The Board believes the role of the Board of Directors is to oversee the affairs
of the corporation for the benefit of shareholders.
Strategic Issues
The Board believes it is important to discuss long-range strategic issues as a
matter of course at regular Board meetings as well as at periodic meetings
devoted solely to strategic issues.
Operating Plan
The Board reviews BankAmerica's yearly operating plan and specific financial
goals at the start of each year and monitors performance in comparison to plan.
The Board also believes it is important to establish and evaluate longer-term
objectives and not to over-emphasize short-term performance.
Business Ethics
The Board believes the long-term success of BankAmerica is dependent upon
maintenance of an ethical business environment that focuses on adherence to both
the letter and the spirit of regulatory and legal mandates and expects
management to conduct operations in a manner supportive of the Board's view.
Performance of CEO
The Board believes that CEO performance should be evaluated annually and as a
regular part of any decision with respect to CEO compensation. The Board
ratifies any compensation decisions for the CEO made by the Executive Personnel
and Compensation Committee.
Chairman of the Board
The Chairman of the Board may be an officer/director or an outside director and
may or may not be the same individual as the CEO, at the option of the Board.
The Board believes it should be free to make these determinations depending on
what it believes is best for the corporation in light of all the circumstances.
Executive Sessions
The Board believes that outside directors should meet in executive session from
time to time during the year and that some of the executive sessions should be
with the CEO, who is an inside director, and some should be outside the presence
of the CEO and any other inside directors or management officials.
Outside Directors
The Board believes that a significant majority of the Board should be outside
directors: individuals who are not members of management and have not been such
within the last 10 years; have no close family relationship with a member of key
management; are not significant advisors or consultants to BankAmerica; do not
have significant personal service contracts with BankAmerica; and do not have
any other relationship with BankAmerica which, in the opinion of the Board,
would adversely affect their ability to exercise independent judgment as
directors.
Selection of Directors
The Board believes that directors should be nominated by a Nominating Committee
of the Board consisting entirely of outside directors and that an offer to join
the Board should be extended by the committee. The committee may consider the
views of the CEO in making nominations. The Board believes that directors should
not represent particular constituents, but should be diverse enough to be
clearly able to represent differing points of view. The Board does not set
specific criteria for directors, but believes that they should show evidence of
leadership in their particular field, and have broad experience and the ability
to exercise sound business judgment. In selecting directors, the Board generally
seeks a combination of active or former CEOs of major complex businesses,
leading academics and entrepreneurs, including women and ethnic minority
individuals.
Board Effectiveness
The Board believes it is appropriate to periodically review its own
effectiveness, including its corporate governance policies and practices, and
would generally expect a review annually. The Board believes that the Nominating
Committee should review incumbent directors as part of the annual nomination
process and in the context of the committee's overall review of the strengths
and weaknesses of the Board as a whole.
Director Compensation
The Board believes that director compensation should be competitive with that
paid to directors of other major financial institutions and major corporations.
The Board believes directors should have a financial stake in BankAmerica and in
1995 established a stock ownership guideline of three times the annual director
retainer fee in stock or deferred restricted stock equivalent units, to be
achieved within five years of joining the Board. The Board also mandates
deferral of at least one-half of the retainer into deferred restricted stock
equivalent units which fluctuate with the value of BankAmerica stock.
Committee Assignments
The Board believes that the Auditing and Examining Committee, the Executive
Personnel and Compensation Committee, and the Nominating Committee should be
comprised solely of outside directors.
Committee Agendas
The Board believes committee chairmen, in consultation with appropriate members
of management and committee members, should determine committee agendas.
95
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
Glossary of Common Banking Terms
Adjustable Rate Mortgage (ARM)
A loan secured by real estate with periodic adjustments in the interest rate.
These mortgages often have consumer protections against rapid escalation in
borrowing costs, such as a maximum amount that the interest rate can increase in
any single year and over the life of the loan.
Asset-Liability Management
The practice of balance sheet management with the objective of promoting income
generation while containing market risk exposures.
Bank Insurance Fund (BIF)
The government guarantee program administered by the Federal Deposit Insurance
Corporation, backing deposits in commercial banks up to $100,000 per account.
Core Deposits
Customer deposits which are considered a stable and reasonably priced source of
funds for investing.
Derivative Financial Instrument
A financial instrument that derives its cash flows, and therefore its value, by
reference to an underlying instrument, index, or reference rate. For example, an
equity option is a derivative financial instrument because its value is derived
from an underlying stock, stock index, or futures contract.
Duration
Expected life of a fixed-income security, taking into account its coupon yield,
interest payments, maturity, and call features. Duration attempts to measure
actual maturity, as opposed to final maturity, by measuring the average time
required to collect all payments of principal and interest.
Economic Capital
The level of equity capital that is assigned to cover the inherent risk of each
business. Economic Capital is the amount of capital protection that is required
to protect the business against unexpected losses.
Economic Profit
The dollar amount of earnings generated by a business after subtracting the
cost of economic capital. Economic profit is a function of a group's risk
adjusted net income, assigned economic capital, and the Bank's cost of equity
capital.
Fixed Rate Mortgage (FRM)
A loan secured by real estate with an interest rate that does not vary over
the term of the loan.
Hedging
The financial technique in which transactions or contractual agreements are
undertaken to offset the risk of loss from one or more types of business risk,
such as price or rate fluctuations in the market.
Interest Rate Gap
The amount by which the carrying value of interest-rate-sensitive assets for a
designated maturity period differs from the carrying value of
interest-rate-sensitive liabilities and equity during the same period.
Liquidity
The ability of an organization to meet its maturing financial obligations as
they come due.
Manufactured Housing
A single family residence built in a factory and transported to a homesite
where the wheels and axles are removed and the home is set.
Master Netting Agreement
A written contract to settle mutual obligations with a single counterparty at
the net value of all outstanding contracts, as opposed to settling each contract
at its gross value.
Mortgage-Backed Securities
Investment grade securities backed by a pool of mortgages or trust deeds.
Principal and interest payments on the underlying mortgages are used to pay
semi-annual interest and principal on the securities.
Risk-Based Capital
A measure of a bank's financial strength developed by banking regulators,
taking into account the risks inherent in the bank's assets as well as its
off-balance-sheet exposures.
Risk Management
The procedures necessary to manage a bank's exposure to various types of risk
associated with transacting business.
Savings Association Insurance Fund (SAIF)
The government guarantee program administered by the Federal Deposit Insurance
Corporation, backing deposits in federal savings and loan associations, federal
savings banks, and certain state savings and loan associations up to $100,000
per account.
Simulation
A technique to test earnings performance under different interest rate and
pricing scenarios.
Spread
The difference between the interest rate charged by a bank on an investment
(i.e. a loan) and the bank's cost of funds.
Transfer Pricing
A method by which costs are allocated to the various profit centers within an
organization.
96
<PAGE>
BankAmerica Corporation 1997 Annual Report
CORPORATE INFORMATION
Connecting With BankAmerica
By Mail
The Annual Report of BankAmerica Corporation is designed to provide financial
facts and analysis to shareholders and professional investors while satisfying
various regulatory requirements.
The following additional publications are available without charge by writing
to:
Bank of America,
Corporate Secretary's Office #13018,
P.O. Box 37000, San Francisco, CA 94137
* The BankAmerica Corporation 1997 Form 10-K, which includes additional
information and financial data on the corporation
* Environmental Program Progress Report
* Information regarding community
reinvestment and related activities
* Recording for the blind of the 1997 Annual Report
Requests for copies of the full text of the BankAmerica Corporation Board of
Directors' Corporate Governance Principles can be obtained by writing to:
BankAmerica Corporation
Corporate Secretary's Office #13018
Bank of America Center
555 California Street
San Francisco, CA 94104
Requests for assistance with specific matters related to BankAmerica's stock
and registered securities can be addressed to the corporation's Transfer Agent
and Registrar:
ChaseMellon Shareholder Services, L.L.C.
83 Challenger Road
Ridgefield Park, NJ 07660
or
ChaseMellon Shareholder Services, L.L.C.
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
By Phone
Shareholder Assistance Line 1-800-642-9880
Shareholders can call ChaseMellon Shareholder Services toll-free to receive
assistance with specific matters related to BAC stock and registered
securities, such as change of address, stock transfers and change of
ownership, non-receipt of or lost stock certificates or dividend checks, sale
or transfer of book-entry shares, dividend reinvestment plan information,
direct deposit of dividends, consolidation of accounts, and dividend income
reporting for tax purposes. Shareholders can also call (415) 622-3530 during
normal Pacific Coast business hours to receive information on corporate
activities.
Customer Service 1-800-521-BofA (521-2632),
1-800-24First (243-4778) (in Washington)
Loan-by-Phone 1-800-The BofA (843-2632)
Customers can apply for loans toll-free, 24 hours a day.
Online
Visit BankAmerica's home page on the World Wide Web to view the latest
information about the corporation and its products and services, open an
account, bank online, or apply for a loan or credit card.
(http://www.bankamerica.com)
Financial information and a link to the corporation's disclosure
documents filed with the Securities and Exchange Commission by BankAmerica are
available on the shareholder section of BankAmerica's home page.
(http://www.bankamerica.com/shareholder)
Shareholders can reach the corporation's Transfer Agent and Registrar through
(http://www.chasemellon.com)
In Person
With approximately 1,800 branches, nearly 1,000 in-store facilities, and close
to 7,700 ATMs, BankAmerica provides a level of on-site customer convenience
that is second to none. Consult the telephone directory for a location near
you.
The Annual Meeting of Shareholders will be held in Portland, Oregon at the
DoubleTree Hotel--Jantzen Beach, 909 N. Hayden Island Drive on Thursday, May 21,
1998 at 2 p.m.
97
<PAGE>
Exhibit 21
BANKAMERICA CORPORATION (BAC) SUBSIDIARIES
The following list sets forth information concerning the direct subsidiaries of
BankAmerica Corporation (the Parent) and indirect subsidiaries of the Parent.
Except as otherwise indicated, each subsidiary is wholly owned and does
business under its own name.
As of December 31, 1997
* Denotes Ownership within the BAC Family by More Than One Entity - See
Listing at end of report for details
@ Denotes Partial Outside Ownership - See Listing at end of report for details
In certain cases, a small number of shares of a subsidiary may be held by one
or more employees of the registrant due to
requirements of local law.
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
54 Appold Holdings Limited Delaware, USA
80 Appold Japan Limited Hong Kong
86 Appold Leasing Limited U.K.
199 Security Pacific EuroFinance, Inc. Delaware, USA
1400 Societe Nouvelle Les Dolomites Francaises, SARL* France
52 Appold Leasing, Inc. Delaware, USA
368 BA Futures, Incorporated Delaware, USA
2268 BA Futures, S.A.@ France
15 BA Northwest Community Service Corporation Washington, USA
376 BancAmerica Commercial Corporation Pennsylvania, USA
120 BancAmerica Robertson Stephens Delaware, USA
DBA : Texas BA Securities, Inc.
121 Bank of America Community Development Bank California, USA
DBA : Security Pacific Insurance Agency, Inc.
44 Bank of America National Association USA (National Bank)
385 Bank of America National Trust and Savings Association USA
DBA : Seafirst Bank
DBA : Security Pacific National Bank
517 693327 Ontario Limited*@ Canada
3211 Alie Investments* U.K.
361 BA Credit Corporation Delaware, USA
DBA : BankAmerica Credit Corporation
DBA : SPFSSI-SPCC, Inc.
2275 BA Interactive Services Holding Company, Inc. Delaware, USA
282 BA Investment Services, Inc. Delaware, USA
3000 BA Merchant Services, Inc.@ Delaware, USA
2792 BA Mortgage Securities, Inc. Delaware, USA
264 BA Properties, Inc. Delaware, USA
DBA : BEBAC
DBA : Holding Pattern Company
2082 BA Service Corp. Delaware, USA
657 Bamerilease, Inc. Arizona, USA
266 BancAmerica Auto Finance Corp. Delaware, USA
DBA : Security Pacific Auto Finance
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
526 Bank of America (Jersey) Limited@ Channel Islands
3120 Bank of America (Polska) S.A. Poland
514 Bank of America Canada Canada
517 693327 Ontario Limited*@ Canada
515 Bank of America Canada Leasing Corporation Canada
3206 Bank of America Canada Leasing III, Inc. Canada
3207 Bank of America Canada Leasing IV, Inc. Canada
3208 Bank of America Canada Leasing V, Inc. Canada
516 Bank of America Canada Securities Corporation Canada
437 Bank of America Colombia*@ Colombia
2019 Bank of America Illinois Community Development Corporation Delaware, USA
470 Bank of America International Limited* U.K.
473 BA Netting Limited U.K.
476 Fenchurch Steamship Corporation Liberia
440 Bank of America, S.A.* Spain
441 BankAmerica Gestion SGIIC, S.A. Spain
360 BankAmerica Business Credit, Inc. Delaware, USA
DBA : BA Business Credit, Inc.
438 BankAmerica International USA (Edge Act)
2270 Arrendadora BankAmerica, S.A.* Mexico
2269 Bank of America Mexico, S.A.* Mexico
440 Bank of America, S.A.* Spain
441 BankAmerica Gestion SGIIC, S.A. Spain
498 Inversiones of America Corredores de Bolsa Limitada* Chile
443 Societe Anonyme Immobiliere du 28 Place Vendome France
1400 Societe Nouvelle Les Dolomites Francaises, SARL* France
444 BankAmerica International Financial Corporation USA (Edge Act)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
3078 "BA Services (Poland)" Sp. zo.o Poland
2270 Arrendadora BankAmerica, S.A.* Mexico
445 BA Asia Limited Hong Kong
2801 BA Assets Company Cayman Islands
506 BA Australia Limited Australia
3080 BA LocProc Pty. Limited Australia
509 BA Staff Limited Australia
707 BA Staff Superannuation Limited Australia
2941 BA Card Services, Inc.@ Philippines
446 BA Finance (Hong Kong) Limited Hong Kong
3212 BA Finance Ireland Limited Ireland
2271 BA Forex (Philippines), Inc. Philippines
450 BA Holding Company S.A.* Luxembourg
470 Bank of America International Limited* U.K.
473 BA Netting Limited U.K.
476 Fenchurch Steamship Corporation Liberia
451 BankAmerica International Trustees (B.V.I.) Limited British Virgin Islands
459 BankAmerica Financial Services Ltd. British Virgin Islands
452 BankAmerica Trust and Banking Corporation (Bahamas) Bahamas
453 Trunoms, Limited Bahamas
454 Wolnoms, Limited Bahamas
455 BankAmerica Trust and Banking Corporation (Cayman) Limited Cayman Islands
1360 BankAmerica Fund Management Limited Cayman Islands
456 Harbour Nominees Ltd. Cayman Islands
457 BankAmerica Trust Company (Hong Kong) Limited* Hong Kong
458 BATCO Nominees Limited* Hong Kong
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
461 Fiduciary Services Limited* Hong Kong
460 ITG Secretaries Limited* Hong Kong
462 Renfrew Services Limited* Hong Kong
461 Fiduciary Services Limited* Hong Kong
460 ITG Secretaries Limited* Hong Kong
462 Renfrew Services Limited* Hong Kong
458 BATCO Nominees Limited* Hong Kong
461 Fiduciary Services Limited* Hong Kong
460 ITG Secretaries Limited* Hong Kong
467 BankAmerica Trust Company (Jersey) Limited Channel Islands
468 BankAmerica Properties (Jersey) Limited Channel Islands
2939 Fenborough Services Limited British Virgin Islands
2940 NS Secretaries Limited Channel Islands
2938 Ridgemount Services Limited British Virgin Islands
469 Unihouse Nominees Limited Channel Islands
3110 BA Insurance Brokerage Inc.@ Taiwan
3109 BA Securities Investment Advisory Limited@ Taiwan
449 BA Swallow Business Systems Limited U.K.
479 BamerInvest C.A. Venezuela
437 Bank of America Colombia*@ Colombia
470 Bank of America International Limited* U.K.
473 BA Netting Limited U.K.
476 Fenchurch Steamship Corporation Liberia
2140 Bank of America Malaysia Berhad Malaysia
2269 Bank of America Mexico, S.A.* Mexico
481 BankAmerica Representacao e Servicos Limitada* Brazil
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
1003 BankAmerica Singapore Limited Singapore
3079 Bofa Investment Company S.A. Argentina
628 Bunga Orkid, Ltd. Bermuda
491 Companhia Internacional de Participacoes Empreendimentos S.A.@ Brazil
492 Multi Banco S.A.@ Brazil
293 Fundo 2000 de Conversao-Capital Estrangeiro Brazil
534 Golden Gate Participacoes Ltda. Brazil
497 Hedges S.A.* Argentina
232 Inchroy Credit Corporation Limited@ Hong Kong
3021 InverAmerica S.A.* Colombia
498 Inversiones of America Corredores de Bolsa Limitada* Chile
499 Inversiones y Negocios Fiduciarios S.A.* Argentina
301 InvestAmerica S.A.* Chile
668 Orion Eight, Inc. Delaware, USA
671 Delta FSC Eight, Inc. U.S. Virgin Islands
669 Orion Nine, Inc. Delaware, USA
672 Delta FSC Nine, Inc. U.S. Virgin Islands
670 Orion Ten, Inc. Delaware, USA
673 Delta FSC Ten, Inc. U.S. Virgin Islands
306 Security Pacific Overseas Investment Corporation Delaware, USA
339 Appold Limited U.K.
308 Bank of America (Asia) Limited* Hong Kong
312 Bank of America (Macau) Limited Macau
309 The Bank of Canton (Nominees) Limited Hong Kong
3021 InverAmerica S.A.* Colombia
301 InvestAmerica S.A.* Chile
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
--- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
----- - - - - - - - -
<S> <C> <C>
323 Security Pacific Australian Assets Limited Australia
336 Security Pacific Financing Services Ltd. U.K.
337 Security Pacific Hong Kong Holdings Limited Hong Kong
308 Bank of America (Asia) Limited* Hong Kong
312 Bank of America (Macau) Limited Macau
309 The Bank of Canton (Nominees) Limited Hong Kong
501 Titulos Rioplatenses S.A.* Uruguay
2078 Venco, B.V. Cayman Islands
2144 Montana Fundo de Renda Fixa Brazil
3083 Verrington Limited Cayman Islands
2022 BankAmerica International Investment Corporation USA (Edge Act)
3099 Ace China Holdings LLC@ Cayman Islands
2028 C.N. Investments, Inc. Cayman Islands
2026 CIC Trading, S.A.* Argentina
2079 Continental Bank Participacoes, Ltda. Brazil
2029 Continental Capital Markets Limited U.K.
2030 Lease Continental PLC U.K.
2032 Continental Finanziaria S.P.A. Italy
2033 Continental Illinois De Mexico, S.A. De C.V.* Mexico
2037 Continental Information & Technology Services Co. S.A.* Argentina
2038 Continental International Finance Corporation II Limitada* Chile
2041 Continental International Securities Limited Cayman Islands
2043 Continental Investment Company S.A.* Argentina
2044 Continental Servicios Corporativos, S.A. De C.V. Mexico
2098 Fundo 2001 de Conversao-Capital Estrangeiro Brazil
2054 Ismael I, Inc. Cayman Islands
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
2057 Juliana, Inc. Cayman Islands
2059 Justin, Inc. Chile Limitada* Chile
2058 Justin, Inc. Cayman Islands
2059 Justin, Inc. Chile Limitada* Chile
2064 Labco I, Inc. Cayman Islands
2065 Labco I, Inc. Chile Limitada* Chile
2038 Continental International Finance Corporation II Limitada* Chile
2067 Labco II, Inc. Cayman Islands
2065 Labco I, Inc. Chile Limitada* Chile
2038 Continental International Finance Corporation II Limitada* Chile
2107 Moraine Ltd. Cayman Islands
2026 CIC Trading, S.A.* Argentina
2037 Continental Information & Technology Services Co. S.A.* Argentina
2043 Continental Investment Company S.A.* Argentina
2077 Valores Mercantiles Banconti, C.A. Venezuela
313 BankAmerica Nominees (1993) Pte Ltd. Singapore
502 BankAmerica Nominees (Hong Kong) Ltd. Hong Kong
504 BankAmerica Nominees (Singapore) Pte. Ltd. Singapore
503 BankAmerica Nominees Limited (London) Channel Islands
2999 BankAmerica Preferred Capital Corporation Maryland, USA
481 BankAmerica Representacao e Servicos Limitada* Brazil
542 BankAmerica Special Assets Corporation Delaware, USA
3106 Perissa LLC Delaware, USA
250 BankAmerica Ventures California, USA
2886 Bay Street Limited Cayman Islands
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
278 BofA Capital Management, Inc. Delaware, USA
DBA : InterCash Capital Advisors
DBA : Pacific Century Advisers
2014 C.I.N.B. Nominees (London) Limited U.K.
3217 Cabot Investments U.K.
2945 California Street Limited Cayman Islands
20 Centrum Properties Corporation Washington, USA
2033 Continental Illinois De Mexico, S.A. De C.V.* Mexico
2020 Continental Illinois Property Corporation No. 3 Delaware, USA
2021 Continental Illinois Venture Corporation Delaware, USA
2081 Continental Partners Group, Inc. Delaware, USA
625 DAS Holdings, Inc. Washington, USA
3016 Davis Street Limited Cayman Islands
249 Equitable Deed Company California, USA
DBA : Continental Auxiliary Company
252 Grant County Power Company Delaware, USA
2367 Het Loo REIT, Co. Delaware, USA
3225 CalKearn, LLC* California, USA
536 Lease Holding VI, Inc. Delaware, USA
3210 Leman Investments* U.K.
2090 Moorpark Holding, Inc. Delaware, USA
541 NAGSA II, Inc. Delaware, USA
258 Pacific Southwest Realty Company Delaware, USA
2091 PDE, Inc. Cayman Islands
3218 PDN Holdings, LLC Delaware, USA
3211 Alie Investments* U.K.
3210 Leman Investments* U.K.
259 PNB Securities Corporation California, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
11 Rainier Credit Company Washington, USA
416 Seafirst America Corporation Washington, USA
2185 Seafirst Asset Holding Co. Delaware, USA
411 Seafirst Auto Leasing, Inc. Washington, USA
1364 Seafirst Center Limited Partnership* Washington, USA
404 Seafirst Insurance Corporation Washington, USA
27 Seafirst Investment Services, Inc. Washington, USA
413 Seafirst Leasing Company Washington, USA
420 Seafirst Properties Corporation Washington, USA
1364 Seafirst Center Limited Partnership* Washington, USA
421 Seafirst Services Corporation Washington, USA
265 Security Pacific Asia Limited Singapore
347 Security Pacific Equipment Leasing, Inc. Delaware, USA
DBA : SPELI
428 BA Leasing & Capital Corporation California, USA
3003 Airlease Management Services, Inc. Delaware, USA
3254 Airlease Ltd., A California Limited Partnership*@ California, USA
1324 BA FSC Holdings, Inc. Delaware, USA
3051 Aegina, Inc. Delaware, USA
3058 Aegina FSC, Inc. U.S. Virgin Islands
348 Aerocrane Leasing Ltd. U.S. Virgin Islands
1323 BA Swiss FSC Holdings, Inc. Delaware, USA
551 Samedan Leasing Ltd. U.S. Virgin Islands
2364 Canea FSC, Inc. U.S. Virgin Islands
1419 Eloundra, Inc. Delaware, USA
2790 Eloundra FSC, Inc. U.S. Virgin Islands
2212 Epidaurus FSC, Inc. U.S. Virgin Islands
349 First Executive Sands Leasing Corp. California, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
350 First Executive Leasing FSC Ltd. U.S. Virgin Islands
2791 Irapetra FSC, Inc. U.S. Virgin Islands
3201 Jambu Holdings, Inc. Delaware, USA
3209 Bunga Jambu Ltd. Bermuda
3075 Kavala, Inc. Delaware, USA
3076 Kavala FSC, Inc. Barbados, BWI
1409 Knossus FSC, Inc. U.S. Virgin Islands
2970 Lease Holding Company Pte. Ltd. Singapore
3053 Lindos, Inc. Delaware, USA
3073 Lindos FSC, Inc. U.S. Virgin Islands
549 Marco Polo Leasing Ltd. U.S. Virgin Islands
2213 Mycenae, Inc. Delaware, USA
2214 Mycenae FSC, Inc. U.S. Virgin Islands
1436 Nauplia, Inc. Delaware, USA
1438 Nauplia FSC, Inc. U.S. Virgin Islands
2368 Patras, Inc. Delaware, USA
2365 Patras FSC, Inc. U.S. Virgin Islands
1408 Phaestos FSC, Inc.@ U.S. Virgin Islands
3054 Poros, Inc. Delaware, USA
3074 Poros FSC, Inc. U.S. Virgin Islands
3052 Pylos, Inc. Delaware, USA
3059 Pylos FSC, Inc. U.S. Virgin Islands
550 Raffles Leasing Ltd. U.S. Virgin Islands
1439 Sounion FSC, Inc. U.S. Virgin Islands
552 Tanah Merah Leasing Ltd. U.S. Virgin Islands
3077 Thasos FSC, Inc. British West Indies
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
1420 Tiryns FSC, Inc.@ U.S. Virgin Islands
184 General Fidelity Insurance Company California, USA
2969 Pydna Corporation Delaware, USA
433 Transit Holding, Inc. Delaware, USA
434 Asset Holding Co. Inc. Delaware, USA
3002 United States Airlease Holding, Inc. California, USA
546 Balmoral Leasing Ltd. U.S. Virgin Islands
354 SPAA Leasing Corporation Delaware, USA
358 Security Pacific Financial Services of California Inc. Delaware, USA
3015 Silver REMIC Management Co. Delaware, USA
3121 The Dana Partnership@ South Africa
533 The Electronic Payments Exchange, Inc. Delaware, USA
3042 Vision Achievement Limited Hong Kong
364 Zentac Productions, Inc. Delaware, USA
2771 Kauai Hotel Limited Partnership@ Delaware, USA
389 Bank of America Texas, N.A. USA
32 Bank of America, FSB USA (Federal Savings Bank)
DBA : Bank of America Hawaii
DBA : Bank of America, FSB, Community Development Division
DBA : BankAmerica Housing Services, a division of Bank of America, FSB
DBA : BankAmerica Mortgage, a division of Bank of America, FSB
2202 Arbor National Holdings, Inc. New York, USA
2208 Arbor National Mortgage, Inc. New York, USA
2203 Arbor Real Estate Management, Inc. New York, USA
2206 Designated Appraisers, Inc. New York, USA
2207 Home Closing Services, Inc. New York, USA
2204 Lauren Advertising, Inc. New York, USA
641 Bank of America (Hawaii) Insurance Agency, Inc. Hawaii, USA
631 Honfed Financial Services Corp. Hawaii, USA
1411 United Mortgage Corporation Minnesota, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
1410 United Mortgage Holding Company Minnesota, USA
3069 BankAmerica Capital I Delaware, USA
3070 BankAmerica Capital II Delaware, USA
3081 BankAmerica Capital III Delaware, USA
29 BankAmerica Community Development Corporation Oregon, USA
139 BankAmerica Financial, Inc. Delaware, USA
370 B.A. Insurance (Cayman) Ltd. Cayman Islands
2001 BankAmerica Capital Corporation Delaware, USA
98 Security Pacific Investors, Inc. Delaware, USA
182 BankAmerica Insurance Group, Inc. Delaware, USA
190 BA Insurance Agency, Inc. Delaware, USA
43 BankAmerica Southwest Insurance Agency, Inc. Arizona, USA
185 General Fidelity Life Insurance Company California, USA
109 Brazilian Financial Services, Inc. Delaware, USA
110 BFS Participacoes Ltda. Brazil
112 Brazilian Tourism Holdings, Inc. Delaware, USA
397 Overseas Lending Corporation Delaware, USA
497 Hedges S.A.* Argentina
499 Inversiones y Negocios Fiduciarios S.A.* Argentina
168 Security Pacific Housing Services, Inc. Delaware, USA
169 BankAmerica Acceptance Corp. Delaware, USA
170 Security Pacific Acceptance Corp. II Delaware, USA
172 Security Pacific Leasing Corporation Delaware, USA
3071 DFO Partnership@ New York, USA
173 MCOG Leasing Corp. California, USA
2356 Sardonyx Shipping Pte Ltd@ Singapore
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- ----- ------- -----------------------------
Level 1 2 3 4 5 6 7 8
- ----- - - - - - - - -
<C> <S> <C>
200 Securilease BV Netherlands Antilles
174 Security Pacific Capital Leasing Corporation Delaware, USA
194 Security Pacific EuroFinance Holdings, Inc. Delaware, USA
195 Security Pacific Equipment Finance (Europe) Inc. Delaware, USA
224 Security Pacific Lease Finance (Europe) Inc. Delaware, USA
218 Security Pacific International Leasfinance, Inc. Delaware, USA
3001 Ulysses Beta, Inc. Delaware, USA
3252 Beta Dearborn Limited Partnership * Delaware, USA
3251 Alpha Dearborn Limited Partnership * Delaware, USA
2972 Ulysses Queensland Corporation Delaware, USA
177 White Sands Leasing Corporation Delaware, USA
178 Pasir Mas Ltd. U.S. Virgin Islands
179 Windmill Sands Leasing Corporation Delaware, USA
180 Windmill Leasing Ltd. U.S. Virgin Islands
501 Titulos Rioplatenses S.A.* Uruguay
400 Western America Financial, Inc. Delaware, USA
3067 BankAmerica Institutional Capital A Delaware, USA
3068 BankAmerica Institutional Capital B Delaware, USA
2003 BankAmerica Investment Corporation Delaware, USA
2784 Asia Port Investors LLC@ Cayman Islands
2785 Port Investors Limited British Virgin Islands
2010 BankAmerica Realty Finance, Inc. Delaware, USA
380 BankAmerica Realty Services, Inc. Delaware, USA
2247 555 California Street Partners@ California, USA
3205 Broadway Pointe Venture, LLC@ California, USA
2768 Maguire Partners - Glendale Center, L.L.C.@ California, USA
2005 Continental Illinois Energy Development Corporation Delaware, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- -------- ------- -----------------------------
<C> <S> <C>
Level 1 2 3 4 5 6 7 8
- -------- - - - - - - - -
2110 LaSalle Street Natural Resources Corporation Delaware, USA
12 Rainier Mortgage Company Washington, USA
372 Real Estate Collateral Management Company Delaware, USA
3019 Villages of La Costa Southwest, L.L.C.* Delaware, USA
3116 Robertson Stephens Investment Management Co. Delaware, USA
3145 BA Robertson Stephens International Limited U.K.
3223 BancAmerica Robertson Stephens Evergreen, Ltd.@ Israel
3144 BancAmerica Robertson Stephens International Ltd. California, USA
3122 Bayview Holdings, Inc. Delaware, USA
3220 Robertson, Stephens & Company Private Equity Group, L.L.C.* Delaware, USA
3139 Bayview Investors IV, L.P.@ California, USA
3140 Bayview Investors V, L.P.@ California, USA
3192 Bayview Investors VI, L.P.@ California, USA
3189 Robertson Stephens Emerging Growth Partners, L.P.*@ California, USA
3138 Bayview Investors, Ltd.@ California, USA
3191 Delta Growth Fund, L.P.*@ California, USA
3187 The Robertson Stephens Black Bear Fund I, L.P.*@ California, USA
3193 The Robertson Stephens Orphan Fund*@ California, USA
3148 RCS III@ California, USA
3146 RCS Investors General Partnerships A-F@ California, USA
3147 RCSW II A Limited Partnership@ California, USA
3153 RS & Co. Environmental Partners, L.P. Delaware, USA
3158 RS & Co. Venture Partners IV, L.P. Delaware, USA
3159 RS & Co. IV, L.P.@ Delaware, USA
3160 RS Pacific Venture L.P.*@ Cayman Islands
3161 RSCPF Manager, LLC* California, USA
3162 Robertson Stephens Commercial Property Fund, LLC@ California, USA
3185 RSCR I, L.L.C.* Delaware, USA
3197 RS Investment Management, Inc. Delaware, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- -------- ------- -----------------------------
<C> <S> <C>
Level 1 2 3 4 5 6 7 8
- -------- - - - - - - - -
3164 RSCRE II, L.L.C.* Delaware, USA
3165 R.S. Property Fund I, L.P.@ California, USA
3166 RSRF Company, LLC* California, USA
3172 Robertson Stephens Residential Fund, L.P.@ California, USA
3175 RSRF Castle Rock Company, LLC* Arizona, USA
3173 RSRF Fern Bluff Company, LP* California, USA
3174 RSRF Sabino Terrace Company, LLC* Arizona, USA
3178 Omega II Management, L.L.C.@ Delaware, USA
3179 Omega Ventures II, L.P.@ California, USA
3180 Omega Ventures II Cayman, L.P.*@ Cayman Islands
3184 Robertson Stephens Administrative General Partner, Ltd. Cayman Islands
3180 Omega Ventures II Cayman, L.P.*@ Cayman Islands
3160 RS Pacific Venture L.P.*@ Cayman Islands
3186 Robertson, Stephens & Company Investment Management, L.P.* California, USA
3194 Crossover Investment Management, L.L.C*@ Delaware, USA
3195 Crossover Fund II, L.P.@ Delaware, USA
3196 Crossover Fund IIA, L.P.@ Delaware, USA
3191 Delta Growth Fund, L.P.*@ California, USA
3188 Golden Bear Fund, L.P.@ California, USA
3231 Minerva Capital Partners, LLC@ California, USA
3189 Robertson Stephens Emerging Growth Partners, L.P.*@ California, USA
3187 The Robertson Stephens Black Bear Fund I, L.P.*@ California, USA
3193 The Robertson Stephens Orphan Fund*@ California, USA
3190 The Robertson Stephens Orphan Offshore Fund, L.P.@ Cayman Islands
3163 Robertson, Stephens Commercial Property Fund, L.P.* California, USA
3228 RSCPF 1201 Louisiana Place General Partner, Inc. California, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Org # LE Name Jurisdiction of Incorporation
- -------- ------- -----------------------------
<C> <S> <C>
Level 1 2 3 4 5 6 7 8
- -------- - - - - - - - -
3229 RSCPF 1201 Louisiana Place, L.P.* California, USA
3230 RSCPF Fredricksburg, L.P.* California, USA
3226 RSCPF 801 Travis General Partner, Inc. California, USA
3227 RSCPF 801 Travis, L.P.* California, USA
3281 RS Omega III Holdings, L.L.C. Delaware, USA
132 Security-First Company California, USA
133 Security-First CMO-I Corporation California, USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
* LEGAL ENTITIES OWNED BY MORE THAN ONE ENTITY WITHIN THE BAC FAMILY
- --------------------------------------------------------------------
<S> <C> <C>
Legal 517 693327 Ontario Limited
Holding Type:: Voting Common Shares
Shareholders :
514 Bank of America Canada 10.2158400
385 Bank of America National Trust and Savings Association 51.6941600
61.91
Legal 3254 Airlease Ltd., A California Limited Partnership
Holding Type:: General Partnership Interest
Shareholders :
3003 Airlease Management Services, Inc. 1.0000000
Holding Type:: Limited Partnership Interest
Shareholders :
3002 United States Airlease Holding, Inc. 5.0000000
428 BA Leasing and Capital Corporation 17.2000000
23.2
Legal 3211 Alie Investments
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association 99.9999964
3218 PDN Holdings, LLC .0000036
100.00
Legal 3251 Alpha Dearborn Limited Partnership
Holding Type:: General Partnership Interest
Shareholders :
3252 Beta Dearborn Limited Partnership 1.0000000
Holding Type:: Limited Partnership Interest
Shareholders :
3071 The DFO Partnership 99.0000000
100.00
Legal 2270 Arrendadora BankAmerica, S.A.
Holding Type:: Voting Common Shares
Shareholders :
438 BankAmerica International .0025000
444 BankAmerica International Financial Corporation 99.9975000
100.00
Legal 450 BA Holding Company S.A.
Holding Type:: Voting Common Shares
Shareholders :
469 Unihouse Nominees Limited .000532
444 BankAmerica International Financial Corporation 99.9999468
100.00
Legal 308 Bank of America (Asia) Limited
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Holding Type:: Voting Common Shares
Shareholders :
337 Security Pacific Hong Kong Holdings Limited 31.0519713
306 Security Pacific Overseas Investment Corporation 68.9480287
100.00
Holding Type:: Voting Preferred Shares
Shareholders :
337 Security Pacific Hong Kong Holdings Limited 81.2626966
306 Security Pacific Overseas Investment Corporation 18.7373034
100.00
Legal 437 Bank of America Colombia
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association 94.9999056
444 BankAmerica International Financial Corporation 4.9999812
99.99988680
Legal 470 Bank of America International Limited
Holding Type:: Voting Common Shares
Shareholders :
450 BA Holding Company S.A. 31.3327269
385 Bank of America National Trust and Savings Association 19.7235259
444 BankAmerica International Financial Corporation 48.9437472
100.00
Legal 2269 Bank of America Mexico, S.A.
Holding Type:: Voting Common Shares
Shareholders :
438 BankAmerica International .3267974
444 BankAmerica International Financial Corporation 99.6732026
100.00
Legal 440 Bank of America, S.A.
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association 50.0000000
438 BankAmerica International 50.0000000
100.00
Legal 481 BankAmerica Representacao e Servicos Limitada
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association .0494041
444 BankAmerica International Financial Corporation 99.9505959
100.00
Legal 457 BankAmerica Trust Company (Hong Kong) Limited
Holding Type:: Voting Common Shares
Shareholders :
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
450 BA Holding Company S.A. 99.5815900
458 BATCO Nominees Limited .4184100
100.00
Legal 458 BATCO Nominees Limited
Holding Type:: Voting Common Shares
Shareholders :
457 BankAmerica Trust Company (Hong Kong) Limited 50.0000000
462 Renfrew Services Limited 50.0000000
100.00
Legal 3252 Beta Dearborn Limited Partnership
Holding Type:: General Partnership Interest
Shareholders :
3001 Ulysses Beta, Inc. 25.0000000
Holding Type:: Limited Partnership Interest
Shareholders :
3071 The DFO Partnership 75.0000000
100.00
Legal 3225 CalKearn, LLC
Holding Type:: Member Interest
Shareholders :
385 Bank of America National Trust and Savings Association .5000000
Holding Type:: Managing Member Interest
Shareholders :
2367 Het Loo REIT, Co. 99.5000000
100.00
Legal 2026 CIC Trading, S.A.
Holding Type:: Voting Common Shares
Shareholders :
2022 BankAmerica International Investment Corporation 99.0000000
2107 Moraine Ltd. 1.0000000
100.00
Legal 2033 Continental Illinois De Mexico, S.A. De C.V.
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association .0000038
2022 BankAmerica International Investment Corporation 99.9999962
Legal 2037 Continental Information & Technology Services Co. S.A.
Holding Type:: Voting Common Shares
Shareholders :
2022 BankAmerica International Investment Corporation 99.0000000
2107 Moraine Ltd. 1.0000000
100.00
Legal 2038 Continental International Finance Corporation II Limitada
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Holding Type:: Voting Participation or Partnership Interest
Shareholders :
2022 BankAmerica International Investment Corporation 99.9788203
2065 Labco I, Inc. Chile Limitada .0211797
100.00
Legal 2043 Continental Investment Company S.A.
Holding Type:: Voting Common Shares
Shareholders :
2022 BankAmerica International Investment Corporation 99.9999331
2107 Moraine Ltd. .0000669
100.00
Legal 3194 Crossover Investment Management, L.L.C.
Holding Type:: Member Interest
Shareholders :
3138 Bayview Investors, Ltd. 47.668
3185 RSCR I, L.L.C. 13.083
Holding Type:: Managing Member Interest
Shareholders :
3186 Robertson, Stephens & Company Investment Management, L.P. 0.0
60.751
Legal 3191 Delta Growth Fund, L.P.
Holding Type:: General Partnership Interest
Shareholders :
3138 Bayview Investors, Ltd. 0.0
3186 Robertson, Stephens & Company Investment Management, L.P. 0.0
0.0
Legal 461 Fiduciary Services Limited
Holding Type:: Voting Common Shares
Shareholders :
457 BankAmerica Trust Company (Hong Kong) Limited 50.0000000
458 BATCO Nominees Limited 50.0000000
100.00
Legal 497 Hedges S.A.
Holding Type:: Voting Common Shares
Shareholders :
444 BankAmerica International Financial Corporation 99.9000000
397 Overseas Lending Corporation .1000000
100.00
Legal 3021 Inveramerica S.A.
Holding Type:: Voting Common Shares
Shareholders :
444 BankAmerica International Financial Corporation 89.9900000
306 Security Pacific Overseas Investment Corporation 10.0000000
99.99
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Legal 498 Inversiones of America Corredores de Bolsa Limitada
Holding Type:: Voting Participation or Partnership Interest
Shareholders :
438 BankAmerica International .0003000
444 BankAmerica International Financial Corporation 99.9997000
100.00
Legal 499 Inversiones y Negocios Fiduciarios S.A.
Holding Type:: Voting Common Shares
Shareholders :
444 BankAmerica International Financial Corporation 99.0000107
397 Overseas Lending Corporation .9999893
100.00
Legal 301 InvestAmerica S.A.
Holding Type:: Voting Common Shares
Shareholders :
444 BankAmerica International Financial Corporation 99.9923797
306 Security Pacific Overseas Investment Corporation .0076203
100.00
Legal 460 ITG Secretaries Limited
Holding Type:: Voting Common Shares
Shareholders :
457 BankAmerica Trust Company (Hong Kong) Limited 50.0000000
458 BATCO Nominees Limited 50.0000000
100.00
Legal 2059 Justin, Inc. Chile Limitada
Holding Type:: Voting Participation or Partnership Interest
Shareholders :
2057 Juliana, Inc. 1.0000000
2058 Justin, Inc. 99.0000000
100.00
Legal 2065 Labco I, Inc. Chile Limitada
Holding Type:: Voting Participation or Partnership Interest
Shareholders :
2064 Labco I, Inc. 99.0000000
2067 Labco II, Inc. 1.0000000
100.00
Legal 3210 Leman Investments
Holding Type:: Voting Common Shares
Shareholders :
385 Bank of America National Trust and Savings Association 99.9999833
3218 PDN Holdings, LLC .0000167
100.00
Legal 3180 Omega Ventures II Cayman, L.P.
Holding Type:: General Partnership Interest
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Shareholders :
3178 Omega II Management, L.L.C. 0.8000000
3184 Robertson Stephens Administrative General Partner, Ltd. 0.2000000
1.00
Legal 462 Renfrew Services Limited
Holding Type:: Voting Common Shares
Shareholders :
457 BankAmerica Trust Company (Hong Kong) Limited 50.0000000
458 BATCO Nominees Limited 50.0000000
100.00
Legal 3189 Robertson Stephens Emerging Growth Partners, L.P.
Holding Type:: General Partnership Interest
Shareholders :
3192 Bayview Investors VI, L.P. 9.2830000
3186 Robertson, Stephens & Company Investment Management, L.P. 0.0000000
9.283
Legal 3186 Robertson, Stephens & Company Investment Management, L.P.
Holding Type:: Limited Partnership Interest
Shareholders :
3185 RSCR I, L.L.C. 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 1.0000000
100.00
Legal 3220 Robertson, Stephens & Company Private Equity Group, L.L.C.
Holding Type:: Member Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 99.0000000
Holding Type:: Managing Member Interest
Shareholders :
3122 Bayview Holdings, Inc. 1.0000000
100.00
Legal 3163 Robertson, Stephens Commercial Property Fund, L.P.
Holding Type:: Limited Partnership Interest
Shareholders :
3162 Robertson Stephens Commercial Property Fund, LLC 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 1.0000000
100.00
Legal 3160 RS Pacific Venture L.P.
Holding Type:: General Partnership Interest
Shareholders :
3184 Robertson Stephens Administrative General Partner, Ltd. .1000000
3220 Robertson, Stephens & Company Private Equity Group, L.L.C. .9000000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
1.00
Legal 3229 RSCPF 1201 Louisiana Place, L.P.
Holding Type:: Limited Partnership Interest
Shareholders :
3163 Robertson, Stephens Commercial Property Fund, L.P. 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3228 RSCPF 1201 Louisiana Place General Partner, Inc. 1.0000000
100.00
Legal 3227 RSCPF 801 Travis, L.P.
Holding Type:: Limited Partnership Interest
Shareholders :
3163 Robertson, Stephens Commercial Property Fund, L.P. 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3226 RSCPF 801 Travis General Partner, Inc. 1.0000000
100.00
Legal 3230 RSCPF Fredricksburg, L.P.
Holding Type:: Limited Partnership Interest
Shareholders :
3163 Robertson, Stephens Commercial Property Fund, L.P. 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3228 RSCPF 1201 Louisiana General Partner, Inc. 1.0000000
100.00
Legal 3161 RSCPF Manager, LLC
Holding Type:: Member Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 99.0000000
Holding Type:: Managing Member Interest
Shareholders :
3122 Bayview Holdings, Inc. 1.0000000
100.00
Legal 3185 RSCR I, L.L.C.
Holding Type:: Member Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 99.0000000
Holding Type:: Managing Member Interest
Shareholders :
3122 Bayview Holdings, Inc. 1.0000000
100.00
Legal 3164 RSCRE II, L.L.C.
Holding Type:: Member Interest
Shareholders :
3116 Robertson Stephens Investment Management Co. 99.0000000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Holding Type:: Managing Member Interest
Shareholders :
3122 Bayview Holdings, Inc. 1.0000000
100.00
Legal 3175 RSRF Castle Rock Company, LLC
Holding Type:: Member Interest
Shareholders :
3172 Robertson Stephens Residential Fund, L.P. 99.0000000
Holding Type:: Managing Member Interest
Shareholders :
3166 RSRF Company, LLC 1.0000000
100.00
Legal 3166 RSRF Company, LLC
Holding Type:: Member Interest
Shareholders :
3138 Bayview Investors, Ltd. 52.5000000
3116 Robertson Stephens Investment Management Co. 46.5000000
Holding Type:: Managing Member Interest
Shareholders :
3122 Bayview Holdings, Inc. 1.0000000
100.00
Legal 3173 RSRF Fern Bluff Company, LP
Holding Type:: Limited Partnership Interest
Shareholders :
3172 Robertson Stephens Residential Fund, L.P. 99.0000000
Holding Type:: General Partnership Interest
Shareholders :
3166 RSRF Company, LLC 1.0000000
100.00
Legal 3174 RSRF Sabino Terrace Company, LLC
Holding Type:: Member Interest
Shareholders :
3172 Robertson Stephens Residential Fund, L.P. 98.5500000
Holding Type:: Managing Member Interest
Shareholders :
3166 RSRF Company, LLC 1.4500000
100.00
Legal 1364 Seafirst Center Limited Partnership
Holding Type:: Limited Partnership Interest
Shareholders :
385 Bank of America National Trust and Savings Association 49.0000000
420 Seafirst Properties Corporation 49.0000000
Holding Type:: General Partnership Interest
Shareholders :
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
385 Bank of America National Trust and Savings Association 1.0000000
420 Seafirst Properties Corporation 1.0000000
100.00
Legal 1400 Societe Nouvelle Les Dolomites Francaises, SARL
Holding Type:: Voting Common Shares
Shareholders :
199 Security Pacific EuroFinance, Inc. 99.8000000
443 Societe Anonyme Immobiliere du 28 Place Vendome .2000000
100.00
Legal 3187 The Robertson Stephens Black Bear Fund I, L.P.
Holding Type:: General Partnership Interest
Shareholders :
3138 Bayview Investors, Ltd. 9.6525800
3186 Robertson, Stephens & Company Investment Management, L.P. .2868700
9.93945
Legal 3193 The Robertson Stephens Orphan Fund
Holding Type:: General Partnership Interest
Shareholders :
3138 Bayview Investors, Ltd. 12.3980000
3186 Robertson, Stephens & Company Investment Management, L.P. 0.0000000
12.398
Legal 501 Titulos Rioplatenses S.A.
Holding Type:: Voting Common Shares
Shareholders :
139 BankAmerica Financial, Inc. 2.0000000
444 BankAmerica International Financial Corporation 98.0000000
100.00
Legal 3019 Villages of la Costa Southwest, L.L.C.
Holding Type:: Member Interest
Shareholders :
380 BankAmerica Realty Services, Inc. 1.0000000
Holding Type:: Managing Member Interest
Shareholders :
372 Real Estate Collateral Management Company 99.0000000
100.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
@ LISTING OF SUBSIDIARIES WHERE OWNERSHIP WITHIN THE BAC FAMILY IS LESS THAN 100%
-------------------------------------------------------------------------------------------------
<C> <S> <C>
2247 555 California Street Partners 50
517 693327 Ontario Limited 61.91
3099 Ace China Holdings LLC 50
3254 Airlease Ltd., A California Limited Partnership 23.2 ( general partner)
2784 Asia Port Investors LLC 90
2941 BA Card Services, Inc. 99.99541985
2268 BA Futures, S.A. 99.91
3110 BA Insurance Brokerage Inc. 99.9985
3000 BA Merchant Services, Inc. 66.59
3109 BA Securities Investment Advisory Limited 99.7
3223 BancAmerica Robertson Stephens Evergreen, Ltd. 50
526 Bank of America (Jersey) Limited 99.9952
437 Bank of America Colombia 99.99988680
3138 Bayview Investors, Ltd. 1 (general partner)
3139 Bayview Investors IV, L.P. 0 (general partner)
3140 Bayview Investors V, L.P. 0 (general partner)
3141 Bayview Investors VI, L.P. 1 (general partner)
3205 Broadway Pointe Venture, LLC 90
491 Companhia Internacional de Participacoes Empreendimentos S.A. 99.99999929932
3194 Crossover Investment Management, L.L.C. 60.751 (managing member)
3195 Crossover Fund II, L.P. 4.07492 (general partner)
3196 Crossover Fund IIA, L.P. .488 (general partner)
3191 Delta Growth Fund, L.P. 0 (general partner)
3071 DFO Partnership 50
3188 Golden Bear Fund, L.P. 0 (general partner)
232 Inchroy Credit Corporation Limited 50
2771 Kauai Hotel Limited Partnership 1 nonvoting (general partner)
2768 Maguire Partners - Glendale Center, L.L.C. 70
3231 Minerva Capital Partners, LLC .54 (managing member)
492 Multi Banco S.A. 99.87826922969
3178 Omega II Management, L.L.C. 82.5 (general partner)
3179 Omega Ventures II, L.P. 1 (general partner)
3180 Omega Ventures II Cayman, L.P. 1 (general partner)
1408 Phaestos FSC, Inc. 50
3148 RCS III 0 (general partner)
3146 RCS Investors General Partnerships A-F 0.01 (general partner)
3147 RCSW II A Limited Partnership 1 (general partner)
3162 Robertson Stephens Commercial Property Fund, LLC 0 (managing member)
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
3189 Robertson Stephens Emerging Growth Partners, L.P. 9.283 (general partner)
3172 Robertson Stephens Residential Fund, L.P. 1.45 (general partner)
3165 R.S. Property Fund I, L.P. 0 (general partner)
3159 RS & Co. IV, L.P. 1 (general partner)
3160 RS Pacific Venture L.P. 1 (general partner)
2356 Sardonyx Shipping Pte Ltd 50
3121 The Dana Partnership 99.99
3187 The Robertson Stephens Black Bear Fund I, L.P. 9.939 (general partner)
3193 The Robertson Stephens Orphan Fund 12.398 (general partner)
3190 The Robertson Stephens Orphan Offshore Fund, L.P. 0 (general partner)
1420 Tiryns FSC, Inc. 50
</TABLE>
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement numbers 333-27817 on Form S-8 filed May 27, 1997; 333-40643 on Form S-
8 filed November 20, 1997; 333-16477 on Form S-8 filed November 20, 1996; 333-
16131 on Form S-8 filed November 13, 1996; 333-15559 on Form S-3 filed November
5, 1996, as amended by Pre-Effective Amendment No. 1 filed December 4, 1996;
333-09575 on Form S-8 filed on August 5, 1996; 33-55225 on Form S-8 filed August
25, 1994; 33-54385 on Form S-3 filed June 30, 1994, as amended by Pre-Effective
Amendment No. 1 filed August 17, 1994; 33-61483 on Form S-8 filed August 1,
1995; 33-53919 on Form S-8 filed June 1, 1994; 33-60648 on Form S-8 filed April
2, 1993; 33-51064 on Form S-3 filed August 20, 1992, as amended by Pre-Effective
Amendment No. 1 filed October 23, 1992 (to which the prospectus in 33-54385 also
applies); 33-50124 on Form S-8 filed July 29, 1992; 33-65326 on Form S-8 filed
July 1, 1993; 333-32769 on Form S-8 filed August 4, 1997; 333-27965 on Form S-8
filed May 29, 1997; 33-43862 on Form S-3 filed November 12, 1991, as amended by
Pre-Effective Amendment No. 1 filed January 17, 1992 (to which the prospectus in
33-54385 also applies); 33-36718 on Form S-3 filed September 7, 1990, as amended
by Pre-Effective Amendment No. 1 filed November 28, 1990 (to which the
prospectus in 33-54385 also applies); 33-26755 on Form S-3 filed January 27,
1989, as amended by Pre-Effective Amendment No. 1 filed February 16, 1989 and
Post-Effective Amendment No. 1 filed November 3, 1992; 33-23192 on Form S-3
filed July 21, 1988, as amended by Pre-Effective Amendment No. 1 filed September
13, 1988 (to which the prospectus in 33-54385 also applies); 2-93664 on Form S-3
filed on October 9, 1984, as amended by Amendment No. 1 filed November 23, 1984;
33-28252 on Form S-8 filed April 19, 1989, as amended by Post-Effective
Amendment No. 1 filed August 15, 1989 and Post-Effective Amendment No. 2 filed
on February 22, 1990; 33-13368 on Form S-8 (to which the prospectus in 33-28252
also applies); 33-29646 on Form S-8 filed June 30, 1989, as amended by Post-
Effective Amendment No. 1 filed August 3, 1990; and 2-82873, 2-71577, 2-64201,
2-58595, 2-57423, 2-53068, 2-47747, 2-32651 and 33-14135 on Form S-8 (to all of
which the prospectus in 33-29646 also applies), of BankAmerica Corporation and
in their related prospectuses of our report dated January 20, 1998, with respect
to the consolidated financial statements of BankAmerica Corporation incorporated
by reference in this Annual Report on Form 10-K for the year ended December 31,
1997.
/s/ ERNST & YOUNG LLP
--------------------------
ERNST & YOUNG LLP
San Francisco, California
March 13, 1998
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 1/28, 1998
/s/ JOSEPH F. ALIBRANDI
-------------------------
Joseph F. Alibrandi
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/1, 1998
/s/ PETER B. BEDFORD
--------------------
Peter B. Bedford
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: Jan 29, 1998
/s/ RICHARD A. CLARKE
---------------------
Richard A. Clarke
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as Chairman of the Board, President, and Chief Executive Officer of
BankAmerica Corporation and file with the Securities and Exchange Commission the
Corporation's Form 10-K annual report for 1997, and any amendments.
Dated: 2/2, 1998
/s/ DAVID A. COULTER
--------------------
David A. Coulter
[BAC-Form 10-K: Principal Executive Officer]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ TIMM F. CRULL
-----------------
Timm F. Crull
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ KATHLEEN FELDSTEIN
----------------------
Kathleen Feldstein
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 1/30, 1998
/s/ DONALD E. GUINN
-------------------
Donald E. Guinn
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as an Executive Vice President and Chief Accounting Officer of
BankAmerica Corporation and file with the Securities and Exchange Commission the
Corporation's Form 10-K annual report for 1997, and any amendments.
Dated: February 2, 1998
/s/ JOHN J. HIGGINS
-------------------
John J. Higgins
[BAC-Form 10-K: Principal Accounting Officer]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 1/30, 1998
/s/ FRANK L. HOPE, JR.
----------------------
Frank L. Hope, Jr.
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ WALTER E. MASSEY
--------------------
Walter E. Massey
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as Vice Chairman and Chief Financial Officer of BankAmerica
Corporation and file with the Securities and Exchange Commission the
Corporation's Form 10-K annual report for 1997, and any amendments.
Dated: 2/2, 1998
/s/ MICHAEL E. O'NEILL
----------------------
Michael E. O'Neill
[BAC-Form 10-K: Principal Financial Officer]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: Jan. 29, 1998
/s/ JOHN M. RICHMAN
-------------------
John M. Richman
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ SANFORD R. ROBERTSON
------------------------
Sanford R. Robertson
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 1/30, 1998
/s/ RICHARD M. ROSENBERG
------------------------
Richard M. Rosenberg
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ A. MICHAEL SPENCE
---------------------
A. Michael Spence
[BAC-Form 10-K: Director]
<PAGE>
Exhibit 24
POWER OF ATTORNEY
-----------------
I hereby appoint JAMES N. ROETHE, JEFFREY R. LAPIC, and CHERYL SOROKIN,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
1997, and any amendments.
Dated: 2/2, 1998
/s/ SOLOMON D. TRUJILLO
-----------------------
Solomon D. Trujillo
[BAC-Form 10-K: Director]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
CONTAINS SUMMARY FINANCIAL INFORMATION WHICH IS INCORPORATED BY REFERENCE FROM
THE 1997 ANNUAL REPORT TO SHAREHOLDERS AND EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES AND RATES,
NONPERFORMING ASSETS, ALLOWANCE FOR CREDIT LOSSES, AND ALLOCATION OF ALLOWANCE
FOR CREDIT LOSSES, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL
REPORT AND FORM 10-K FILING.
Any item provided in the schedule, in accordance with the rules governing the
schedule, will not be subject to liability under the federal securities laws,
except to the extent that the financial statements and other information from
which the data 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 14,280
<INT-BEARING-DEPOSITS> 5,862
<FED-FUNDS-SOLD> 9,879
<TRADING-ASSETS> 15,551
<INVESTMENTS-HELD-FOR-SALE> 12,786
<INVESTMENTS-CARRYING> 3,667
<INVESTMENTS-MARKET> 3,774
<LOANS> 167,111
<ALLOWANCE> 3,500
<TOTAL-ASSETS> 260,159
<DEPOSITS> 172,037
<SHORT-TERM> 30,612
<LIABILITIES-OTHER> 23,751<F1>
<LONG-TERM> 13,922<F2>
0
614
<COMMON> 1,210
<OTHER-SE> 18,013
<TOTAL-LIABILITIES-AND-EQUITY> 260,159
<INTEREST-LOAN> 13,872
<INTEREST-INVEST> 1,123
<INTEREST-OTHER> 2,462<F3>
<INTEREST-TOTAL> 17,457
<INTEREST-DEPOSIT> 5,793
<INTEREST-EXPENSE> 8,788
<INTEREST-INCOME-NET> 8,669
<LOAN-LOSSES> 950
<SECURITIES-GAINS> 116
<EXPENSE-OTHER> 8,521
<INCOME-PRETAX> 5,326
<INCOME-PRE-EXTRAORDINARY> 5,326
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,210
<EPS-PRIMARY> 4.45
<EPS-DILUTED> 4.32
<YIELD-ACTUAL> 4.06
<LOANS-NON> 897
<LOANS-PAST> 203
<LOANS-TROUBLED> 274
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,523
<CHARGE-OFFS> 1,305
<RECOVERIES> 404
<ALLOWANCE-CLOSE> 3,500
<ALLOWANCE-DOMESTIC> 2,245
<ALLOWANCE-FOREIGN> 1,005
<ALLOWANCE-UNALLOCATED> 250
<FN>
<F1>Includes corporation obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely junior subordinated deferrable interest
debentures of the corporation of $1,873 million.
<F2>Includes subordinated capital notes of $353 million.
<F3>Includes interest income on trading account assets of $1,230 million.
</FN>
</TABLE>
