<PAGE>
BankAmerica Corporation Analytical Review and Form 10-Q
[BANK AMERICA LOGO APPEARS HERE]
1998
1st Quarter
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1998
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7377
Exact name of registrant as specified in its charter:
BankAmerica Corporation
State or other jurisdiction of incorporation or organization:
Delaware
I.R.S. Employer Identification Number:
94-1681731
Address of principal executive offices:
Bank of America Center
San Francisco, California 94104
Registrant's telephone number, including area code:
415-622-3530
Former name, former address, and former fiscal year,
if changed since last report:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1.5625 par value ----- 682,703,733 shares outstanding on
March 31, 1998.*
*In addition, 91,993,787 shares were held in treasury.
- --------------------------------------------------------------------------------
This document serves both as an analytical review for analysts, shareholders,
and other interested persons, and as the quarterly report on Form 10-Q of
BankAmerica Corporation to the Securities and Exchange Commission, which has
taken no action to approve or disapprove the report or to pass upon its accuracy
or adequacy. Additionally, this document is to be read in conjunction with
BankAmerica Corporation's Annual Report on Form 10-K for the year ended December
31, 1997, including the consolidated financial statements and notes thereto.
<PAGE>
CONTENTS
<TABLE>
============================================================================================
<S> <C>
PART I Item 1.
FINANCIAL Financial Statements:
INFORMATION Consolidated Statement of Operations................................ 2
Consolidated Balance Sheet.......................................... 3
Consolidated Statement of Cash Flows................................ 4
Consolidated Statement of Changes in Stockholders' Equity........... 5
Notes to Consolidated Financial Statements.......................... 6
Item 2.
Management's Discussion and Analysis:
Financial Highlights................................................ 16
Highlights.......................................................... 17
Business Sectors.................................................... 19
Results of Operations:
Net Interest Income............................................... 22
Noninterest Income................................................ 24
Noninterest Expense............................................... 25
Year 2000......................................................... 26
Income Taxes...................................................... 26
Balance Sheet Review:............................................... 27
Credit Card Securitizations....................................... 28
Credit Risk Management:
Loan Portfolio Management......................................... 29
Domestic Consumer Loans......................................... 30
Domestic Commercial Loans....................................... 30
Foreign Loans................................................... 31
Recent International Developments................................. 31
Regional Foreign Exposures........................................ 31
Allowance for Credit Losses....................................... 33
Nonperforming Assets.............................................. 36
Derivative Financial Instruments.................................... 39
Funding and Capital:
Liquidity Review.................................................. 40
Capital Management................................................ 40
Forward-Looking Statements.......................................... 42
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.............. 42
- --------------------------------------------------------------------------------------------
PART II ITEM 6.
OTHER INFORMATION EXHIBITS AND REPORTS ON FORM 8-K.................................. 43
Signatures........................................................ 44
============================================================================================
</TABLE>
1
<PAGE>
FINANCIAL STATEMENTS
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
=================================================================================================================================
1998 1997
------- -------------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $3,388 $3,445 $3,537 $3,513 $ 3,438
Interest-bearing deposits in banks 108 104 107 105 99
Federal funds sold 8 10 14 9 8
Securities purchased under resale agreements 233 233 208 180 155
Trading account assets 383 340 323 298 269
Available-for-sale and held-to-maturity securities 283 290 277 270 286
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 4,403 4,422 4,466 4,375 4,255
INTEREST EXPENSE
Deposits 1,489 1,501 1,502 1,424 1,366
Federal funds purchased 27 21 11 19 13
Securities sold under repurchase agreements 251 256 227 178 149
Other short-term borrowings 293 269 268 287 275
Long-term debt 248 253 249 257 263
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,308 2,300 2,257 2,165 2,066
- ---------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 2,095 2,122 2,209 2,210 2,189
PROVISION FOR CREDIT LOSSES 245 220 260 250 220
- ---------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 1,850 1,902 1,949 1,960 1,969
NONINTEREST INCOME
Deposit account fees 338 362 364 361 360
Credit and other card fees 91 102 96 93 87
Trust fees 75 75 62 61 57
Other fees and commissions 562 565 424 417 375
Trading income 251 63 223 218 188
Equity investment activities 190 225 171 98 106
Net gain on sales of loans 115 93 53 44 59
Net gain (loss) on available-for-sale debt securities 61 12 2 (1) 13
Net gain on sales of subsidiaries and operations 20 34 139 27 13
Other income 110 85 121 108 112
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 1,813 1,616 1,655 1,426 1,370
NONINTEREST EXPENSE
Salaries 1,050 968 892 873 839
Employee benefits 179 153 177 189 189
Occupancy 191 192 192 183 186
Equipment 171 188 182 173 182
Professional services 112 134 107 82 75
Communications 97 95 95 96 93
Amortization of intangibles 91 90 88 89 91
Other expense 397 389 499 362 378
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 2,288 2,209 2,232 2,047 2,033
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,375 1,309 1,372 1,339 1,306
PROVISION FOR INCOME TAXES 540 497 553 540 526
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 835 $ 812 $ 819 $ 799 $780
- -----------------------------------------------------------======================================================================
EARNINGS PER COMMON SHARE $ 1.21 $ 1.15 $ 1.14 $ 1.10 $ 1.05
DILUTED EARNINGS PER COMMON SHARE 1.17 1.12 1.11 1.07 1.03
DIVIDENDS DECLARED PER COMMON SHARE 0.345 0.305 0.305 0.305 0.305
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
==================================================================================================================================
1998 1997
-------- -------------------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 14,699 $ 14,280 $ 13,854 $ 14,884 $ 13,561
Interest-bearing deposits in banks 5,737 5,862 5,368 7,037 6,390
Federal funds sold 1,748 105 48 270 153
Securities purchased under resale agreements 11,179 9,774 10,076 7,272 7,730
Trading account assets 21,328 15,551 16,351 16,765 12,931
Available-for-sale securities 12,328 12,786 12,408 11,959 11,532
Held-to-maturity securities 3,645 3,667 3,689 3,858 3,972
Loans 165,520 168,104 168,009 170,161 168,443
Less: Allowance for credit losses 3,517 3,500 3,504 3,563 3,538
- ----------------------------------------------------------------------------------------------------------------------------------
Net loans 162,003 164,604 164,505 166,598 164,905
Customers' acceptance liability 3,374 3,561 3,154 3,230 3,229
Accrued interest receivable 1,625 1,570 1,593 1,567 1,441
Goodwill, net 3,790 3,822 3,727 3,842 3,888
Identifiable intangibles, net 1,420 1,374 1,459 1,499 1,554
Unrealized gains on off-balance-sheet instruments 9,347 10,929 7,892 7,319 7,813
Premises and equipment, net 3,831 3,880 3,909 3,944 3,985
Other assets 9,382 8,394 9,487 8,319 6,820
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $265,436 $260,159 $257,520 $258,363 $249,904
- ------------------------------------------------------------======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits in domestic offices:
Interest-bearing $ 95,387 $ 94,495 $ 94,074 $ 83,308 $ 84,071
Noninterest-bearing 33,628 33,704 31,206 41,434 39,561
Deposits in foreign offices:
Interest-bearing 43,249 42,326 44,450 46,667 43,854
Noninterest-bearing 1,626 1,512 1,683 1,759 1,513
- ----------------------------------------------------------------------------------------------------------------------------------
Total deposits 173,890 172,037 171,413 173,168 168,999
Federal funds purchased 810 3,751 1,349 1,730 730
Securities sold under repurchase agreements 13,500 11,159 11,024 9,699 7,124
Other short-term borrowings 18,333 15,702 18,701 18,327 18,883
Acceptances outstanding 3,374 3,563 3,154 3,230 3,229
Accrued interest payable 1,004 978 1,023 958 921
Unrealized losses on off-balance-sheet instruments 8,792 10,502 7,541 7,157 7,473
Other liabilities 9,626 6,835 7,318 7,117 5,850
Long-term debt 14,011 13,922 14,198 14,736 14,725
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 243,340 238,449 235,721 236,122 227,934
- ----------------------------------------------------------------------------------------------------------------------------------
Corporation obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely junior
subordinated deferrable interest debentures of the
corporation (trust preferred securities) 2,212 1,873 1,873 1,873 1,873
STOCKHOLDERS' EQUITY
Preferred stock 614 614 848 1,596 1,596
Common stock 1,210 1,210 1,210 1,210 605
Additional paid-in capital 7,994 7,974 7,947 7,872 8,473
Retained earnings 14,292 13,726 13,168 12,598 12,029
Net unrealized gain (loss) on available-for-sale securities 66 137 108 13 (90)
Common stock in treasury, at cost (4,292) (3,824) (3,355) (2,921) (2,516)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 19,884 19,837 19,926 20,368 20,097
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $265,436 $260,159 $257,520 $258,363 $249,904
- ------------------------------------------------------------======================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
=================================================================================================================================
THREE MONTHS ENDED MARCH 31
---------------------------
(IN MILLIONS) 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 835 $ 780
Adjustments to net income to arrive at net cash used by operating activities:
Provision for credit losses 245 220
Net gain on sales of loans and subsidiaries and operations (135) (72)
Depreciation and amortization 210 207
Provision for (benefit from) deferred income taxes (246) 2
Change in assets and liabilities:
Increase in accrued interest receivable (55) -
Increase in accrued interest payable 26 42
Increase in trading account assets (5,777) (726)
Increase in current income taxes payable 502 509
Deferred fees received from lending activities 42 38
Net cash used by loans held for sale (271) (80)
Other, net 2,009 1,025
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (2,615) 1,945
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Sales proceeds 1,551 1,101
Maturities, prepayments, and calls 827 1,225
Purchases (1,823) (1,955)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 137 293
Purchases (201) (130)
Proceeds from loan sales and securitizations 3,095 2,138
Purchases of loans (859) (108)
Purchases of premises and equipment (89) (153)
Proceeds from sales of other real estate owned 86 128
Net cash provided (used) by:
Loan originations and principal collections 494 (4,433)
Interest-bearing deposits in banks (558) (681)
Federal funds sold (1,643) (19)
Securities purchased under resale agreements (1,405) (455)
Other, net (84) 107
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (472) (2,942)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 955 784
Principal payments and retirements of long-term debt (865) (1,842)
Net proceeds from issuance of trust preferred securities 339 396
Proceeds from issuance of treasury stock 83 62
Preferred stock redeemed - (646)
Treasury stock purchased (604) (481)
Common stock dividends (236) (216)
Preferred stock dividends (10) (34)
Net cash provided (used) by:
Deposits 1,853 984
Federal funds purchased (2,941) (1,446)
Securities sold under repurchase agreements 2,341 (520)
Other short-term borrowings 2,631 1,317
Other, net (39) (35)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 3,507 (1,677)
Effect of exchange rate changes on cash and due from banks (1) 12
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and due from banks 419 (2,662)
Cash and due from banks at beginning of period 14,280 16,223
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT END OF PERIOD $14,699 $13,561
- --------------------------------------------------------------------------------------------------===============================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
=================================================================================================================================
1998 1997
------- -----------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of quarter $ 614 $ 848 $ 1,596 $ 1,596 $ 2,242
Preferred stock redeemed - (234) (748) - (646)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 614 614 848 1,596 1,596
COMMON STOCK
Balance, beginning of quarter 1,210 1,210 1,210 605 605
Issuance of 387,314,462 shares of common stock to effect
a two-for-one common stock split - - - 605 -
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 1,210 1,210 1,210 1,210 605
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of quarter 7,974 7,947 7,872 8,473 8,467
Common stock issued - 10 18 1 -
Issuance of 387,314,462 shares of common stock to effect
a two-for-one common stock split - - - (605) -
Treasury stock issued in excess of cost 20 17 57 3 6
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 7,994 7,974 7,947 7,872 8,473
RETAINED EARNINGS
Balance, beginning of quarter 13,726 13,168 12,598 12,029 11,500
Net income 835 812 819 799 780
Common stock dividends (236) (211) (212) (214) (216)
Preferred stock dividends (10) (14) (22) (30) (34)
Foreign currency translation adjustments, net of
related income taxes (23) (29) (15) 14 (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 14,292 13,726 13,168 12,598 12,029
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE SECURITIES
Balance, beginning of quarter 137 108 13 (90) 32
Valuation adjustments, net of related income taxes (71) 29 95 103 (122)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter 66 137 108 13 (90)
COMMON STOCK IN TREASURY, AT COST
Balance, beginning of quarter (3,824) (3,355) (2,921) (2,516) (2,133)
Treasury stock purchased (600) (550) (525) (475) (475)
Treasury stock issued 133 85 112 71 94
Other (1) (4) (21) (1) (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, end of quarter (4,292) (3,824) (3,355) (2,921) (2,516)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 19,884 $19,837 $19,926 $20,368 $20,097
- ------------------------------------------------------------=====================================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. The unaudited consolidated financial statements of BankAmerica
FINANCIAL Corporation and subsidiaries (BAC) are prepared in conformity
STATEMENT with generally accepted accounting principles for interim
PRESENTATION financial information, the instructions to Form 10-Q, and Rule
10-01 of Regulation S-X. In the opinion of management, all
adjustments necessary for a fair presentation of the financial
position and results of operations for the periods presented
have been included. All such adjustments are of a normal
recurring nature. These unaudited consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements included in BankAmerica
Corporation's (the Parent) Annual Report on Form 10-K for the
year ended December 31, 1997.
The unaudited consolidated financial statements of BAC include
the accounts of the Parent and companies in which more than 50
percent of the voting stock is owned directly or indirectly by
the Parent, including Bank of America NT&SA (the Bank), and
other banking and nonbanking subsidiaries. The revenues,
expenses, assets, and liabilities of the subsidiaries are
included in the respective line items in the unaudited
consolidated financial statements after elimination of
intercompany accounts and transactions.
In June 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" (SFAS No. 125). The FASB
subsequently amended SFAS No. 125 in December 1996. As amended,
SFAS No. 125 applies to securities lending, repurchase
agreements, dollar rolls, and other similar secured financing
transactions occurring after December 31, 1997 and to all other
transfers and servicing of financial assets occurring after
December 31, 1996. The adoption of SFAS No. 125 did not have a
material effect on BAC's financial position or results of
operations.
Certain amounts in prior periods have been reclassified to
conform to the current presentation.
- --------------------------------------------------------------------------------
NOTE 2. On April 10, 1998, BAC and NationsBank Corporation
MERGER (NationsBank) entered into an agreement and plan of
AGREEMENT WITH reorganization (the merger). The merger will create a new
NATIONSBANK Delaware holding company which will be renamed BankAmerica
CORPORATION Corporation and will be headquartered in Charlotte, North
Carolina.
In accordance with the terms of the merger, each outstanding
share of BAC common stock, par value $1.5625, will be converted
into 1.1316 shares (exchange ratio) of the new holding company
and each share of NationsBank's common stock will be converted
into one share of the new holding company's common stock. All
rights with respect to common stock options of both BAC and
NationsBank will be converted into and become options of the
new holding company with substantially similar terms, and with
the BAC options adjusted to reflect the exchange ratio. The
exchange ratio was derived from the relative share prices of
NationsBank common stock and BAC common stock at the close of
business on April 9, 1998, with no premium paid to either
party.
In addition, in connection with the merger, BAC and NationsBank
have each granted to the other an option that entitles each
company, under certain situations, to purchase up to 19.9
percent of the other company's outstanding common stock, at the
closing price of the stock as of the last trading date
immediately prior to the announcement of the merger.
6
<PAGE>
================================================================================
The merger, which will be accounted for as a pooling-of-
interests, is subject to regulatory and shareholder approval
and is expected to close in the fourth quarter of 1998.
- --------------------------------------------------------------------------------
NOTE 3. During the three-month periods ended March 31, 1998 and 1997,
SUPPLEMENTAL BAC made interest payments on deposits and other
DISCLOSURE interest-bearing liabilities of $2,282 million and $2,024
OF CASH FLOW million, respectively, and made net income tax payments of $284
INFORMATION million and $45 million, respectively. In addition, during the
same periods foreclosures took place on loans with carrying
values of $34 million and $62 million, respectively.
During the three-month period ended March 31, 1998, BAC made
payments on accrued liabilities of $4 million related to common
stock repurchased during 1997. At March 31, 1998, BAC did not
accrue any liability related to common stock repurchased during
the first quarter of 1998.
- --------------------------------------------------------------------------------
NOTE 4. As of January 1, 1998, BAC adopted Statement of Financial
COMPREHENSIVE Accounting Standards No. 130, "Reporting Comprehensive Income"
INCOME (SFAS No. 130), which requires companies to report and display
comprehensive income and its components, which include net
income, net unrealized gains (losses) on available-for-sale
securities, and foreign currency translation adjustments. The
adoption of SFAS No. 130 in the first quarter of 1998 did not
have an impact on BAC's financial position or results of
operations.
The following is a summary of the components of total
comprehensive income, net of related income taxes:
<TABLE>
<CAPTION>
1998 1997
------- -------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income $835 $812 $819 $799 $780
Net unrealized gain (loss) on
available-for-sale securities (71) 29 95 103 (122)
Foreign currency translation adjustments (23) (29) (15) 14 (1)
- ------------------------------------------------------------------------------------------
Total comprehensive income $741 $812 $899 $916 $657
- ----------------------------------------------============================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5. During the three-month period ended March 31, 1998, BAC
AVAILABLE-FOR-SALE sold available-for-sale securities for aggregate proceeds
AND HELD-TO-MATURITY of $1,551 million, resulting in gross realized gains of
SECURITIES $170 million and gross realized losses of $7 million.
During the three-month period ended March 31, 1997, BAC
sold available-for-sale securities for aggregate proceeds
of $1,101 million, resulting in gross realized gains of
$28 million and gross realized losses of $8 million.
The fair values and amortized costs of available-for-sale
and held-to-maturity securities were as follows:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
SECURITIES SECURITIES
--------------------- --------------------
FAIR AMORTIZED FAIR AMORTIZED
(IN MILLIONS) VALUE COST VALUE COST
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31, 1998 $12,328 $12,239 $3,675 $3,645
December 31, 1997 12,786 12,557 3,744 3,667
September 30, 1997 12,408 12,251 3,759 3,689
June 30, 1997 11,959 11,959 3,655 3,858
March 31, 1997 11,532 11,701 3,666 3,972
</TABLE>
7
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
At March 31, 1998, securities pledged as collateral related to
secured financing transactions using available-for-sale
securities amounted to $391 million and were reported in
available-for-sale securities.
- --------------------------------------------------------------------------------
NOTE 6. During the first quarter of 1998, BankAmerica Capital IV, a
TRUST PREFERRED trust, all of whose outstanding common securities ($11 million
SECURITIES liquidation amount) are owned by the Parent, issued trust
preferred securities (the Series 4 preferred securities) with
an aggregate liquidation amount of $350 million. The sole
assets of the trust are junior subordinated deferrable interest
debentures issued by the Parent having an aggregate principal
amount of $361 million (the Series 4 debentures). In addition,
the Parent has entered into an expense agreement with the trust
obligating the Parent to pay any costs, expenses or liabilities
of the trust, other than obligations of the trust to pay
amounts due pursuant to the terms of the Series 4 preferred
securities.
The distribution rate for the Series 4 preferred securities
corresponds to the interest rate on the Series 4 debentures,
which is an annual rate of 7%. The interest payment dates are
the last day of March, June, September, and December of each
year. The Parent has the right to defer payment of interest on
the Series 4 debentures at any time or from time to time for an
extension period not exceeding 20 consecutive quarters. During
any such extension period, distributions on the Series 4
preferred securities will also be deferred and the Parent's
ability to pay dividends on its common and preferred stock will
be restricted.
The Series 4 debentures have a stated maturity of March 31,
2028, although the Parent may redeem the Series 4 debentures
prior to stated maturity (i) on or after February 24, 2003, or
(ii) prior to February 24, 2003 upon the occurrence of certain
events relating to the tax treatment of the trust or the Series
4 debentures or relating to the capital treatment of the Series
4 preferred securities, in each case, at a redemption price of
100% of the principal amount plus accrued interest. The Series
4 preferred securities are subject to mandatory redemption upon
repayment of the Series 4 debentures at their stated maturity
date or their earlier redemption at a redemption price equal to
their liquidation amount plus accrued distributions to the date
fixed for redemption.
The Parent has issued a guarantee for the payment of
distributions and payments on liquidation or redemption of the
Series 4 preferred securities, but only to the extent of funds
held by the trust. The guarantee is a junior subordinated
obligation of the Parent.
In the first quarter of 1998, distributions and amortization of
deferred issuance costs on all of the trust preferred
securities totaling $38 million and $0.3 million, respectively,
were included in noninterest expense in the consolidated
statement of operations.
For specific details on other trust preferred securities, refer
to Note 15 on pages 70 and 71 of BAC's 1997 Annual Report to
Shareholders.
8
<PAGE>
================================================================================
NOTE 7. During the first quarter of 1998, BAC's Board of Directors
STOCK REPURCHASE increased the size of its existing stock repurchase
PROGRAM program and extended it through December 1999. The amended
program authorized 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. However, due to the announced decision to merge with
NationsBank, the common stock repurchase program has been
terminated.
During the three months ended March 31, 1998, the Parent
repurchased 8.3 million shares of its common stock under the
amended and prior stock repurchase programs at an average per-
share price of $72.62, which reduced stockholders' equity by
approximately $600 million. There were no preferred stock
redemptions during the first quarter of 1998.
The remaining redemption authority for preferred stock under
the current amended program totaled $0.6 billion at March 31,
1998.
- --------------------------------------------------------------------------------
Note 8. The following is a summary of the components of income tax
INCOME TAXES expense:
<TABLE>
<CAPTION>
1998 1997
------- ---------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES
Federal $369 $168 $382 $359 $370
State and local 80 62 91 86 84
Foreign 91 267 80 95 72
- ------------------------------------------------------------------------------------
$540 $497 $553 $540 $526
- ------------------------------------================================================
</TABLE>
BAC's estimated annual effective income tax rates for the
three-month periods ended March 31, 1998 and 1997 were 39.3
percent and 40.3 percent, respectively. These rates are higher
than the federal statutory tax rate of 35.0 percent due
principally to state income taxes.
- --------------------------------------------------------------------------------
NOTE 9. BAC recorded a pre-tax restructuring charge of $280 million in
RESTRUCTURING the fourth quarter of 1996 as a result of decisions to
CHARGE implement a number of restructurings of its business
activities. The charge covered approximately $196 million for
severance payments, approximately $72 million for premises,
primarily reflecting the planned closure of 120 branches, and
approximately $12 million for other costs affected by the
actions. Due to the announced decision to merge with
NationsBank, management is currently evaluating the projects
relating to these restructurings.
During the first quarter of 1998, 159 positions were reduced
and during 1997, 1,836 positions were reduced. Following is a
summary of changes in the restructuring charge through the
first quarter of 1998:
<TABLE>
<CAPTION>
(IN MILLIONS) SEVERANCE PREMISES OTHER/(a)/ TOTAL
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $73 $34 $5 $112
Payments (17) (5) - (22)
- -------------------------------------------------------------------------------------
Balance at March 31, 1998 $56 $29 $5 $90
- --------------------------------------------=========================================
</TABLE>
/(a)/ Includes equipment write-offs and other miscellaneous costs.
9
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
NOTE 10. The computation of earnings per common share is presented in
EARNINGS PER the tables below.
COMMON SHARE
<TABLE>
<CAPTION>
EARNINGS PER COMMON SHARE
- ----------------------------------------------------------------------------------------------------------------
1998 1997
------- --------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS, FIRST FOURTH THIRD SECOND FIRST
EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER/(a)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON STOCK
Net income $835 $812 $819 $799 $780
Less: Preferred stock dividends 10 14 22 30 34
- ----------------------------------------------------------------------------------------------------------------
825 798 797 769 746
- ----------------------------------------------------------------------------------------------------------------
Average number of common shares
outstanding (in thousands) 684,737 690,878 695,835 701,458 708,585
- ----------------------------------------------------------------------------------------------------------------
Earnings Per Common Share $1.21 $1.15 $1.14 $1.10 $1.05
- ---------------------------------------------------------=======================================================
/(a)/ Restated to reflect a two-for-one stock split effective June 2, 1997.
</TABLE>
<TABLE>
<CAPTION>
DILUTED EARNINGS PER COMMON SHARE
- ----------------------------------------------------------------------------------------------------------------
1998 1997
------- --------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS, FIRST FOURTH THIRD SECOND FIRST
EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER/(a)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON STOCK
Net income $835 $812 $819 $799 $780
Less: Preferred stock dividends 10 14 22 30 34
- ----------------------------------------------------------------------------------------------------------------
825 798 797 769 746
- ----------------------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING USED TO
CALCULATE DILUTED EARNINGS PER COMMON SHARE
(IN THOUSANDS)
Average number of common shares
outstanding (in thousands) 684,737 690,878 695,835 701,458 708,585
Effect of dilutive options and warrants (in thousands) 21,744 23,531 22,549 18,056 18,215
- ----------------------------------------------------------------------------------------------------------------
706,481 714,409 718,384 719,514 726,800
- ----------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Common Share $1.17 $1.12 $1.11 $1.07 $1.03
- ---------------------------------------------------------=======================================================
</TABLE>
/(a)/ Restated to reflect a two-for-one stock split effective June 2, 1997.
- --------------------------------------------------------------------------------
NOTE 11. In the ordinary course of business, BAC enters into various
OFF-BALANCE-SHEET types of transactions that involve credit-related and
TRANSACTIONS 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 foreign exchange,
interest rate, equity, and credit risks.
10
<PAGE>
================================================================================
Credit-Related Financial Instruments
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>
1998 1997
-------- ---------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend credit:
Unutilized credit card lines $38,939 $35,920 $37,222 $38,028 $37,917
Other commitments to extend credit/(a)/118,902 114,771 109,971 106,590 101,128
Standby letters of credit/(b)/ 19,790 18,888 18,305 18,680 18,954
Commercial letters of credit 2,894 2,345 3,354 4,186 3,677
- ------------------------------------------------------------------------------------------
</TABLE>
/(a)/ Represents agreements to extend credit to customers for which BAC may have
received fees. These commitments have specified interest rates and
generally have fixed expiration dates and may be terminated by BAC if
certain conditions of the contract are violated.
/(b)/ Net of participations sold of $3,452 million at March 31, 1998, $3,300
million at December 31, 1997, $3,306 million at September 30, 1997, $2,907
million at June 30, 1997, and $3,102 million at March 31, 1997.
DERIVATIVE FINANCIAL INSTRUMENTS
The tables on page 12 summarize 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. These tables should be read in
conjunction with the descriptions of such products and their
risks included on pages 43 through 49 and 80 through 86 of
BAC's 1997 Annual Report to Shareholders.
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.
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.
11
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
NOTIONAL AND CREDIT RISK AMOUNTS FOR DERIVATIVE FINANCIAL
INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES
---------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
---------------------------- ------------------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/(a)/ AMOUNT RISK/(a)/
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $ 478,193 $ 2,005/(b)/ $ 463,295 $ 1,828/(b)/
Futures and forward rate contracts:
Commitments to purchase 150,128 65 112,562 69
Commitments to sell 148,410 42 145,158 50
Written options 32,391 --/(c)/ 27,191 --/(c)/
Purchased options 44,968 471 36,522 395
- -----------------------------------------------------------------------------------------------------------
TOTAL INTEREST RATE CONTRACTS 854,090 2,583 784,728 2,342
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 596,271 4,225 575,761 6,530
Written options 31,211 --/(c)/ 31,748 --/(c)/
Purchased options 30,282 439 30,330 520
Currency swaps 28,728 1,878 29,063 1,450
- -----------------------------------------------------------------------------------------------------------
TOTAL FOREIGN EXCHANGE CONTRACTS 686,492 6,542 666,902 8,500
STOCK INDEX OPTIONS AND COMMODITY CONTRACTS 5,833 135 4,349 87
CREDIT DERIVATIVE CONTRACTS
Credit default swaps 158 6 -- --
Total rate of return swaps 758 81 -- --
- -----------------------------------------------------------------------------------------------------------
TOTAL CREDIT DERIVATIVE CONTRACTS 916 87 -- --
- -----------------------------------------------------------------------------------------------------------
TOTAL $1,547,331/(d)/ $ 9,347 $1,455,979/(e)/ $ 10,929
- -----------------------------------------------------------------------------------------------------------
</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 $9.3 billion and $0.7
billion, respectively. Foreign exchange contracts in the trading portfolio
include $3.2 billion of intercompany hedging-related contracts.
/(e)/ Interest rate swaps and interest rate options in the trading portfolio
include intercompany hedging-related contracts of $6.5 billion and $0.7
billion, respectively. Foreign exchange contracts in the trading portfolio
include $4.2 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>
MARCH 31, 1998 DECEMBER 31, 1997
--------------------------------------------------
NOTIONAL CREDIT NOTIONAL CREDIT
(IN MILLIONS) AMOUNT RISK/(a)/ AMOUNT RISK/(a)/
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $ 51,281 $ 256 $ 48,704 $167
Futures and forward rate contracts 66,270 -- 89,650 --
Purchased options 17,727 24 17,959 49
- -----------------------------------------------------------------------------------------
TOTAL INTEREST RATE CONTRACTS 135,278 280 156,313 216
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts 7,038 -- 3,756 --
Currency swaps 756 -- 771 --
- -----------------------------------------------------------------------------------------
TOTAL FOREIGN EXCHANGE CONTRACTS 7,794 -- 4,527 --
- -----------------------------------------------------------------------------------------
TOTAL $143,072/(b)/ $ 280 $160,840/(c)/ $216
- -----------------------------------------------------------------------------------------
</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
$9.3 billion and $0.7 billion, respectively. Foreign exchange contracts in
the asset and liability management portfolio include $3.2 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
$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.
12
<PAGE>
================================================================================
The tables on page 14 summarize the average and period-end fair
values of each significant class of derivative financial
instrument outstanding in BAC's trading portfolio and the
period-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.
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. For a detailed description of
BAC's asset and liability management objectives and strategies
used to achieve those objectives, refer to pages 84 through 86
of BAC's 1997 Annual Report to Shareholders.
The expected maturities and weighted average interest rates
associated with BAC's asset and liability management interest
rate swap portfolio at March 31, 1998 were not significantly
different from those at year-end 1997.
13
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
================================================================================
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED
FOR TRADING PURPOSES
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
------------------------------------- -----------------------------------
Average Average
Fair Value Fair Value
For the Period-End for the Year-End
(in millions) Period Ended/(ab)/ Fair Value/(b)/ Year Ended/(ab)/ Fair Value/(b)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps:
Assets $ 2,083 $ 2,005 $ 2,280 $ 1,828
Liabilities (1,772) (1,930) (1,999) (1,603)
Futures and forward rate contracts:
Assets 90 107 150 119
Liabilities (57) (76) (131) (78)
Written options (253) (229) (283) (302)
Purchased options 324 471 303 395
- ----------------------------------------------------------------------------------------------------------------
TOTAL INTEREST RATE CONTRACTS 415 348 320 359
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts:
Assets 5,397 4,225 4,454 6,530
Liabilities (5,154) (4,537) (4,370) (6,521)
Written options (655) (621) (640) (731)
Purchased options 427 439 504 520
Currency swaps:
Assets 1,619 1,878 1,154 1,450
Liabilities (1,268) (1,284) (962) (1,199)
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN EXCHANGE CONTRACTS 366 100 140 49
STOCK INDEX OPTIONS AND COMMODITY CONTRACTS
Assets 122 135 67 87
Liabilities (91) (95) (61) (68)
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCK INDEX OPTIONS AND
COMMODITY CONTRACTS 31 40 6 19
CREDIT DERIVATIVE CONTRACTS
Credit default swaps:
Assets 2 6 -- --
Liabilities -- -- -- --
Total rate of return swaps:
Assets -- 81 -- --
Liabilities (7) (21) -- --
- ----------------------------------------------------------------------------------------------------------------
TOTAL CREDIT DERIVATIVE CONTRACTS (5) 66 -- --
- ----------------------------------------------------------------------------------------------------------------
TOTAL $ 807 $ 554 $ 466 $ 427
- ----------------------------------------------------------------------------------------------------------------
</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 through 88 of BAC's
1997 Annual Report to Shareholders.
<TABLE>
<CAPTION>
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED
FOR ASSET AND LIABILITY MANAGEMENT PURPOSES
- ----------------------------------------------------------------------------------------------------------------
(IN MILLIONS) MARCH 31, 1998/(ab)/ DECEMBER 31, 1997/(ab)/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swaps $(328) $(325)
Futures and forward rate contracts (6) (16)
Purchased options 25 42
- ----------------------------------------------------------------------------------------------------------------
TOTAL INTEREST RATE CONTRACTS (309) (299)
FOREIGN EXCHANGE CONTRACTS
Spot, forward, and futures contracts - -
Currency swaps (135) (133)
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN EXCHANGE CONTRACTS (135) (133)
TOTAL $(444) $(432)
- ----------------------------------------------------------------------------====================================
</TABLE>
(a) For a description of fair value methodologies, refer to Note 26 of the Notes
to Consolidated Financial Statements on pages 86 through 88 of BAC's 1997
Annual Report to Shareholders.
(b) Bracketed amounts reflect net liability positions.
14
<PAGE>
================================================================================
NOTE 12. Trading income represents the net amount earned from BAC's
TRADING ACTIVITIES 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. This table should be read
in conjunction with the description of such products
included on page 84 of BAC's 1997 Annual Report to
Shareholders.
<TABLE>
<CAPTION>
TRADING-RELATED INCOME
- --------------------------------------------------------------------------------
1998 1997
------- ------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRADING INCOME
Interest rate products $ 45 $ (28) $ 24 $ 17 $ 12
Foreign exchange contracts 158 139 106 107 92
Debt instruments 48 (48) 93 94 84
- --------------------------------------------------------------------------------
$ 251 $ 63 $ 223 $ 218 $ 188
- -----------------------------===================================================
OTHER TRADING-RELATED INCOME
Interest rate products(a) $ 6 $ 15 $ 6 $ 12 $ 10
Foreign exchange contracts 2 -- 1 2 4
Debt instruments(a) 88 73 49 47 50
- --------------------------------------------------------------------------------
$ 96 $ 88 $ 56 $ 61 $ 64
- -----------------------------===================================================
</TABLE>
(a) Primarily includes the net interest revenue associated with the respective
products.
During the three-month periods ended March 31, 1998 and 1997,
trading income included net unrealized holding gains on trading
securities of $20 million and $6 million, respectively. These
amounts exclude the net unrealized trading results of the
Parent's securities broker/dealer subsidiary (Section 20
subsidiary).
For secured financing transactions, BAC reports securities
received as collateral in other assets and the corresponding
obligation to return the securities in other liabilities. At
March 31, 1998, these securities amounted to $1,402 million. At
March 31, 1998, securities provided as collateral related to
secured financing transactions using trading securities
amounted to $1,847 million and were reported in trading account
assets.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
=============================================================================================================================
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997
-------- -------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER QUARTER/A/
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 4,403 $ 4,422 $ 4,466 $ 4,375 $ 4,255
Interest expense 2,308 2,300 2,257 2,165 2,066
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 2,095 2,122 2,209 2,210 2,189
Provision for credit losses 245 220 260 250 220
Noninterest income 1,813 1,616 1,655 1,426 1,370
Noninterest expense 2,288 2,209 2,232 2,047 2,033
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,375 1,309 1,372 1,339 1,306
Provision for income taxes 540 497 553 540 526
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 835 $ 812 $ 819 $ 799 $ 780
- ---------------------------------------------------------------===============================================================
PER SHARE DATA
Earnings per common share $ 1.21 $ 1.15 $ 1.14 $ 1.10 $ 1.05
Diluted earnings per common share 1.17 1.12 1.11 1.07 1.03
Dividends declared per common share 0.345 0.305 0.305 0.305 0.305
- ------------------------------------------------------------------------------------------------------------------------------
STOCK DATA
Book value per common share at period end $ 28.23 $ 27.94 $ 27.51 $ 26.88 $ 26.25
Common stock price range:
High 87 1/8 81 15/16 77 7/8 69 61 7/8
Low 75 66 1/4 64 9/16 49 9/16 47 11/16
Closing common stock price 82 5/8 73 73 5/16 64 9/16 50 7/16
Average number of common shares
outstanding (in thousands) 684,737 690,878 695,835 701,458 708,585
Average number of diluted common shares
outstanding (in thousands) 706,481 714,409 718,384 719,514 726,800
Number of common shares outstanding at period
end (in thousands) 682,704 688,057 693,468 698,407 704,708
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Loans $165,520 $168,104 $168,009 $170,161 $168,443
Total assets 265,436 260,159 257,520 258,363 249,904
Deposits 173,890 172,037 171,413 173,168 168,999
Long-term debt 14,011 13,922 14,198 14,736 14,725
Common equity 19,270 19,223 19,078 18,772 18,501
Total equity 19,884 19,837 19,926 20,368 20,097
- ------------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Expense to revenue/b/ 55.41% 53.53% 52.79% 52.93% 53.53%
Rate of return (based on net income) on:
Average common equity 17.89 16.69 16.82 16.73 16.50
Average total equity 17.52 16.05 16.23 15.99 15.70
Average total assets 1.28 1.25 1.26 1.26 1.25
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS
Ratio of common equity to total assets 7.26% 7.39% 7.41% 7.27% 7.40%
Ratio of total equity to total assets 7.49 7.62 7.74 7.88 8.04
Ratio of average total equity to average total assets 7.33 7.82 7.78 7.86 7.99
- ------------------------------------------------------------------------------------------------------------------------------
</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/ Excludes net other real estate owned expense, amortization of intangibles,
expenses associated with trust preferred securities, a third-quarter 1997
gain of $246 million on the sale of Security Pacific Financial Services,
Inc., charges of approximately $112 million incurred in the third quarter of
1997 associated with the decision to exit Midwest retail facilities and
expenses connected with multiple legal matters, writedowns on corporate real
estate, and contributions to the BankAmerica Foundation totaling $140
million.
16
<PAGE>
HIGHLIGHTS
================================================================================
On April 13, 1998, BankAmerica Corporation and subsidiaries
(BAC) and NationsBank Corporation (NationsBank) announced a
definitive agreement to merge in a stock-for-stock transaction.
For more information on the merger, refer to Note 2 of the
Notes to Consolidated Financial Statements on page 6. In
addition, on April 13, 1998, BAC announced an agreement to sell
BankAmerica Housing Services. Each transaction is subject to
the satisfaction or waiver of certain conditions, and there can
be no assurance that the transactions will be consummated.
The following is a summary of first-quarter 1998 financial
information for BAC.
. BAC reported first-quarter 1998 diluted earnings per
common share of $1.17, an increase of 14 percent from
$1.03 for the same period a year ago. Net income for the
first quarter of 1998 was $835 million, up 7 percent from
$780 million for the first quarter of 1997.
. The return on average common equity was 17.89 percent, an
increase of 139 basis points from the amount reported in
the first quarter of 1997.
. BAC continued to effectively manage its capital through
the following activities in the first quarter of 1998:
-- Securitized $750 million of credit card receivables;
-- Sold $6.3 billion of residential first mortgages;
-- Issued $350 million of trust preferred securities;
-- Announced the intention to sell its consumer branch
and small business operations in Texas. However, given
the position that NationsBank has in Texas, BAC will
stop the sale and will look at how to integrate the
combined operations.
-- Extended its stock repurchase program by authorizing
the repurchase of an additional $3.5 billion of common
stock and the redemption of an additional $450 million
of preferred stock by the end of 1999. However, due to
the announced decision to merge with NationsBank, the
common stock repurchase program has been terminated.
. Net interest income was down $94 million from the first
quarter of 1997. BAC's net interest margin for the first
quarter of 1998 was 3.84 percent, down 33 basis points
from the comparable period a year ago.
. Noninterest income for the first quarter of 1998 was
$1,813 million, an increase of $443 million, or 32
percent, from the first quarter of 1997. The first-quarter
1998 amount included the results from the businesses
acquired with Robertson Stephens during the fourth quarter
of 1997.
. Noninterest expense for the first quarter of 1998 was
$2,288 million, an increase of $255 million from the first
quarter of 1997. This increase included the results
associated with the Robertson Stephens businesses.
17
<PAGE>
================================================================================
. Nonaccrual assets were $1,036 million at March 31,
1998, an increase of $137 million, or 15 percent, from
their December 31, 1997 level. This increase was
primarily associated with borrowers in Asian countries.
. The provision for credit losses was $245 million for the
first quarter of 1998, up $25 million from the previous
quarter and from the first quarter of 1997. Net credit
losses were $239 million for the first quarter of 1998, an
increase of $35 million from the first quarter of 1997.
. In connection with BAC's ongoing efforts to effectively
manage capital, BAC repurchased 8.3 million shares of its
common stock during the first quarter of 1998 at an
average per-share price of $72.62, which reduced
stockholders' equity by approximately $600 million. Due to
the announced decision to merge with NationsBank, the
common stock repurchase program has been terminated.
18
<PAGE>
================================================================================
BUSINESS The business sector information is being presented in a format
SECTORS that is different compared to previous quarters. The sectors
now reflect the new organizational structure announced in 1997.
In addition, the financial information has been expanded to
include all performance measures used internally to evaluate
business performance.
BAC examines the financial performance of its businesses from
multiple capital return perspectives to facilitate meeting
various decision support needs of managers. Each measure
reflects different levels of capital, treatment of intangible
assets, and bases for recognition of credit losses. The key
return on capital measures are:
- Return on Avg. Common Equity-- This is a method of
performance measurement where all of average common equity
is allocated to businesses on the basis of their relative
share of BAC's total assets and an apportionment of the
corporate provision and reserve for credit losses. Income is
derived in a manner consistent with externally reported
financial statement results. This measure is oriented toward
external performance comparisons and does not allocate
capital based on the risks inherent in a specific business.
Net interest margin and expense to revenue ratios for a
business are derived under this perspective.
- Risk Adjusted Return on Capital (RAROC)-- This is a method
of performance measurement where economic capital is
allocated to businesses on the bases of credit, country,
market/interest rate, and business/operating risks. The
assignments are based on empirical analysis of the risks
that are inherent in the operation of each business. Credit
losses reflect the statistically derived expected losses
within a given portfolio. Goodwill is not amortized in
deriving this measure. This measure includes only the
capital necessary to cover the risks of unexpected losses,
and represents that which is incrementally attributable to
businesses for individual transactions. RAROC is most often
used for incremental decision analysis.
- Return on Invested Capital (ROIC)-- ROIC is an all-in
return concept based on a quasi-cash derivation of net
income. Credit losses in this measure are represented by
net charge-offs and goodwill is not amortized. Under this
method of performance measurement, BAC invested capital is
defined as common equity plus the tax-effected loan loss
reserve. Invested capital is allocated to businesses based
on risk based economic capital as assigned through the
RAROC process described above and increased by an
additional allocation based on the intangible assets
assigned to a business. Capital is thereby assumed to
cover unexpected losses plus an amount of capital
necessary to fully fund businesses grown through
acquisition. This measure enables managers to evaluate
their overall business performance on a comprehensive,
fully allocated basis that is oriented toward cash flows.
Net interest income is adjusted for each return calculation to
reflect changes in the debt to equity mix under each measure.
Economic Profit, which reflects net income available to common
shareholders less a 12 percent charge for the cost of capital,
is calculated for the RAROC and ROIC measurements.
19
<PAGE>
BUSINESS SECTORS
<TABLE>
<CAPTION>
==============================================================================================================================
SELECTED BUSINESS SECTOR DATA
- ------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1998/a/
----------------------------------------------------------------------------------------
GLOBAL RETAIL BANK GLOBAL WHOLESALE BANK
------------------------------------------------ ------------------------------------
TOTAL
GLOBAL
CONSUMER MIDDLE PRIVATE RETAIL U.S. &
(DOLLAR AMOUNTS IN MILLIONS) BANKING MARKET BANKING BANK CANADA ASIA EMEA/b/
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
KEY MEASURES
ROIC economic profit/c/ $ 96 $ 42 $ 7 $ 145 $ 83 $ 8 $ 7
ROIC return on invested capital/c/ 16.4% 20.5% 17.9% 17.2% 18.1% 15.1% 15.5%
RAROC economic profit/c/ $ 169 $ 44 $ 9 $ 222 $ 92 $ 37 $ (3)
RAROC risk adj. return on capital/c/ 23.1% 23.7% 23.4% 23.2% 20.5% 25.0% 11.1%
Return on avg. common equity/c/ 23.9 20.5 20.3 23.0 17.9 (1.0) 10.7
Expense/revenue/d/ 58.1 43.0 65.7 56.6 50.6 50.4 67.5
Net interest margin 5.18 4.15 2.86 5.42 2.25 2.29 1.52
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net interest income $ 1,315 $ 241 $ 52 $ 1,608 $ 303 $ 111 $ 66
Noninterest income 773 71 63 907 524 107 94
Noninterest expense (1,308) (146) (81) (1,535) (431) (111) (109)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR CREDIT
LOSSES AND INCOME TAXES 780 166 34 980 396 107 51
Provision for credit losses (117) 1 1 (115) (13) (111) 9
Income taxes (284) (67) (14) (365) (158) 1 (19)
- ------------------------------------------------------------------------------------------------------------------------------
Net income 379 100 21 500 225 (3) 41
- ------------------------------------------------------------------------------------------------------------------------------
Net preferred/e/ (4) (1) -- (5) (3) (1) (1)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 375 $ 99 $ 21 $ 495 $ 222 $ (4) $ 40
- --------------------------------------========================================================================================
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $ 78,308 $ 23,234 $ 5,067 $ 106,609 $ 37,390 $ 11,404 $ 4,633
Total assets 86,536 26,541 5,514 118,591 68,381 22,116 20,955
Deposits 100,789 10,119 7,255 118,163 19,730 12,831 15,744
Common equity 6,349 1,948 405 8,702 5,019 1,623 1,538
RAROC economic capital/c/ 6,176 1,544 336 8,056 4,376 1,204 971
ROIC invested capital/c/ 8,889 2,013 506 11,408 5,497 1,239 972
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998/a/
- --------------------------------------------------------------------------------------
GLOBAL WHOLESALE BANK
----------------------
TOTAL
GLOBAL
LATIN WHOLESALE ALL TOTAL
(DOLLAR AMOUNTS IN MILLIONS) AMERICA BANK OTHER BAC
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEY MEASURES
ROIC economic profit/c/ $ 42 $ 140 $ (13) $ 272
ROIC return on invested capital/c/ 35.5% 18.9% NM 17.3%
RAROC economic profit/c/ $ 40 $ 166 $ (8) $ 380
RAROC risk adj. return on capital/c/ 34.6% 21.4% NM 21.5%
Return on avg. common equity/c/ 27.5 14.2 NM 17.9
Expense/revenue/d/ 31.1 50.6 NM 55.4
Net interest margin 4.19 2.45 NM 3.84
- --------------------------------------------------------------------------------------
OPERATING RESULTS
Net interest income $ 92 $ 572 $ (85) $ 2,095
Noninterest income 44 769 137 1,813
Noninterest expense (42) (693) (60) (2,288)
- --------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR CREDIT
LOSSES AND INCOME TAXES 94 648 (8) 1,620
Provision for credit losses (15) (130) -- (245)
Income taxes (21) (197) 22 (540)
- --------------------------------------------------------------------------------------
Net income 58 321 14 835
- --------------------------------------------------------------------------------------
Net preferred/e/ -- (5) -- (10)
- --------------------------------------------------------------------------------------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 58 $ 316 $ 14 $ 825
- --------------------------------------================================================
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $ 6,017 $ 59,444 $ 1,299 $ 167,352
Total assets 11,399 122,851 22,085 263,527
Deposits 1,969 50,274 3,243 171,680
Common equity 837 9,017 985 18,704
RAROC economic capital/c/ 729 7,280 840 16,176
ROIC invested capital/c/ 735 8,443 992 20,843
- --------------------------------------------------------------------------------------
</TABLE>
/a/ For comparability purposes, both 1998 and 1997 amounts reflect BAC's
internal allocation and classification methodologies, adjusted for
residuals, at March 31, 1998.
/b/ Europe, Middle East, and Africa.
/c/ See page 19 for more detailed description on method of performance
measurement.
GLOBAL RETAIL BANK
Consumer Banking -- Consumer Banking's net income available to
common shareholders for the first three months of 1998
increased $75 million, or 25 percent, from the same period last
year. The first quarter of 1997 results include certain lines
of business (Hawaii, Mid-west retail, and indirect consumer
lending) that have been exited since the first quarter of 1997.
Net interest income declined $109 million from the first
quarter of 1997, due to sales of residential first mortgages,
securitizations of credit card receivables and manufactured
housing loans, and exited businesses. Noninterest income
increased $69 million due to higher loan servicing revenues and
gains on loan sales. The noninterest expense increase of $14
million reflects higher people development and training
expenses offset partially by exited businesses. A $170 million
decrease in the provision for credit losses is attributable to
securitizations of credit card receivables and manufactured
housing loans, and exited businesses. Average loans decreased
$6.3 billion, or 8 percent, from the first quarter of 1997,
reflecting the securitizations of credit card receivables and
manufactured housing loans, and the sale of residential first
mortgages.
20
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 1997/a/
----------------------------------------------------------------------------------------------
GLOBAL RETAIL BANK GLOBAL WHOLESALE BANK
---------------------------------------------- ------------------------------------------
TOTAL
GLOBAL
CONSUMER MIDDLE PRIVATE RETAIL U.S. &
(DOLLAR AMOUNTS IN MILLIONS) BANKING MARKET BANKING BANK CANADA ASIA EMEA/b/
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
KEY MEASURES
ROIC economic profit/c/ $ 97 $ 36 $ 3 $ 136 $ 57 $ 11 $ 27
ROIC return on invested capital/c/ 15.9% 19.3% 14.5% 16.4% 16.7% 16.9% 23.9%
RAROC economic profit/c/ $ 159 $ 41 $ 7 $ 207 $ 62 $ 9 $ 24
RAROC risk adj. return on
capital/c/ 21.7% 23.3% 21.6% 22.0% 18.6% 16.0% 22.4%
Return on avg. common equity/c/ 17.6 22.6 18.3 18.6 18.9 12.8 15.2
Expense/revenue/d/ 55.9 42.9 66.2 54.8 43.1 57.1 55.0
Net interest margin 6.01 4.39 2.65 6.14 2.43 1.89 1.96
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net interest income $ 1,424 $ 232 $ 47 $ 1,703 $ 293 $ 88 $ 72
Noninterest income 704 54 53 811 332 80 97
Noninterest expense (1,294) (131) (72) (1,497) (298) (97) (94)
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR CREDIT
LOSSES AND INCOME TAXES 834 155 28 1,017 327 71 75
Provision for credit losses (287) 14 -- (273) 33 8 (1)
Income taxes (237) (68) (11) (316) (149) (29) (19)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 310 101 17 428 211 50 55
- ----------------------------------------------------------------------------------------------------------------------------------
Net preferred/e/ (10) (2) -- (12) (5) (1) (1)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 300 $ 99 $ 17 $ 416 $ 206 $ 49 $ 54
- ------------------------------------==============================================================================================
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $ 84,575 $ 21,114 $ 4,571 $ 110,260 $ 35,634 $ 10,514 $ 5,124
Total assets 94,794 24,401 5,085 124,280 60,452 21,547 19,228
Deposits 97,255 9,398 7,301 113,954 19,706 12,678 14,407
Common equity 6,910 1,779 371 9,060 4,406 1,571 1,402
RAROC economic capital/c/ 6,610 1,454 305 8,369 3,783 884 818
ROIC invested capital/c/ 9,918 2,011 505 12,434 4,932 924 819
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997/a/
-----------------------------------------------
GLOBAL WHOLESALE BANK
----------------------
TOTAL
GLOBAL
LATIN WHOLESALE ALL TOTAL
(DOLLAR AMOUNTS IN MILLIONS) AMERICA BANK OTHER BAC
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
KEY MEASURES
ROIC economic profit/c/ $ 37 $ 132 $ (70) $ 198
ROIC return on invested capital/c/ 42.0% 19.3% NM 16.0%
RAROC economic profit/c/ $ 33 $ 128 $ (69) $ 266
RAROC risk adj. return on capital/c/ 39.2% 20.4% NM 19.1%
Return on avg. common equity/c/ 37.5 18.5 NM 16.5
Expense/revenue/d/ 30.2 45.7 NM 53.5
Net interest margin 4.83 2.54 NM 4.17
- ------------------------------------------------------------------------------------
OPERATING RESULTS
Net interest income $ 86 $ 539 $ (53) $ 2,189
Noninterest income 30 539 20 1,370
Noninterest expense (35) (524) (12) (2,033)
- ------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR CREDIT
LOSSES AND INCOME TAXES 81 554 (45) 1,526
Provision for credit losses 12 52 1 (220)
Income taxes (33) (230) 20 (526)
- ------------------------------------------------------------------------------------
Net income 60 376 (24) 780
- ------------------------------------------------------------------------------------
Net preferred/e/ (1) (8) (14) (34)
- ------------------------------------------------------------------------------------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 59 $ 368 $ (38) $ 746
- -------------------------------------===============================================
SELECTED AVERAGE BALANCE
SHEET COMPONENTS
Loans $ 4,615 $ 55,887 $ 382 $ 166,529
Total assets 8,832 110,059 17,766 252,105
Deposits 1,387 48,178 4,359 166,491
Common equity 644 8,023 1,241 18,324
RAROC economic capital/c/ 489 5,974 900 15,243
ROIC invested capital/c/ 495 7,170 834 20,438
- ------------------------------------------------------------------------------------
</TABLE>
/d/ Excludes net other real estate owned expense, amortization of intangibles,
and expenses associated with trust preferred securities.
/e/ Net preferred represents the incremental cost of preferred dividends, and
the allocation of trust preferred securities and subordinated debt, net of
funding and tax effects.
Middle Market Banking -- Net income available to common
shareholders for the first quarter of 1998 was flat from the
same period last year at $99 million, and reflects higher
noninterest income from financial management fees, offset by an
increase in noninterest expense. Additionally, in the first
quarter of 1997, the credit provision included higher
recoveries. RAROC and ROIC economic profit increased slightly
from the first quarter of 1997, reflecting the higher income
before provision for credit losses and income taxes.
Private Banking -- Private Banking's net income available to
common shareholders increased slightly by $4 million, or 24
percent for the first quarter of 1998 from the same period a
year ago, due to loan growth and an increase in trust fee
revenue.
GLOBAL WHOLESALE BANK
US & Canada -- US & Canada's net income available to common
shareholders for the first three months of 1998 increased $16
million, or 8 percent, from the same period a year ago.
Noninterest income increased $192 million due to businesses
acquired from Robertson Stephens during the fourth quarter of
1997, better performance in capital markets, higher financial
management fees, and increased equity investment activities.
Noninterest expense increased by $133 million due to the
Robertson Stephens businesses and higher variable pay related
to improved trading results. The provision for credit losses
increased $46 million as recoveries were lower than last
21
<PAGE>
================================================================================
year's levels. RAROC and ROIC economic profit increased as
higher income before provision for credit losses and income
taxes exceeded higher capital assignments due to the businesses
acquired from Robertson Stephens and capital markets
activities.
Asia -- Asia's net income available to common shareholders for
the first quarter of 1998 decreased by $53 million from the
same period last year, primarily resulting from an increase of
$119 million in the provision for credit losses, partially
offset by higher net interest income. Economic and invested
capital assignments were increased substantially in response to
the financial problems in the Asian economies. RAROC economic
profit increased as higher income before provision for credit
losses and income taxes exceeded the increased capital
assignment.
Europe, Middle East and Africa (EMEA) -- Net income available
to common shareholders for the first quarter of 1998 decreased
by $14 million, or 26 percent, from the same period a year ago.
The first quarter of 1998 results decreased primarily due to
higher interest recoveries and gains on asset sales in the
first quarter of 1997. However, the first quarter of 1998
included higher capital markets trading results partially
offset by associated variable pay as compared to the same
period last year.
Latin America- Latin America's results for the first three
months of 1998 remained fairly stable from the same period a
year ago.
ALL OTHER
This sector includes the results of Asset and Liability
Management (investment securities, federal funds bought and
sold), along with Asset Management Group, Community Development
Banking, and residual income and expenses related to the
institutional trust business, which BAC had substantially
divested in 1996. Also included is the impact of
reclassifications between financial statement categories made
for internal reporting purposes.
Net income available to common shareholders for the first three
months of 1998 increased $52 million primarily because 1997
included $14 million of realized losses from available-for-sale
securities and 1998 included $59 million of realized gains.
RESULTS OF OPERATIONS
================================================================================
NET INTEREST Taxable-equivalent net interest income for the first quarter
INCOME of 1998 was $2,100 million down $95 million from the
same period of 1997. The decrease primarily resulted from
growth in credit card securitizations and continued higher
funding costs. Excluding the effects of credit card
securitizations, taxable-equivalent net interest income would
have decreased $31 million from the first quarter of 1997.
Average earning assets totaled $219.9 billion for the first
quarter of 1998, up $8.3 billion from the same period in 1997.
The increase was largely attributable to trading account assets
which rose $3.7 billion from the first quarter of 1997. In
addition, securities purchased under resale agreements rose
$2.6 billion from the first quarter of 1997.
BAC's net interest margin for the first quarter of 1998 was
3.84 percent, down 33 basis points from the comparable period a
year ago. The yield on average earning assets decreased 3 basis
points from the same period a year ago. This decrease was
primarily due to lower prevailing market rates and an increase
in lower yielding assets. The cost of
22
<PAGE>
================================================================================
AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST QUARTER 1998 FIRST QUARTER 1997
------------------------------- -------------------------------
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ RATE/b/ BALANCE/a/ INTEREST/b/ RATE/b/
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 6,481 $ 108 6.75% $ 6,069 $ 99 6.63%
Federal funds sold 582 8 5.76 591 8 5.30
Securities purchased under resale agreements 11,982 233 7.90 9,361 155 6.73
Trading account assets 17,034 385 9.16 13,358 269 8.18
Available-for-sale securities/(c,d)/ 12,817 219 6.86 11,595 203 7.04
Held-to-maturity securities/d/ 3,622 66 7.33 4,108 86 8.40
Domestic loans:
Consumer-residential first mortgages 31,217 562 7.20 37,076 686 7.40
Consumer-residential junior mortgages 14,775 306 8.39 14,775 309 8.48
Consumer-credit card 6,418 223 13.91 8,399 305 14.54
Other consumer 20,678 479 9.40 19,788 480 9.84
Commercial and industrial/e/ 38,428 722 7.62 34,935 662 7.69
Commercial loans secured by real estate 12,928 283 8.74 12,429 275 8.86
Financial institutions 3,419 39 4.65 2,942 32 4.47
Lease financing 2,858 39 5.56 2,729 37 5.56
Loans for purchasing or carrying securities 2,435 50 8.39/g/ 1,751 30 6.85
Construction and development loans
secured by real estate 2,285 61 10.77 2,266 66 11.78
Agricultural 1,701 37 8.75 1,562 35 8.96
Other 1,779 26 5.90 1,288 20 6.01
-------- ------ -------- ------
Total domestic loans/e/ 138,921 2,827 8.21 139,940 2,937 8.46
Foreign loans 28,431 562 8.03 26,589 504 7.68
-------- ------ -------- ------
Total loans/(c,e)/ 167,352 3,389 8.18 166,529 3,441 8.33
-------- ------ -------- ------
Total earning assets/e/ 219,870 $4,408 8.10 211,611 $4,261 8.13
====== ======
Nonearning assets/e/ 47,185 44,042
Less: Allowance for credit losses 3,528 3,548
-------- --------
TOTAL ASSETS $263,527 $252,105
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 5,277 $ 21 1.57% $ 7,131 $ 24 1.38%
Savings 10,739 53 2.02 12,158 61 2.02
Money market 48,739 284 2.37 34,608 255 2.99
Time 30,555 420 5.58 29,974 400 5.41
-------- ------ -------- ------
Total domestic interest-bearing deposits 95,310 778 3.31 83,871 740 3.58
Foreign interest-bearing deposits:
Banks located in foreign countries 12,474 200 6.49 13,089 180 5.59
Governments and official institutions 10,067 142 5.69 10,668 137 5.22
Time, savings, and other 22,060 369 6.78 20,945 309 5.99
-------- ------ -------- ------
Total foreign interest-bearing deposits 44,601 711 6.46 44,702 626 5.69
-------- ------ -------- ------
Total interest-bearing deposits 139,911 1,489 4.31 128,573 1,366 4.31
Federal funds purchased 1,994 27 5.49 1,054 13 5.10
Securities sold under repurchase agreements 13,969 251 7.29 9,925 149 6.07
Other short-term borrowings 18,777 293 6.33 17,999 275 6.20
Long-term debt 13,683 248 7.36 15,606 263 6.83
-------- ------ -------- ------
Total interest-bearing liabilities 188,334 $2,308 4.97 173,157 $2,066 4.84
====== ======
Domestic noninterest-bearing deposits 30,292 36,342
Foreign noninterest-bearing deposits 1,477 1,576
Other noninterest-bearing liabilities 22,097 19,106
-------- --------
Total liabilities 242,200 230,181
Trust preferred securities/f/ 2,009 1,784
Stockholders' equity 19,318 20,140
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $263,527 $252,105
======== ========
Interest income as a percentage of average earning assets/e/ 8.10% 8.13%
Interest expense as a percentage of average earning assets/e/ (4.26) (3.96)
---- ----
NET INTEREST MARGIN/e/ 3.84% 4.17%
==== ====
- -------------------------------------------------------------------------------------------------------------------------------
</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
39 percent for 1998 and 40 percent for 1997.
/c/Average balances include nonaccrual assets.
/d/Refer to the table on page 27 of the Balance Sheet Review section for more
detail on available-for-sale and held-to-maturity securities.
/e/Certain amounts in prior periods have been reclassified to conform to the
presentation in the current year.
/f/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.
/g/Rates reflect an increase in fees during the first quarter of 1998 as
compared to the first quarter of 1997.
23
<PAGE>
================================================================================
funds for the first quarter of 1998 increased from the same
period a year ago primarily due to higher rates on federal
funds purchased, securities sold under repurchase agreements,
and other short-term borrowings. 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.
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 $25 million in the first quarter of
1998, compared with an approximate decrease of $20 million in
the corresponding period of 1997.
- --------------------------------------------------------------------------------
Noninterest Noninterest income for the first quarter of 1998 was $1,813
Income million, an increase of $443 million, or 32 percent, from the
comparable period in 1997. The increase reflected growth in
almost all categories of noninterest income.
================================================================================
Noninterest Income
- --------------------------------------------------------------------------------
First Quarter
-----------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
FEES AND COMMISSIONS
Deposit account fees:
Retail $ 251 $ 271
Commercial 87 89
Credit and other card fees 91 87
Trust fees 75 57
Other fees and commissions:
Loan fees and charges 166 133
Off-balance-sheet credit-related instrument fees 73 77
Financial services fees 82 37
Mutual fund and annuity commissions 23 26
Other 218 102
- --------------------------------------------------------------------------------
1,066 879
- --------------------------------------------------------------------------------
TRADING INCOME 251 188
- --------------------------------------------------------------------------------
OTHER NONINTEREST INCOME
Equity investment activities 190 106
Net gain on sales of loans 115 59
Net gain on available-for-sale debt securities 61 13
Net gain on sales of subsidiaries and operations 20 13
Other income 110 112
- --------------------------------------------------------------------------------
496 303
- --------------------------------------------------------------------------------
$1,813 $1,370
- ---------------------------------------------------------------=================
Fees and commissions, the largest component of noninterest
income, was up $187 million, or 21 percent, from the same
period a year ago, reflecting BAC's continued expansion of its
fee-generating activities. Revenues earned from financial
services fees rose $45 million from the first quarter of 1997,
mainly attributable to higher revenues from syndication and
brokerage services. In addition, the growth was partially due
to the Robertson Stephens businesses acquired during the
fourth quarter of 1997. Loan fees and charges, which are
reported net of amortization expense and valuation adjustments
on servicing assets, increased $33 million from the first
quarter of 1997. The
24
<PAGE>
================================================================================
increase was primarily due to higher loan servicing fees from
growth in credit card securitizations, partially offset by
higher valuation adjustments on the mortgage servicing assets
portfolio. The growth in the "other" component of other fees
and commissions of $116 million was largely associated with
the Roberston Stephens businesses, which resulted in higher
revenues from investment banking and underwriting fees as well
as from brokerage commissions. Furthermore, the growth in
investment banking and underwriting fees reflected higher
trading profits on corporate syndication bonds.
Trading income increased $63 million, or 34 percent, in the
first quarter of 1998 from the comparable quarter a year ago
and was primarily attributable to trading activities in
foreign exchange. In addition, the overall increase in trading
income continued to be impacted by volatile overseas markets.
Trading income includes fair value adjustments on defaulted
contracts, valuation adjustments on emerging markets
securities, and a reserve to cover counterparty risk for
certain derivative contracts. For more information on the
functional components of trading income, refer to Note 12 of
the Notes to Consolidated Financial Statements on page 15.
Other noninterest income rose $193 million, or 64 percent, in
the first quarter of 1998, representing higher income related
to equity investment activities, net gain on sales of loans,
and net gain on available-for-sale debt securities.
Noninterest income related to equity investment activities
increased $84 million from first-quarter 1997 due primarily to
higher realized capital gains on equity securities. Net gain
on sales of loans increased by $56 million compared to the
same period last year, largely due to growth in sales of
residential first mortgages and securitizations of
manufactured housing loans. Net gain on available-for-sale
debt securities increased $48 million in the first quarter of
1998 in comparison to the corresponding period last year.
- --------------------------------------------------------------------------------
Noninterest Noninterest expense for the first quarter of 1998 was $2,288
Expense million, up $255 million, or 13 percent, from the
corresponding period a year ago. The increase largely
reflected higher personnel expense and other noninterest
expense.
Personnel expense, the largest component of noninterest
expense, increased $201 million, or 20 percent, from first-
quarter 1997. The increase in personnel expense was primarily
associated with the Robertson Stephens businesses. In
addition, the increase included higher variable pay related to
improved trading results. BAC's staff level on a full-time-
equivalent (FTE) basis was approximately 76,500 at March 31,
1998, down from approximately 77,300 at March 31, 1997. FTE is
a measurement equal to one full-time employee working a
standard day. BAC had approximately 89,900 employees, both
full-time and part-time, at March 31, 1998, down from
approximately 91,900 at March 31, 1997.
Other noninterest expense was up $60 million, or 9 percent, in
the first quarter of 1998 compared to the same period in 1997.
The increase was mainly attributable to higher professional
services fees and other expense. The increase in professional
services fees was largely the result of widespread increases
in outside services. In addition, "other expense" increased
from the first quarter of 1997, reflecting modest increases in
various categories.
25
<PAGE>
================================================================================
Noninterest Expense
- --------------------------------------------------------------------------------
First Quarter
------------------
(in millions) 1998 1997
- --------------------------------------------------------------------------------
PERSONNEL
Salaries $1,050 $ 839
Employee benefits 179 189
- --------------------------------------------------------------------------------
1,229 1,028
- --------------------------------------------------------------------------------
OCCUPANCY 191 186
- --------------------------------------------------------------------------------
EQUIPMENT 171 182
- --------------------------------------------------------------------------------
OTHER NONINTEREST EXPENSE
Professional services 112 75
Communications 97 93
Amortization of intangibles 91 91
Other expense 397 378
- --------------------------------------------------------------------------------
697 637
- --------------------------------------------------------------------------------
$2,288 $2,033
- --------------------------------------------------------------==================
Full-time-equivalent staff at period end 76,500 77,300
Employees at period end 89,900 91,900
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Year 2000 BAC's noninterest expense for the first quarter of 1998
included approximately $41 million incurred in connection with
ongoing efforts to make its computer systems year 2000
compliant.
For additional information regarding the year 2000 issue, refer
to page 28 of BAC's 1997 Annual Report to Shareholders.
- --------------------------------------------------------------------------------
Income The provision for income taxes was $540 million and $526 million
Taxes for the quarters ended March 31, 1998 and 1997, respectively,
reflecting a forecasted annual effective income tax rate of 39.3
percent and 40.3 percent, respectively.
For further information concerning BAC's provision for federal,
state, and foreign income taxes for the most recent five
quarters, refer to Note 8 of the Notes to Consolidated Financial
Statements on page 9.
26
<PAGE>
BALANCE SHEET REVIEW
================================================================================
Interest-earning assets totaled $221 billion at March 31, 1998,
up $5 billion or 2 percent, from year-end 1997. Growth in
interest-earning assets, primarily federal funds sold, trading
account assets, and securities purchased under resale
agreements, was largely funded through increases in securities
sold under repurchase agreements and other short-term
borrowings.
Total deposits at March 31, 1998 were $173.9 billion, an
increase of $1.9 billion from December 31, 1997. The growth was
predominantly attributable to a $0.9 billion increase in both
domestic interest-bearing deposits and foreign interest-bearing
deposits. The increase in domestic interest-bearing deposits
resulted from an increase in money market and interest-bearing
checking accounts. The growth in foreign interest-bearing
deposits was a result of BAC's continued participation in
selected global markets.
<TABLE>
<CAPTION>
===================================================================================================================================
AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES -- AVERAGE BALANCES, INTEREST, AND AVERAGE RATES
- -----------------------------------------------------------------------------------------------------------------------------------
FIRST QUARTER 1998
------------------------------------------------------------------------
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 $ 1,285 $ 19 6.07% 6.25%
Mortgage-backed securities 7,680 132 6.84 6.95
Other domestic securities 1,046 15 5.78 6.32
Foreign securities 2,806/c/ 53 7.69/d/ 7.57/d/
- -----------------------------------------------------------------------------------------------------------------------------------
$12,817 $ 219 6.86% 6.97%
- ------------------------------------------------------------=======================================================================
<CAPTION>
FIRST QUARTER 1997
-----------------------------------------------------------------------
RATE
RATE BASED ON
BASED ON AMORTIZED
(DOLLAR AMOUNTS IN MILLIONS) BALANCE/a/ INTEREST/b/ FAIR VALUE/b/ COST/b/
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury and other government
agency securities $ 1,337 $ 22 6.63% 6.54%
Mortgage-backed securities 6,537 110 6.73 6.75
Other domestic securities 936 13 5.73 6.52
Foreign securities 2,785/c/ 58 8.38/d/ 8.10/d/
- ----------------------------------------------------------------------------------------------------------------------------------
$11,595 $ 203 7.04% 7.05%
- ------------------------------------------------------------======================================================================
<CAPTION>
FIRST QUARTER 1998 FIRST QUARTER 1997
----------------------------------------- -------------------------------------
(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 $ 54 $ -- 3.21% $ 13 $ -- 6.04%
Mortgage-backed securities 1,840 34 7.47 2,128 40 7.46
State, county, and municipal securities 300 6 7.47 392 7 7.44
Other domestic securities 53 1 8.02 57 1 6.82
Foreign securities 1,375 25 7.25 1,518 38 10.05
- ----------------------------------------------------------------------------------------------------------------------------------
$3,622 $ 66 7.33% $4,108 $ 86 8.40%
- -----------------------------------------------===================================================================================
</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 39% in 1998 and 40% in 1997.
/c/ Average balances include nonaccrual assets.
/d/ Rates reflect interest received on nonaccrual debt-restructuring par
bonds.
27
<PAGE>
================================================================================
CREDIT CARD BAC has securitized and sold $4,871 million in credit card
SECURITIZATIONS receivables since mid-1996. The securitizations affect,
among other things, the manner and time period in which
revenue is reported in the statement of operations. The
amounts that would otherwise be included in net interest
revenue are instead included in noninterest income as fees
and commissions, net of any credit losses on the
securitized portion of the credit card portfolio.
The table below shows the impact of the securitizations of
credit card receivables on BAC's results of operations and
financial position as of March 31, 1998.
================================================================================
IMPACT OF CREDIT CARD SECURITIZATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-------------------------------------------------------
INCLUDING
LOANS OF IMPACT OF
CREDIT CARD CREDIT CARD
(DOLLAR AMOUNTS IN MILLIONS) SECURITIZATIONS SECURITIZATIONS REPORTED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income $ 2,189 $ (94)/a/ $ 2,095
Credit card fees 107 (16)/a/ 91
Other noninterest income 1,658 64/a,b/ 1,722
- ----------------------------------------------------------------------------------------------------------------------
Total revenue 3,954 (46)/a/ 3,908
Noninterest expense 2,288 -- 2,288
- ----------------------------------------------------------------------------------------------------------------------
Income before provision for credit
losses and income taxes 1,666 (46)/a/ 1,620
Provision for credit losses 304 (59)/a,c/ 245
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 1,362 $ 13/a/ $ 1,375
- -------------------------------------------------------------------===================================================
NET INTEREST MARGIN 3.95% (0.11)%/a/ 3.84%
- ----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA AT PERIOD END
Credit card loans outstanding $ 10,551 $ (4,871)/d/ $ 5,680
Total assets 270,307 (4,871)/d/ 265,436
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET DATA
Credit card loans 10,261 (3,843)/d/ 6,418
Earning assets 223,713 (3,843)/d/ 219,870
Total assets 267,370 (3,843)/d/ 263,527
- ----------------------------------------------------------------------------------------------------------------------
NET CREDIT LOSSES - CREDIT CARD PORTFOLIO 174 (63)/d/ 111
- ----------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Annualized ratio of net credit losses on credit card loans
to average credit card loans outstanding 6.89% 0.18%/d/ 7.07%
Delinquent credit card loan ratio(e) 4.62 (0.20)/d/ 4.42
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Includes the effects of accumulated credit card securitizations of $4,371
million at March 31, 1998.
/b/ Includes $14 million of gains associated with the securitizations.
/c/ Represents charge-offs on the investor's share.
/d/ Includes the effects of accumulated credit card securitizations of $4,871
million at March 31, 1998, which includes a $500 million purchased credit
card portfolio.
/e/ 30 days or more past due.
28
<PAGE>
CREDIT RISK MANAGEMENT
================================================================================
LOAN PORTFOLIO Total loans at March 31, 1998 decreased $2.6 billion, or 2
MANAGEMENT percent, from year-end 1997. This decline was primarily in
the domestic consumer portfolio, which decreased by $3.4
billion, or 5 percent, from year-end 1997. This decline was
reflected in all domestic consumer loan categories except
for residential junior mortgages.
<TABLE>
<CAPTION>
===============================================================================================================================
LOAN OUTSTANDINGS
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997
-------- -----------------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 29,675 $ 31,749 $ 34,279 $ 35,709 $ 35,881
Residential junior mortgages 14,956 14,847 14,915 15,154 14,857
Other installment 18,179 18,418 18,432 18,410 17,863
Credit card/a/ 5,680 6,697 7,050 7,624 8,365
Other individual lines of credit 1,833 1,937 1,939 1,961 1,939
Other 353 461 442 413 391
- -------------------------------------------------------------------------------------------------------------------------------
70,676 74,109 77,057 79,271 79,296
Commercial:
Commercial and industrial/b/ 37,765 37,595 35,105 35,621 35,659
Loans secured by real estate 12,968 12,897 12,833 12,669 12,445
Financial institutions 3,571 3,485 3,452 2,947 3,232
Lease financing 2,861 2,892 2,700 2,809 2,790
Loans for purchasing or carrying securities 2,794 2,668 2,000 2,616 2,447
Construction and development loans
secured by real estate 2,350 2,206 2,257 2,262 2,261
Agricultural 1,641 1,824 1,774 1,560 1,475
Other 1,904 1,896 1,745 1,738 1,450
- -------------------------------------------------------------------------------------------------------------------------------
65,854 65,463 61,866 62,222 61,759
- -------------------------------------------------------------------------------------------------------------------------------
136,530 139,572 138,923 141,493 141,055
FOREIGN
Commercial and industrial 18,939 18,484 18,260 17,762 17,540
Banks and other financial institutions 3,815 3,904 4,295 4,818 3,526
Governments and official institutions 723 840 861 851 1,008
Other 5,513 5,304 5,670 5,237 5,314
- -------------------------------------------------------------------------------------------------------------------------------
28,990 28,532 29,086 28,668 27,388
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LOANS 165,520 168,104 168,009 170,161 168,443
Less: Allowance for credit losses 3,517 3,500 3,504 3,563 3,538
- -------------------------------------------------------------------------------------------------------------------------------
$162,003 $164,604 $164,505 $166,598 $164,905
- ---------------------------------------------------------======================================================================
</TABLE>
/a/ Excludes outstanding securitized credit card receivables of $4,871 million
at March 31, 1998, $3,621 million at December 31, 1997, $2,971 million at
September 30, 1997, $2,221 million at June 30, 1997, and $1,471 million at
March 31, 1997.
/b/ Amounts in prior periods have been reclassified to conform to the current
presentation.
29
<PAGE>
================================================================================
Growth in residential first mortgages during the first quarter
of 1998 was more than offset by the sale of $6.3 billion of
mortgages from the portfolio, resulting in a net decrease of
$2.1 billion from year-end 1997. The credit card loan portfolio
decreased $1.0 billion from year-end 1997, mainly due to the
securitization of $750 million of credit card receivables.
================================================================================
Domestic Consumer Loans by Geographic Area and Loan Type as of March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Residential Residential
First Junior Manufactured Credit Other Total
(in millions) Mortgages Mortgages Housing Auto Card Consumer Consumer
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
California $21,332 $ 9,826 $ 838 $ 3,080 $ 1,969 $ 2,126 $39,171
Washington 1,042 2,025 324 1,783 1,126 884 7,184
Arizona 729 1,034 230 566 181 85 2,825
Texas 679 109 615 828 210 101 2,542
Oregon 740 575 138 232 196 88 1,969
Other/a/ 5,153 1,387 5,957 1,507 1,998 983 16,985
- -----------------------------------------------------------------------------------------------------------------------------
$29,675 $14,956 $ 8,102 $ 7,996 $ 5,680 $ 4,267 $70,676
- ----------------------------=================================================================================================
</TABLE>
/(a)/ No other state individually exceeded 2 percent of total domestic consumer
loans.
Delinquent domestic consumer loans that are 30 days or more past
due totaled $1,484 million at March 31, 1998, a decrease of $221
million from the December 31, 1997 level. The decrease was a
result of a lower level of delinquencies in most loan
categories, primarily in credit card and other consumer loans.
At March 31, 1998, the delinquency ratio for residential first
mortgages increased 7 basis points to 2.73 percent from the
December 31, 1997 ratio. This increase resulted primarily from a
decline in the outstanding balance due to sales and prepayments.
================================================================================
Domestic Consumer Loan Delinquency Information/(a)/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- ---------------------------------------------------
(dollar amounts in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delinquent consumer loans
Residential first mortgages $ 810 $ 844 $ 909 $ 907 $ 948
Residential junior mortgages 119 138 122 144 151
Credit card 251 305 313 322 343
Other 304 418 391 352 345
- ----------------------------------------------------------------------------------------------------------------------
$ 1,484 $ 1,705 $ 1,735 $ 1,725 $ 1,787
- ----------------------------------------------------------------------------------------------------------------------
Delinquent consumer loan ratios/(b)/
Residential first mortgages 2.73% 2.66% 2.65% 2.54% 2.64%
Residential junior mortgages 0.79 0.93 0.82 0.95 1.02
Credit card 4.42 4.56 4.43 4.23 4.09
Other 1.49 2.01 1.88 1.69 1.71
Total 2.10 2.30 2.25 2.18 2.25
- -----------------------------------------------=======================================================================
</TABLE>
/(a)/ 30 days or more past due
/(b)/ Ratios represent delinquent balances expressed as a percentage of total
loans for that loan category.
Domestic Commercial Loans -- Domestic commercial loans at March
31, 1998 increased $391 million, or 0.6 percent from year-end
1997, reflecting growth in most commercial loan categories.
Commercial and industrial loans increased $170 million. The
growth in commercial and industrial loans primarily reflected
BAC's efforts to diversify its market share as well as increased
loan demand from large corporate and middle market borrowers in
various industries throughout the United States.
30
<PAGE>
================================================================================
Foreign Loans -- Foreign loans increased $458 million from
its level at December 31, 1997, primarily in the
commercial and industrial sector. The continued expansion
of lending activities in certain Latin American countries
accounted for this growth.
- --------------------------------------------------------------------------------
RECENT INTERNATIONAL In April 1998, the Korea debt exchange offer, as disclosed
DEVELOPMENTS in BAC's 1997 Annual Report to Shareholders on page 36,
was completed. As a result of the exchange, a high
percentage of Korea's eligible debt was converted to
longer-term debt. This will provide the government of
Korea with some relief from the liquidity pressures it was
experiencing prior to the exchange. In addition,
negotiations took place during the quarter with
representatives of the Indonesian government and business
community to address that country's difficulties and these
negotiations are expected to continue. Among the major
countries in Asia, the problems facing Indonesia appear
most difficult. It is management's belief that progress
with the International Monetary Fund's programs and bank
debt negotiations will mitigate the problems in troubled
Asian countries, but that these problems will take some
years to work out.
================================================================================
SUMMARY OF TOTAL EXPOSURE WITH SOUTH KOREA
- --------------------------------------------------------------------------------
(IN MILLIONS)
- --------------------------------------------------------------------------------
Balance, beginning of period January 1, 1998/a/ $3,448
Net change in short-term and long-term exposure (526)
New principal 37
Principal repayments (74)
- --------------------------------------------------------------------------------
Balance, end of period March 31, 1998 $2,885
- -------------------------------------------------------------------------======
/a/ Restated to reflect March 31, 1998 exposure criteria.
- --------------------------------------------------------------------------------
REGIONAL FOREIGN Through its credit and market risk management activities,
EXPOSURES BAC devotes 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
concerning risk management, refer to pages 44 through 49
of BAC's 1997 Annual Report to Shareholders.
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 on page 32 sets forth selected
regional foreign exposures of BAC as of March 31, 1998.
Exposure represents loans, securities, which include
restructured debt, unrealized gains on derivative and
foreign exchange products, unused commitments, and other
monetary assets.
The table on page 32 has been revised from the
presentation in prior quarters to reflect gross local
country claims, as opposed to net local currency claims.
Gross local country claims represent claims of BAC's
foreign offices on local country residents, regardless of
the currency. In addition, gross local country claims
and "Other" now include derivative products and unused
commitments. This is different from the previously
disclosed exposure information. The table portrays a
comprehensive picture of BAC's foreign exposures in the
regions presented.
31
<PAGE>
================================================================================
REGIONAL FOREIGN EXPOSURES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
MARCH 31, 1998
---------------------------------------------------------------------------
TOTAL TOTAL
TOTAL CROSS-BORDER GROSS LOCAL EXPOSURE
REGION/COUNTRY EXPOSURE/a/ LOANS COUNTRY CLAIMS/b/ OTHER/c/ DEC. 31, 1997/d/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASIA
China $ 471 $ 201 $ 96 $ 174 $ 690
Hong Kong 5,158 102 4,765 291 5,350
India 2,296 340 1,770 186 2,167
Indonesia 877 295 329 253 1,238
Japan 3,703 191 1,741 1,771 4,832
Korea (South) 2,885 527 462 1,896 3,448
Malaysia 1,053 9 949 95 1,167
Pakistan 443 7 431 5 453
Philippines 643 168 190 285 676
Singapore 1,822 104 1,592 126 2,076
Taiwan 1,753 362 1,265 126 1,827
Thailand 1,337 113 1,052 172 1,986
Other 75 -- 72 3 73
- ------------------------------------------------------------------------------------------------------------------------------------
Total 22,516 2,419 14,714 5,383 25,983
CENTRAL AND EASTERN EUROPE
Russia Federation 528 38 -- 490 439
Other 576 135 85 356 438
- ------------------------------------------------------------------------------------------------------------------------------------
Total 1,104 173 85 846 877
LATIN AMERICA
Argentina 1,618 281 976 361 1,439
Brazil 2,544 1,036 919 589 2,391
Chile 1,650 1,194 440 16 1,600
Colombia 604 390 95 119 685
Mexico 4,329 1,809/e/ 943 1,577 4,744
Venezuela 529 137 68 324 563
Other 137 5 -- 132 177
- ------------------------------------------------------------------------------------------------------------------------------------
Total 11,411 4,852 3,441 3,118 11,599
- ------------------------------------------------------------------------------------------------------------------------------------
Total $35,031 $ 7,444/f/ $18,240 $ 9,347 $38,459
- ----------------------------------==================================================================================================
</TABLE>
/a/ Includes the following foreign assets: loans, accrued interest,
acceptances, interest-bearing deposits in banks, trading account
securities, available-for-sale and held-to-maturity securities, other
interest-earning investments, and other monetary assets. Amounts also
include unrealized gains on off-balance-sheet instruments, unused
commitments, and available-for-sale and held-to-maturity securities that
are collateralized by U.S. Treasury securities.
/b/ Represents claims of BAC's foreign offices on local country residents,
including trading account securities, derivative products, unused
commitments, and available-for-sale and held-to-maturity securities
regardless of the currency.
/c/ Includes: accrued interest receivable, acceptances, interest-bearing
deposits in banks, trading account securities, other interest-earning
investments, other short-term monetary assets, unrealized gains on off-
balance-sheet instruments, unused commitments, and available-for-sale and
held-to-maturity securities, including securities that are collateralized
by U.S. Treasury securities as follows: Mexico - $1,068 million,
Venezuela - $252 million, Philippines - $22 million, and Latin America
Other - 87 million. Held-to-maturity securities amounted to $1,223 million
with a fair value of $1,201 million.
/d/ Restated to reflect March 31, 1998 exposure criteria.
/e/ Includes a $30 million loan that is collateralized by zero-coupon U.S.
Treasury securities.
/f/ Amounts also include nonaccrual loans of $243 million.
32
<PAGE>
================================================================================
ALLOWANCE FOR The allowance for credit losses at March 31, 1998 was $3,517
CREDIT LOSSES million, or 2.13 percent of loans outstanding, compared with
$3,500 million, or 2.08 percent, at December 31, 1997. The
ratio of the allowance for credit losses to total nonaccrual
assets was 339 percent at March 31, 1998, down from 389
percent at December 31, 1997.
Management develops the allowance for credit losses using a
"building block approach" for various portfolio segments.
Significant loans, particularly those considered to be
impaired, are individually analyzed, while other loans are
analyzed by portfolio segment. In establishing the allowance
for the portfolio segments, credit officers include results
obtained from statistical models using historical loan
performance data.
After an allowance has been established for the loan portfolio
segments, credit management determines an unallocated portion
of the allowance for credit loses, which is attributable to
factors that cannot be associated with a specific loan or
portfolio segment. These factors include 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 reduced. The decline
in the unallocated portion of the allowance for credit losses
in the quarters ended March 31, 1998 and December 31, 1997
reflected corresponding increases in the reserves for specific
portfolio segments, primarily in the foreign component due to
the foreign transfer risk in Asia and emerging markets
globally.
================================================================================
COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- -------------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:
Migration model benchmark $ 476 $ 353 $ 318 $ 316 $ 334
Qualitative credit management evaluation 629 592 398 370 404
- ------------------------------------------------------------------------------------------------------------------
Total special mention and classified 1,105 945 716 686 738
Other:
Domestic consumer 1,350 1,432 1,469 1,523 1,475
Domestic commercial 286 282 279 262 240
Foreign 556 591 388 310 309
- ------------------------------------------------------------------------------------------------------------------
Total allocated 3,297 3,250 2,852 2,781 2,762
Unallocated 220 250 652 782 776
- ------------------------------------------------------------------------------------------------------------------
$3,517 $3,500 $3,504 $3,563 $3,538
- ----------------------------------------------------==============================================================
</TABLE>
33
<PAGE>
================================================================================
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES BY LOAN TYPE/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------------------- --------------------------
PERCENT PERCENT
OF LOAN OF LOAN
(DOLLAR AMOUNTS IN MILLIONS) ALLOWANCE CATEGORY ALLOWANCE CATEGORY
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic consumer:
Residential first mortgages $ 78 0.26% $ 86 0.27%
Residential junior mortgages 98 0.66 112 0.75
Credit card 373 6.56 411 6.13
Other consumer 801 3.93 822 3.95
Domestic commercial:
Commercial and industrial/b/ 538 1.27 513 1.22
Loans secured by real estate 184 1.42 189 1.46
Financial institutions 11 0.31 11 0.32
Lease financing 33 1.16 32 1.11
Construction and development loans
secured by real estate 50 2.12 48 2.16
Agricultural 22 1.36 21 1.15
Foreign 1,109 3.83 1,005 3.52
Unallocated 220 -- 250 --
- ----------------------------------------------------------------------------------------------------------------
Total $3,517 2.13% $3,500 2.08%
- --------------------------------------------------==============================================================
</TABLE>
/a/ Includes the allowance for credit losses on impaired loans of $171 million
and $81 million at March 31, 1998 and December 31, 1997, 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.
Net credit losses for the first quarter of 1998 amounted to $239
million, an increase of $35 million from the same period a year
ago. These changes were largely in the foreign portfolio where
foreign net credit losses for the first quarter of 1998
increased $27 million from the comparable period in 1997 as a
result of the ongoing financial problems in the Asian economies.
In the domestic portfolios, domestic consumer net credit losses
for the first quarter of 1998 totaled $209 million, a decrease
of $4 million from the amount reported in the first quarter of
1997. Domestic commercial net credit losses for the first
quarter of 1998 totaled $7 million, an increase of $12 million
from the comparable period in 1997.
34
<PAGE>
================================================================================
QUARTERLY CREDIT LOSS EXPERIENCE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------- -------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(DOLLAR AMOUNTS IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance, beginning of period $ 3,500 $ 3,504 $ 3,563 $ 3,538 $ 3,523
CREDIT LOSSES
Domestic consumer:
Residential first mortgages 4 3 4 7 7
Residential junior mortgages 9 11 10 13 13
Credit card 123 121 132 134 124
Other installment 107 107 99 85 104
Other individual lines of credit 23 24 21 22 21
Other 7 7 6 5 5
Domestic commercial:
Commercial and industrial 15 27 52 24 16
Loans secured by real estate -- 17 3 2 1
Financial institutions -- -- -- -- --
Lease financing 1 3 1 -- --
Construction and development loans secured by real estate -- 1 5 -- 1
Loans for purchasing or carrying securities -- -- -- -- --
Agricultural -- 1 -- -- --
Foreign 39 51 4 9 2
- -----------------------------------------------------------------------------------------------------------------------------------
Total credit losses 328 373 337 301 294
CREDIT LOSS RECOVERIES
Domestic consumer:
Residential first mortgages -- 1 -- -- --
Residential junior mortgages 3 2 3 5 4
Credit card 12 9 10 10 9
Other installment 45 39 36 36 45
Other individual lines of credit 2 2 2 2 2
Other 2 2 1 1 1
Domestic commercial:
Commercial and industrial 7 15 6 5 16
Loans secured by real estate 1 3 1 2 2
Financial institutions -- 79 -- -- --
Lease financing -- -- 1 -- 1
Construction and development loans secured by real estate -- 2 4 8 3
Loans for purchasing or carrying securities -- -- 4 -- --
Agricultural 1 -- 1 1 1
Foreign 16 5 9 7 6
- -----------------------------------------------------------------------------------------------------------------------------------
Total credit loss recoveries 89 159 78 77 90
- -----------------------------------------------------------------------------------------------------------------------------------
Total net credit losses 239 214 259 224 204
Provision for credit losses 245 220 260 250 220
Other net additions (deductions) 11 (10) (60)/a/ (1) (1)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF PERIOD $ 3,517 $ 3,500 $ 3,504 $ 3,563 $ 3,538
- ----------------------------------------------------------------------=============================================================
ANNUALIZED RATIO OF NET CREDIT LOSSES (RECOVERIES)
TO AVERAGE LOAN OUTSTANDINGS
Domestic consumer:
Residential first mortgages 0.05% 0.02% 0.05% 0.08% 0.08%
Residential junior mortgages 0.15 0.20 0.20 0.23 0.27
Credit card 7.07 6.41 6.32 6.07 5.57
Other installment 1.36 1.48 1.35 1.08 1.36
Other individual lines of credit 4.49 4.61 3.99 3.98 3.89
Other 5.97 4.93 4.77 3.64 3.91
Domestic commercial:
Commercial and industrial 0.09 0.14 0.54 0.23 --
Loans secured by real estate 0.47 0.45 0.07 -- (0.05)
Financial institutions 0.01 (9.26) -- -- --
Lease financing 0.06 0.45 -- -- (0.09)
Construction and development loans secured by real estate (2.86) (0.20) 0.20 (1.47) (0.38)
Loans for purchasing or carrying securities (0.01) -- (0.71) -- --
Agricultural (0.11) 0.05 (0.24) (0.12) (0.28)
Total domestic 0.63 0.48 0.76 0.64 0.61
Foreign 0.33 0.65 (0.08) 0.04 (0.06)
TOTAL 0.58 0.51 0.62 0.54 0.50
RATIO OF ALLOWANCE TO LOANS AT QUARTER END 2.13 2.09 2.10 2.11 2.11
EARNINGS COVERAGE OF NET CREDIT LOSSES/(b)/ 6.77x 7.17x 6.30x 7.08x 7.49x
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Represents the deduction in the provision for credit losses related to the
sale of SPFS.
/b/ Earnings coverage of net credit losses is calculated as income before
income taxes plus the provision for credit losses as a multiple of net
credit losses.
35
<PAGE>
================================================================================
NONPERFORMING Total nonaccrual assets increased $137 million, or 15 percent,
ASSETS between year-end 1997 and March 31, 1998. This increase for
the quarter resulted from loans being placed on nonaccrual
status, primarily domestic commercial and industrial loans and
foreign loans. The increase in foreign nonaccrual loans was
concentrated in Asia primarily due to the previously discussed
economic pressures in this area.
At March 31, 1998, the ratio of nonaccrual loans to total
loans was 0.63 percent, up from 0.53 percent at December 31,
1997. In addition, the ratio of nonperforming assets
(comprised of nonaccrual assets and other real estate owned)
to total assets increased slightly from year-end 1997 to 0.45
percent at March 31, 1998.
For further information concerning nonaccrual assets, refer to
the table below and on pages 37 and 38.
================================================================================
ANALYSIS OF CHANGE IN NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------- -------------------------------------------------------
FIRST FOURTH THIRD SECOND FIRST
(IN MILLIONS) QUARTER QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter $ 899 $ 930 $ 861 $ 1,030 $ 1,118
Additions:
Loans placed on nonaccrual status 290 127 244 103 108
Deductions:
Sales (50) (18) (26) (103) (3)
Restored to accrual status (6) (34) (31) (38) (75)
Foreclosures -- -- -- (1) (8)
Charge-offs (38) (57) (47) (20) (10)
Other, primarily payments (59) (49) (71) (110) (100)
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF QUARTER $ 1,036 $ 899 $ 930 $ 861 $ 1,030
- --------------------------------------------------==========================================================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
NONACCRUAL ASSETS, RESTRUCTURED LOANS, AND LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997
-------- -------------------------------------------------
(IN MILLIONS) MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NONACCRUAL ASSETS
Domestic consumer loans:
Residential first mortgages $ 339 $ 345 $ 335 $ 318 $ 347
Residential junior mortgages 35 43 41 54 60
Other consumer -- 5 2 1 2
Domestic commercial loans:
Commercial and industrial 203 150 188 203 251
Loans secured by real estate 90 104 136 120 147
Financial institutions 35 41 45 -- --
Lease financing 3 5 8 2 2
Construction and development loans secured by real estate 29 30 39 59 104
Agricultural 17 18 22 23 23
- --------------------------------------------------------------------------------------------------------------------------------
751 741 816 780 936
Foreign loans, primarily commercial 282 156 114 81 89
Other interest-bearing assets 3 2 -- -- 5
- --------------------------------------------------------------------------------------------------------------------------------
Total $1,036 $ 899 $ 930 $ 861 $1,030
- ------------------------------------------------------------------==============================================================
RESTRUCTURED LOANS/a/
Domestic commercial:
Commercial and industrial $ 1 $ 5 $ 5 $ 18 $ 21
Loans secured by real estate 222 265 268 268 257
Construction and development loans secured by real estate 34 3 11 15 16
Agricultural 1 1 1 1 1
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 258 $ 274 $ 285 $ 302 $ 295
- ------------------------------------------------------------------==============================================================
LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST
Domestic consumer:
Other consumer $ 153 $ 189 $ 177 $ 190 $ 189
Domestic commercial:
Commercial and industrial 4 7 12 15 13
Loans secured by real estate 4 4 4 7 12
Lease financing 1 -- -- -- --
Construction and development loans secured by real estate 1 -- 1 1 1
Agricultural -- -- -- -- 1
- --------------------------------------------------------------------------------------------------------------------------------
163 200 194 213 216
Foreign 8 3 3 1 2
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 171 $ 203 $ 197 $ 214 $ 218
- ------------------------------------------------------------------==============================================================
</TABLE>
/a/ Excludes debt restructurings with countries that have experienced liquidity
problems of $1.4 billion at March 31, 1998, $1.4 billion at December 31,
1997, $1.4 billion at September 30, 1997, $1.5 billion at June 30, 1997, and
$1.5 billion at March 31, 1997. The majority of these instruments was
classified as either available-for-sale or held-to-maturity securities.
37
<PAGE>
================================================================================
INTEREST INCOME FOREGONE ON NONACCRUAL ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN MILLIONS) MARCH 31, 1998
- -----------------------------------------------------------------------------------------
<S> <C>
DOMESTIC
Interest income that would have been recognized had the assets
performed in accordance with their original terms $38
Less: Interest income included in the results of operations 12
- -----------------------------------------------------------------------------------------
Domestic interest income foregone 26
FOREIGN
Interest income that would have been recognized had the assets
performed in accordance with their original terms 9
Less: Interest income included in the results of operations 1
- -----------------------------------------------------------------------------------------
Foreign interest income foregone 8
- -----------------------------------------------------------------------------------------
$34
- --------------------------------------------------------------------------------------===
</TABLE>
================================================================================
CASH INTEREST PAYMENTS ON NONACCRUAL ASSETS BY LOAN TYPE/a/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------------------------------------------------------------------
CUMULATIVE BOOK AS A
CONTRACTUAL INTEREST NONACCRUAL PERCENTAGE
PRINCIPAL CUMULATIVE APPLIED BOOK OF
(DOLLAR AMOUNTS IN MILLIONS) BALANCE CHARGE-OFFS TO PRINCIPAL BALANCE CONTRACTUAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOMESTIC
Consumer:
Residential first mortgages $ 339 $ -- $ -- $ 339 100%
Residential junior mortgages 35 -- -- 35 100
Other consumer -- -- -- -- --
Commercial:
Commercial and industrial 495 247 45 203 41
Loans secured by real estate 152 46 16 90 59
Financial institutions 40 2 3 35 88
Lease financing 3 -- -- 3 100
Construction and development
loans secured by real estate 48 16 3 29 60
Agricultural 30 7 6 17 57
- ----------------------------------------------------------------------------------------------------------------------------
1,142 318 73 751 66
FOREIGN, PRIMARILY COMMERCIAL 391 106 3 282 72
Other interest-bearing assets 4 1 -- 3 75
- ----------------------------------------------------------------------------------------------------------------------------
$1,537 $ 425 $ 76 $1,036 67%
- ----------------------------------------------==============================================================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
---------------------------------------------------------------------
CASH INTEREST
AVERAGE PAYMENTS APPLIED
NONACCRUAL ---------------------------------------------------
BOOK AS INTEREST
(DOLLAR AMOUNTS IN MILLIONS) BALANCE INCOME OTHER/b/ TOTAL
- -------------------------------------------------------------------------------------------------------------------
DOMESTIC
Consumer:
Residential first mortgages $ 344 $ 5 $ -- $ 5
Residential junior mortgages 36 -- -- --
Other consumer 2 -- -- --
Commercial:
Commercial and industrial 199 3 3 6
Loans secured by real estate 95 1 1 2
Financial institutions 38 -- 1 1
Lease financing 4 -- -- --
Construction and development
loans secured by real estate 30 2 -- 2
Agricultural 18 1 -- 1
- -------------------------------------------------------------------------------------------------------------------
766 12 5 17
FOREIGN, PRIMARILY COMMERCIAL 240 1 1 2
Other interest-bearing assets 3 -- -- --
- -------------------------------------------------------------------------------------------------------------------
$1,009 $ 13 $ 6 $ 19
- --------------------------------------------------=================================================================
CASH YIELD ON AVERAGE TOTAL NONACCRUAL BOOK BALANCE 7.78%
- -------------------------------------------------------------------------------------------------------------------
</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.
38
<PAGE>
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, with the terms tailored to meet the needs of
BAC and its customers. At March 31, 1998, notional amounts for
credit derivative financial instruments used in 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. 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 connection with BAC's own asset and liability management
activities, it primarily uses foreign exchange derivative
financial instruments to manage foreign exchange risk; 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.
Similar to on-balance-sheet financial instruments, such as loans
and investment securities, off-balance-sheet financial
instruments expose BAC to various types of risk. These risks
include credit risk (the possibility of loss from the failure of
a borrower or counterparty to fully perform under the terms of a
credit-related contract); operational risk (the risk of
unexpected losses attributable to human error, systems failures,
fraud, or inadequate internal controls and procedures); market
risk (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)); and liquidity risk (the possibility
that BAC's cash flows may not be adequate to fund operations and
meet commitments on a timely and cost-effective basis). For a
detailed discussion of these risks and how they are managed,
refer to pages 44 through 49 of BAC's 1997 Annual Report to
Shareholders.
For additional information concerning interest rate, foreign
exchange, equity, credit, and commodity derivative financial
instruments, including their respective notional, credit risk,
and fair value amounts, refer to Note 11 of the Notes to
Consolidated Financial Statements on pages 10 through 14.
39
<PAGE>
FUNDING AND CAPITAL
================================================================================
LIQUIDITY BAC's liquid assets consist of cash and due from banks,
REVIEW interest-bearing deposits in banks, federal funds sold,
securities purchased under resale agreements, trading account
assets, and available-for-sale securities. Liquid assets totaled
$67 billion at March 31, 1998, up $8.7 billion, or 15 percent,
from year-end 1997. The increase in liquid assets was primarily
attributable to increases in trading account assets, federal
funds sold and securities purchased under resale agreements.
The ongoing operations of BAC resulted in cash inflows of $4.5
billion and $2.3 billion in the first quarters of 1998 and 1997,
respectively, from deposits and short-term borrowings. During
the same periods, BAC's liquidity was enhanced by proceeds from
loan sales and securitizations, totaling $3.1 billion and $2.1
billion, respectively. In addition, total sales, maturities,
prepayments, and calls of securities exceeded total purchases,
resulting in cash inflows of $491 million and $534 million,
respectively.
Total loan originations and purchases exceeded total principal
collections, resulting in cash outflows of $0.4 billion and $4.5
billion for the first three months of 1998 and 1997,
respectively. In addition, for the first quarters of 1998 and
1997, BankAmerica Corporation (the Parent) paid dividends of
$246 million and $250 million, respectively, to its preferred
and common stockholders. During the same periods of 1998 and
1997, the Parent repurchased common and redeemed preferred stock
for a total of $604 million and $1,127 million, respectively.
- --------------------------------------------------------------------------------
CAPITAL At March 31, 1998, total stockholders' equity amounted to $19.9
MANAGEMENT billion, an increase of $47 million from year-end 1997.
Common equity at March 31, 1998 was $19.3 billion, up $47
million from December 31, 1997. Net income less common and
preferred stock dividends of $0.6 billion was offset by a
reduction in common equity of $0.6 billion due to repurchases of
common stock.
During the first three months of 1998, BAC repurchased 8.3
million shares of its common stock at an average price per share
of $72.62 reflecting the corporation's ongoing efforts to
effectively manage capital. The shares were repurchased on the
open market over 54 trading days and represented approximately 7
percent of the total volume of BAC common stock traded on those
days. For additional information regarding the stock repurchase
program, refer to Note 7 of the Notes to Consolidated Financial
Statements on page 9.
During the first quarter of 1998, BAC issued trust preferred
securities totaling $339 million, net of $11 million of deferred
debt issuance costs. For additional information regarding trust
preferred securities, refer to Note 6 of the Notes to
Consolidated Financial Statements on page 8.
40
<PAGE>
================================================================================
RISK-BASED CAPITAL, RISK-WEIGHTED ASSETS, AND RISK-BASED CAPITAL RATIOS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- ------------------------------------------------------
(DOLLAR AMOUNTS IN MILLIONS) MARCH 31/ab/ DEC. 31/a/ SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RISK-BASED CAPITAL
Common stockholders' equity $ 19,204 $ 19,086 $ 18,970 $ 18,759 $ 18,591
Qualified perpetual preferred stock 614 614 848 1,197 1,596
Minority interest/c/ 2,457 2,122 1,975 1,967 1,964
Less: Goodwill, nongrandfathered core deposit and
other identifiable intangibles, and other deductions/d/ (4,511) (4,531) (4,632) (4,778) (4,832)
- ------------------------------------------------------------------------------------------------------------------------------------
TIER 1 RISK-BASED CAPITAL 17,764 17,291 17,161 17,145 17,319
Eligible portion of the allowance for credit losses 2,971 2,879 2,822 2,791 2,778
Hybrid capital instruments 70 71 71 71 142
Subordinated notes and debentures 6,293 6,357 6,270 6,140 6,248
Less: Other deductions -- -- (205) (196) (188)
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 2 risk-based capital 9,334 9,307 8,958 8,806 8,980
Tier 3 risk-based capital -- NA NA NA NA
- ------------------------------------------------------------------------------------------------------------------------------------
Total 27,098 26,598 26,119 25,951 26,299
Less: Investments in unconsolidated banking
and finance subsidiaries (44) (44) (48) (50) (48)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-BASED CAPITAL $ 27,054 $ 26,554 $ 26,071 $ 25,901 $ 26,251
- ---------------------------------------------------------------=====================================================================
RISK-WEIGHTED ASSETS
Balance sheet assets:
Trading account assets $ 9,171 $ 6,826 $ 6,821 $ 6,846 $ 6,653
Available-for-sale and held-to-maturity securities 5,499 5,103 4,703 3,358 4,953
Loans 140,931 142,044 140,158 139,457 141,317
Other assets 19,566 20,662 19,673 19,887 17,221
- ------------------------------------------------------------------------------------------------------------------------------------
Total balance sheet assets 175,167 174,635 171,355 169,548 170,144
- ------------------------------------------------------------------------------------------------------------------------------------
Off-balance-sheet items:
Unused commitments 30,973 31,567 31,070 30,089 28,455
Standby letters of credit 14,494 13,459 15,061 15,414 15,613
Foreign exchange and derivatives contracts 5,698 5,623 4,911 4,885 4,669
Other 4,616 4,421 2,260 2,213 2,190
- ------------------------------------------------------------------------------------------------------------------------------------
Total off-balance-sheet items 55,781 55,070 53,302 52,601 50,927
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Covered positions/e/ (9,171) NA NA NA NA
Add: Market risk equivalent assets/f/ 15,350 NA NA NA NA
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RISK-WEIGHTED ASSETS $ 237,127 $ 229,705 $ 224,657 $ 222,149 $ 221,071
- ------------------------------------------------------------------------------------------------------------------------------------
RISK-BASED CAPITAL RATIOS
TIER 1 CAPITAL RATIO 7.49% 7.53% 7.64% 7.72% 7.83%
TOTAL CAPITAL RATIO 11.41 11.56 11.60 11.66 11.87
LEVERAGE RATIO 6.86 6.81 7.17 7.22 7.36
- ---------------------------------------------------------------=====================================================================
</TABLE>
/a/ Includes the capital and assets of the parent's Section 20 broker/dealer
subsidiary to reflect the Federal Reserve Board's (FRB) October 31, 1997
modifications to the risk-based capital regulations. Prior to December 31,
1997, amounts and ratios excluded the Section 20 subsidiary.
/b/ Includes the effect of market risk as required by the regulators effective
January 1, 1998.
/c/ Represents trust preferred securities and other minority interest of
$2,212 million and $245 million, respectively, at March 31, 1998, $1,873
million and $249 million, respectively, at December 31, 1997, $1,873
million and $102 million, respectively, at September 30, 1997, $1,873
million and $94 million, respectively, at June 30, 1997, and $1,873
million and $91 million, respectively, at March 31, 1997.
/d/ Includes nongrandfathered core deposit and other identifiable intangibles
acquired after February 19, 1992 of $619 million and $70 million,
respectively, at March 31, 1998, $636 million and $73 million,
respectively at December 31, 1997, $688 million and $59 million,
respectively, at September 30, 1997, $705 million and $63 million,
respectively, at June 30, 1997, and $739 million and $65 million,
respectively, at March 31,1997. Also includes $32 million at March 31,
1998 and $18 million at June 30, 1997 of the excess of the net book value
over 90 percent of the fair value of mortgage servicing assets. There were
no such excess amounts at December 31, 1997, September 30, 1997, and March
31, 1997.
/e/ Includes balance sheet trading account assets.
/f/ Represents the mathematical measure for market risk.
NA Not applicable.
41
<PAGE>
================================================================================
BAC's risk-based capital ratios continued to exceed regulatory
guidelines for "well-capitalized" status. BAC's Tier 1 and total
risk-based capital ratios at March 31, 1998 decreased 4 basis
points and 15 basis points, respectively. These decreases
resulted primarily from the effect of an increase in risk-
weighted assets, which includes the effect of the new market
risk requirement as required by the banking regulators
effective January 1, 1998, partially offset by the increase in
Tier 1 capital. Tier 1 capital increased due to the issuance
of $339 million of trust preferred securities and an increase
in retained earnings. This increase was partially offset by
repurchases of common stock. Risk-weighted assets increased by
$7 billion primarily due to the new market risk requirement.
Comparing the new market risk requirement to the previous
method of calculation, Tier 1 and total risk-based capital
ratios at March 31, 1998 decreased by 20 basis points and 27
basis points, respectively. BAC's leverage ratio was 6.86
percent at March 31, 1998, 5 basis points higher than 6.81
percent at December 31, 1997, primarily due to an increase in
BAC's Tier 1 capital as discussed above.
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 Recent International Developments on
page 31. 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
================================================================================
For information concerning BAC's quantitative and qualitative
disclosures about market risk, refer to pages 45 through 47 of
BAC's 1997 Annual Report to Shareholders.
42
<PAGE>
OTHER INFORMATION
================================================================================
ITEM 6. (a) Exhibits:
EXHIBITS AND
REPORTS ON Exhibit
FORM 8-K Number Exhibit
------ -------
10.a BankAmerica Corporation Executive Compensation Program -
Benefits/Perquisites Summary as amended
10.b Resolution of the Board of Directors of BankAmerica
Corporation dated April 27, 1998, Adopting Amendment to
Change in Control Provision under BankAmerica Corporation
1992 Management Stock Plan
12 Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
------------------------------------------------------------------
(b) Reports on Form 8-K:
During the first quarter of 1998, the Parent filed reports on Form
8-K dated January 21, 1998, February 2, 1998 and March 4, 1998.
The January 21 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 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 report disclosed,
pursuant to Item 5 of the report, the Parent's intent to sell the
consumer branch and small business operations of Bank of America
Texas, N.A. After the first quarter of 1998, the Parent filed
reports on Form 8-K dated April 10, 1998 and April 15, 1998. The
April 10 report disclosed, pursuant to Item 5 of the report, the
Parent and NationsBank Corporation entered into an Agreement and
Plan of Reorganization on April 10, 1998. The April 15 report
filed, pursuant to Items 5 and 7 of the report, a copy of the
Parent's press release titled "BankAmerica First Quarter
Earnings."
43
<PAGE>
SIGNATURES
================================================================================
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BANKAMERICA CORPORATION
Registrant
By Principal Financial Officer and
Duly Authorized Signatory:
/s/ MICHAEL E. O'NEILL
Michael E. O'Neill
Vice Chairman and
Chief Financial Officer
May 14, 1998
By Chief Accounting Officer and
Duly Authorized Signatory:
/s/ JOHN J. HIGGINS
John J. Higgins
Executive Vice President
and Chief Accounting Officer
May 14, 1998
44
<PAGE>
[LOGO OF BANKAMERICA LOGO APPEARS HERE]
BankAmerica
Other information about
BankAmerica Corporation may be
found in its Annual Report to
Shareholders. This report, as well as
additional copies of this Analytical
Review and Form 10-Q, may be obtained from:
Bank of America
Corporate Secretary's Office #13018
P.O. Box 37000
San Francisco, CA 94137
Information Online - To keep
current online via the Internet,
visit BankAmerica Corporation's
home page on the World Wide Web
/http://www.bankamerica.com/
--------------------------
to view the latest information about
the corporation and its products and
services, or apply for a loan or credit
card. Corporation 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/.
NL-9 5/98 [LOGO OF
RECYCLED PAPER Recycled
APPEARS HERE] Paper
<PAGE>
EXHIBIT INDEX
Exhibit
Reference Description
--------- -----------
10.a BankAmerica Corporation Executive Compensation Program -
Benefits/Perquisites Summary as amended
10.b Resolution of the Board of Directors
of BankAmerica Corporation dated
April 27, 1998, Adopting Amendment to
Change in Control Provision under
BankAmerica Corporation 1992
Management Stock Plan
12 Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.A
U.S. EXECUTIVE COMPENSATION PROGRAMS
Summary of Certain Benefits/Perquisites
Office of the Chairman
================================================================================
Executive Financial Counseling Each executive is assigned his or her own
financial planner from The Ayco Corporation-
providing an all-encompassing financial
counseling program to include income tax
planning and preparation, investment
planning, etc. A one time $3,000 allowance
will also be provided for estate planning
documentation, e.g., preparation of a will.
Company paid cost of the program is $16,700
per participant for the first year and
approximately $10,000 each year thereafter.
In the event the executive wishes to utilize
a financial planner of his or her own
choice, he or she will receive an annual
allowance and reimbursements equivalent to
that provided under the AYCO program.
All reimbursed costs will be considered
imputed income for purposes of W-2 earnings
and will be grossed up to help compensate
for associated income taxes.
- --------------------------------------------------------------------------------
Excess Liability Insurance Provides executive with additional liability
insurance coverage of $10 million to protect
against high-dollar personal litigation.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.B
Board of Directors April 27, 1998
Bank of America Corporation
RESOLUTION ADOPTING AMENDMENT TO
CHANGE IN CONTROL PROVISION UNDER
BAC 1992 MANAGEMENT STOCK PLAN
------------------------------
The Board of Directors of BankAmerica Corporation ("BAC") authorizes and
determines:
1. Section 6.6 of the BAC 1992 Management Stock Plan (the "1992
MSP") provides that if BAC undergoes a change in control, as defined in the 1992
MSP, all outstanding options and stock appreciation rights ("SARs") shall become
immediately exercisable in full and all restricted stock, restricted stock units
and other stock-based awards shall be immediately released free of all
restrictions. In addition, if the employee terminates employment following the
change in control, options and SARs remain exercisable for a period of 3 years
following the termination of employment, not to exceed the original option term.
2. The consummation of the merger (the "NationsBank Merger") of BAC
with NationsBank (DE) pursuant to the agreement and Plan of Reorganization,
dated as of April 10, 1998, between BAC and NationsBank Corporation would
constitute a change in control of BAC for purposes of the 1992 MSP.
3. The Executive Personnel and Compensation Committee of the Board (the
"Committee") has recommended to the Board that the 1992 MSP be amended to
provide that, with respect to the NationsBank Merger, the change in control
provisions shall not apply to awards made on or after March 27, 1998, unless
BAC had entered into a binding obligation to make such award, subject to
Committee approval, prior to March 27, 1998.
3. The Executive Personnel and Compensation Committee of the Board the
"Committee") has recommended to the Board that the 1992 MSP be amended to
provide that, with respect to the NationsBank Merger, the change in control
provisions shall not apply to awards made on or after March 27, 1998, unless BAC
had entered into a binding obligation to make such award, subject to Committee
approval, prior to March 27, 1998.
4. The Board determines that it is in the best interest of BAC to
adopt, and does hereby adopt, the following amendment to the 1992 MSP, effective
immediately:
Section 6.6 is amended by the addition of a subsection (e) to read as
follows:
"(e) Notwithstanding any provision of this Section 6.6 to the
contrary, this Section 6.6 shall not apply, with respect to the consummation of
the merger between BankAmerica and NationsBank (DE) pursuant to the Agreement
and Plan of Reorganization, dated as of April 10, 1998, between BankAmerica and
NationsBank Corporation, to any Award made on or after March 27, 1998, unless
BankAmerica had entered into a binding obligation to make such Award, subject
to the Committee granting the Award, prior to March 27, 1998."
<PAGE>
5. Each officer of BAC and it subsidiaries is authorized to take such
action as the officer deems appropriate to implement the provisions of the
foregoing resolution.
<PAGE>
Exhibit 12
Page 1 of 2
BankAmerica Corporation
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
-------------------- -----------------------
(DOLLAR AMOUNTS IN MILLIONS) 1998 1997 1997 1996
---- ---- ---- ----
Excluding Interest on Deposits
<S> <C> <C> <C> <C>
Fixed charges:
Interest expense (other than interest on deposits) $819 $700 $2,995 $2,713
Interest payments on trust preferred securities (see footnote (a)) 38 34 143 7
Interest factor in rent expense 32 31 122 125
Other 1 - 2 -
-------------------- -----------------------
$890 $765 $3,262 $2,845
==================== =======================
Earnings:
Income from operations $835 $780 $3,210 $2,873
Applicable income taxes 540 526 2,116 1,900
Fixed charges 890 765 3,262 2,845
Other (9) (19) (51) (9)
-------------------- -----------------------
$2,256 $2,052 $8,537 $7,609
==================== =======================
Ratio of earnings to fixed charges,
excluding interest on deposits 2.53 2.68 2.62 2.67
Including Interest on Deposits
Fixed charges:
Interest expense $2,308 $2,066 $8,788 $8,072
Interest payments on trust preferred securities (see footnote (a)) 38 34 143 7
Interest factor in rent expense 32 31 122 125
Other 1 - 2 -
-------------------- -----------------------
$2,379 $2,131 $9,055 $8,204
==================== =======================
Earnings:
Income from operations $835 $780 $3,210 $2,873
Applicable income taxes 540 526 2,116 1,900
Fixed charges 2,379 2,131 9,055 8,204
Other (9) (19) (51) (9)
-------------------- -----------------------
$3,745 $3,418 $14,330 $12,968
==================== =======================
Ratio of earnings to fixed charges,
including interest on deposits 1.57 1.60 1.58 1.58
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
(DOLLAR AMOUNTS IN MILLIONS) 1995 1994 1993
---- ---- ----
Excluding Interest on Deposits
<S> <C> <C> <C>
Fixed charges:
Interest expense (other than interest on deposits) $2,455 $1,505 $1,215
Interest payments on trust preferred securities (see footnote (a)) - - -
Interest factor in rent expense 120 109 112
Other - 3 2
----------------------------------
$2,575 $1,617 $1,329
==================================
Earnings:
Income from operations $2,664 $2,176 $1,954
Applicable income taxes 1,903 1,541 1,474
Fixed charges 2,575 1,617 1,329
Other (12) (55) (39)
----------------------------------
$7,130 $5,279 $4,718
==================================
Ratio of earnings to fixed charges,
excluding interest on deposits 2.77 3.26 3.55
Including Interest on Deposits
Fixed charges:
Interest expense $7,378 $4,842 $4,186
Interest payments on trust preferred securities (see footnote (a)) - - -
Interest factor in rent expense 120 109 112
Other - 3 2
----------------------------------
$7,498 $4,954 $4,300
==================================
Earnings:
Income from operations $2,664 $2,176 $1,954
Applicable income taxes 1,903 1,541 1,474
Fixed charges 7,498 4,954 4,300
Other (12) (55) (39)
----------------------------------
$12,053 $8,616 $7,689
==================================
Ratio of earnings to fixed charges,
including interest on deposits 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 Combined Fixed Charges and Preferred Stock Dividends
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
---------------------- -----------------------
(DOLLAR AMOUNTS IN MILLIONS) 1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Excluding Interest on Deposits
Fixed charges and preferred dividends:
Interest expense (other than interest on deposits) $819 $700 $2,995 $2,713
Interest payments on trust preferred securities (see footnote (a)) 38 34 143 7
Interest factor in rent expense 32 31 122 125
Preferred dividend requirements (see footnote (b)) 16 57 166 307
Other 1 - 2 -
---------------------- -----------------------
$906 $822 $3,428 $3,152
====================== =======================
Earnings:
Income from operations $835 $780 $3,210 $2,873
Applicable income taxes 540 526 2,116 1,900
Fixed charges, excluding preferred dividend requirements 890 765 3,262 2,845
Other (9) (19) (51) (9)
---------------------- -----------------------
$2,256 $2,052 $8,537 $7,609
====================== =======================
Ratio of earnings to combined fixed charges and preferred dividends,
excluding interest on deposits 2.49 2.50 2.49 2.41
INCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense $2,308 $2,066 $8,788 $8,072
Interest payments on trust preferred securities (see footnote (a)) 38 34 143 7
Interest factor in rent expense 32 31 122 125
Preferred dividend requirements (see footnote (b)) 16 57 166 307
Other 1 - 2 -
---------------------- -----------------------
$2,395 $2,188 $9,221 $8,511
====================== =======================
Earnings:
Income from operations $835 $780 $3,210 $2,873
Applicable income taxes 540 526 2116 1,900
Fixed charges, excluding preferred dividend requirements 2,379 2,131 9,055 8,204
Other (9) (19) (51) (9)
---------------------- -----------------------
$3,745 $3,418 $14,330 $12,968
====================== =======================
Ratio of earnings to combined fixed charges and preferred dividends,
including interest on deposits 1.56 1.56 1.55 1.52
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
(DOLLAR AMOUNTS IN MILLIONS) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Excluding Interest on Deposits
Fixed charges and preferred dividends:
Interest expense (other than interest on deposits) $2,455 $1,505 $1,215
Interest payments on trust preferred securities (see footnote (a)) - - -
Interest factor in rent expense 120 109 112
Preferred dividend requirements (see footnote (b)) 389 424 423
Other - 3 2
----------------------------------
$2,964 $2,041 $1,752
==================================
Earnings:
Income from operations $2,664 $2,176 $1,954
Applicable income taxes 1,903 1,541 1,474
Fixed charges, excluding preferred dividend requirements 2,575 1,617 1,329
Other (12) (55) (39)
----------------------------------
$7,130 $5,279 $4,718
==================================
Ratio of earnings to combined fixed charges and preferred dividends,
excluding interest on deposits 2.41 2.59 2.69
INCLUDING INTEREST ON DEPOSITS
Fixed charges and preferred dividends:
Interest expense $7,378 $4,842 $4,186
Interest payments on trust preferred securities (see footnote (a)) - - -
Interest factor in rent expense 120 109 112
Preferred dividend requirements (see footnote (b)) 389 424 423
Other - 3 2
----------------------------------
$7,887 $5,378 $4,723
==================================
Earnings:
Income from operations $2,664 $2,176 $1,954
Applicable income taxes 1,903 1,541 1,474
Fixed charges, excluding preferred dividend requirements 7,498 4,954 4,300
Other (12) (55) (39)
----------------------------------
$12,053 $8,616 $7,689
==================================
Ratio of earnings to combined fixed charges and preferred dividends,
including interest on deposits 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 three months ended
March 31, 1998 and 1997 and the years ended December 31, 1997, 1996, 1995,
1994, and 1993 of $10 million, $34 million, $100 million, $185 million,
$227 million, $248 million, and $241 million, respectively.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL DATA SCHEDULE ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31,
1998 CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES,
INTEREST, AND AVERAGE RATES, NONACCRUAL ASSETS, RESTRUCTURED LOANS, AND LOANS
PAST DUE 90 DAYS OR MORE AND STILL ACCRUING INTEREST, QUARTERLY CREDIT LOSS
EXPERIENCE, AND COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH 10-Q FILING.
Any item provided in the schedule, in accordance with the rules governing the
schedule, will not be subject to liability under the federal securities laws,
except to the extent that the financial statements and other information from
which the data were extracted violate the federal securities laws. Also,
pursuant to item 601(c)(1)(iv) of Regulation S-K promulgated by the Securities
and Exchange Commission (SEC), the schedule shall not be deemed filed for
purposes of Section 11 of the Securities Act of 1933. Section 18 of the Exchange
Act of 1934 and Section 323 of the Trust Indenture Act, or otherwise be subject
to the liabilities of such sections, nor shall it be deemed a part of any
registration statement to which it relates.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 14,699
<INT-BEARING-DEPOSITS> 5,737
<FED-FUNDS-SOLD> 12,927
<TRADING-ASSETS> 21,328
<INVESTMENTS-HELD-FOR-SALE> 12,328
<INVESTMENTS-CARRYING> 3,645
<INVESTMENTS-MARKET> 3,675
<LOANS> 165,520
<ALLOWANCE> 3,517
<TOTAL-ASSETS> 265,436
<DEPOSITS> 173,890
<SHORT-TERM> 32,643
<LIABILITIES-OTHER> 25,008<F1>
<LONG-TERM> 14,011<F2>
0
614
<COMMON> 1,210
<OTHER-SE> 18,060
<TOTAL-LIABILITIES-AND-EQUITY> 265,436
<INTEREST-LOAN> 3,388
<INTEREST-INVEST> 283
<INTEREST-OTHER> 732<F3>
<INTEREST-TOTAL> 4,403
<INTEREST-DEPOSIT> 1,489
<INTEREST-EXPENSE> 2,308
<INTEREST-INCOME-NET> 2,095
<LOAN-LOSSES> 245
<SECURITIES-GAINS> 61
<EXPENSE-OTHER> 2,288
<INCOME-PRETAX> 1,375
<INCOME-PRE-EXTRAORDINARY> 1,375
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 835
<EPS-PRIMARY> 1.21<F4>
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 3.84
<LOANS-NON> 1,033
<LOANS-PAST> 171
<LOANS-TROUBLED> 258
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,500
<CHARGE-OFFS> 328
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 3,517
<ALLOWANCE-DOMESTIC> 2,188
<ALLOWANCE-FOREIGN> 1,109
<ALLOWANCE-UNALLOCATED> 220
<FN>
<F1>Includes trust preferred securities of $2,212 million.
<F2>Includes subordinated capital notes of $352 million.
<F3>Includes interest income on trading accounts assets of $383 million.
<F4>EPS-BASIC
</FN>
</TABLE>
