Bank of America

Investor Relations

Bank of America Announces 13 Percent Increase in EPS

Supplemental second quarter 2002 financial information

Strong Performance in Consumer Bank Continues to Lead Growth; Complemented by Solid Results in Investment Banking

CHARLOTTE, July 15 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported second quarter earnings of $2.22 billion, or $1.40 per share (diluted), a 13 percent increase in earnings per share from $2.02 billion, or $1.24 per share, reported a year ago. The return on common equity was 18.5 percent.

The adoption of FAS No. 142 in the first quarter of 2002 eliminated the amortization of goodwill, which impacts the company's expenses and net income. Excluding goodwill amortization in the second quarter of 2001, net income and earnings per share rose 2 percent and 5 percent, respectively.

The increase in second quarter results was driven by broad-based gains in customer revenue and strong expense control, supported by progress in Six Sigma productivity and quality initiatives. These improvements were somewhat offset by a significant reduction in revenue from trading and equity investments.

"Our performance in the second quarter was led by strong growth in Consumer Banking as the execution of our customer-focused strategy continued to deliver results," said Kenneth D. Lewis, chairman and chief executive officer. "Given market conditions, we were especially pleased to see solid growth in our investment banking fees. Diligent expense management has complemented our efforts to grow revenue across the company and has enabled us to continue to deliver attractive results to our shareholders."

Net income for the first half of 2002 was $4.40 billion, or $2.77 per share (diluted), a 16 percent increase in earnings per share, from $3.89 billion, or $2.39 per share, a year ago. Excluding goodwill amortization in the first half of 2001, net income and earnings per share rose 5 percent and 7 percent, respectively.

Second Quarter Highlights (Compared to a Year Ago)

Financial highlights

  • Shareholder Value Added (SVA) grew 5 percent to $834 million.

  • Average customer deposits grew 7 percent to $326 billion.

  • Nonperforming assets declined from a year earlier and remained essentially unchanged with levels in the first quarter of 2002.

  • Investment banking income grew 2 percent as the demand for fixed income products continued to be strong. Modest growth in equities and a solid advisory business were also contributors.

  • Investment and brokerage service revenue grew 12 percent due to increased customer activity.

  • Active debit cards increased 8 percent and purchase volumes rose 15 percent from a year ago, as more customers began using debit cards. Average managed consumer credit card outstandings were up 12 percent from last year, driven by new account purchase volume and an increase in balance transfers.

  • Corporate service charges grew 11 percent due to higher fees paid in lieu of compensating balances as a result of a lower rate environment.

  • Greater customer activity and the addition of new customers drove a 3 percent increase in consumer service charges.

Customer highlights

  • Net new checking accounts increased by more than 126,000 from the first quarter of 2002, as the company attracted customers with its new My Access Checking product and also retained and deepened relationships with existing customers.

  • During the second quarter, the company offered free online bill pay to new subscribers in an effort to attract customers and encourage existing customers to pay bills online. As a result, active users of online banking climbed 14 percent from the first quarter of 2002 to 3.8 million while active bill pay customers increased 20 percent to more than 1 million -- the most users in the industry.

  • The company launched the SafeSend debit card product that allows consumers to send money to Mexico more efficiently and reduces fraud, helping the company support and strengthen its multi-cultural strategy by better meeting the needs of its diverse customer base.

  • The company launched the Visa CashPay payroll card, a new debit card that allows companies to pay employees with a reusable debit card. The debut of this card is part of the company's strategy for making payment exchange easier for customers.


Revenue declined 1 percent from the previous year to $8.74 billion, as modest growth in fully taxable-equivalent net interest income was offset by a decline in market-related revenue.

Fully taxable-equivalent net interest income rose 3 percent to $5.26 billion, as the company continued to benefit from low interest rates and higher consumer loan and deposit levels as well as higher trading-related revenue, partially offset by the exit of the subprime real estate business and reduced commercial loan levels.

Noninterest income declined 7 percent to $3.48 billion, primarily due to lower trading revenue and equity investment losses.

In connection with asset/liability management, the company realized $93 million in net securities gains.


At $4.49 billion, expenses were down 7 percent from a year ago (adjusted for amortization of goodwill, expenses decreased 4 percent). The efficiency ratio improved to 51.34 percent.

Credit Quality

Credit quality continued to be impacted by the economic slowdown and uncertain market conditions.

  • Provision for credit losses of $888 million was up $88 million from a year ago. Provision was up 6 percent from $840 million in the first quarter of 2002.

  • Net charge-offs were $888 million, or 1.06 percent of loans and leases, up from $787 million, or 0.82 percent, a year ago. The increase in charge-offs was primarily concentrated in the consumer bankcard portfolio due to a 29 percent increase in on-balance-sheet outstandings and the impact of the rise in unemployment and personal bankruptcy filings. Commercial net charge-offs increased $33 million, or 7 percent, from a year ago. Excluding bankcard and the subprime lending business, other consumer-related charge-offs remained essentially unchanged from a year ago. Total net charge-offs increased $48 million, or 6 percent, from the first quarter of 2002.

  • Nonperforming assets were $4.9 billion, or 1.45 percent of loans, leases and foreclosed properties at June 30, 2002, down 20 percent from $6.2 billion, or 1.63 percent, a year earlier. The decrease in nonperforming assets from a year ago is due to the exit of the subprime lending business and the company's risk management program, which includes an aggressive strategy to shed problem credits. Nonperforming assets remained essentially unchanged with levels in the first quarter of 2002.

  • The allowance for credit losses was 2.02 percent of loans and leases on June 30, 2002, an increase in coverage of 20 basis points from 1.82 percent a year ago. The allowance for credit losses, at $6.9 billion, represented 148 percent of nonperforming loans, up from 118 percent a year ago. The allowance remained essentially unchanged from the first quarter of 2002.

Capital Management

Total shareholders' equity was $47.8 billion at June 30, 2002, down 3 percent from a year ago and represented 7.48 percent of period-end assets of $638 billion. The preliminary Tier 1 Capital Ratio was 8.09 percent, an increase of 19 basis points from a year earlier.

During the quarter, Bank of America repurchased 51.2 million shares and issued 22.3 million shares for stock options. Average common shares outstanding were 1.53 billion, down 4 percent from 1.60 billion a year earlier and 1 percent from the first quarter of 2002.

Business Segment Results

To present comparable business segment results, earnings and expenses for the second quarter of 2001 have been adjusted to exclude goodwill amortization.

Consumer and Commercial Banking

Consumer and Commercial Banking (CCB) earned $1.44 billion, up 7 percent from a year ago. Total revenue grew 6 percent while expenses increased 2 percent. Return on equity was 31.4 percent and SVA grew 14 percent to $936 million.

Net interest income increased 7 percent to $3.51 billion, driven by growth in consumer loans and deposits as well as the interest rate environment. Consumer loans grew 16 percent, primarily from residential mortgages and credit cards, driving a 2 percent increase in average loans. Commercial loan levels declined 13 percent.

Average customer deposits grew 6 percent, as new customers opened checking accounts and consumers moved assets into deposit products with greater liquidity during uncertain market conditions. Growth in consumer deposits continued to be led by increases in money market savings and checking account balances.

Noninterest income was up 5 percent to $2.02 billion, driven by higher consumer service charges from increased customer activity, growth in new customers, increased use of debit cards by customers and higher commercial account service charges, slightly offset by lower mortgage banking income due to lower servicing levels.

Global Corporate and Investment Banking

Global Corporate and Investment Banking (GCIB) earned $560 million, a 12 percent increase from last year. While revenue declined 4 percent to $2.36 billion, the provision for loan losses decreased 15 percent and expenses declined 10 percent. Return on equity was 20.2 percent and SVA increased $137 million to $236 million.

Net interest income was up 4 percent to $1.23 billion from a year ago, primarily driven by trading-related activities and lower funding costs. Total trading-related revenue in GCIB, which includes trading-related net interest income and trading fees, was $752 million, down 11 percent from last year's strong results primarily due to weaker demand for equity products.

Despite the challenging environment, investment banking income increased 2 percent to $442 million from last year. These results were driven by the continued strong demand for fixed-income debt products and higher equity underwriting and advisory services income.

Asset Management

Asset Management earnings decreased 42 percent from a year ago to $72 million, primarily due to one large charge-off. Provision for credit losses rose to $144 million from $63 million a year earlier. Revenue of $624 million was slightly below last year while expenses declined 2 percent, even as the company made business investments for the future. Return on equity was 12.4 percent and SVA declined $58 million to $3 million.

Assets under management grew 2 percent, or $6 billion, to $297 billion. This increase was driven by the growth in the Nations Funds family of money market mutual funds.

In an effort to increase its distribution capabilities to better serve the financial needs of clients across the franchise, Asset Management continued to hire top talent during the quarter. The company is on track to reach its goal of increasing its number of licensed financial advisors and relationship managers by 20 percent by the end of 2002.

Equity Investments

Equity Investments reported a loss of $53 million, compared to earnings of $37 million a year ago. In Principal Investing, cash gains and fair market adjustments were approximately $170 million in the second quarter, offset by impairments of approximately $215 million.

One of the world's leading financial services companies, Bank of America is committed to making banking work for customers and clients like it never has before. Through innovative technologies and the ingenuity of its people, Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world new and better ways to manage their financial lives.

Bank of America stock (ticker: BAC) is listed on the New York, Pacific and London stock exchanges. The company's Web site is News, speeches and other corporate information may be found at

Additional financial tables are available at

NOTE: James H. Hance Jr., vice chairman and chief financial officer, will
discuss second quarter results in a conference call at 9:30 a.m. (Eastern
Time) today. The call can be accessed via a Webcast available on the Bank of
America Web site at

Forward-Looking Statements

This press release contains forward-looking statements including, without limitation, statements about the Corporation's financial conditions, results of operations and earnings outlook. These forward-looking statements involve certain risks and uncertainties. Actual conditions, results and earnings may differ materially from those contemplated by such forward-looking statements. Factors that may cause actual results to differ materially from such statements include, among others, the following: 1) projected business increases following process change and other investments are lower than expected; 2) competitive pressure among financial services companies increases significantly; 3) general economic conditions are less favorable than expected; 4) changes in the interest rate environment reduce interest margins and impact funding sources; 5) changes in market rates and prices may adversely impact the value of financial products; 6) legislation or regulatory requirements or changes adversely affect the businesses in which the company is engaged; 7) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the Corporation and its businesses; and 8) decisions to downsize, sell or close units or otherwise change the business mix of the company. For further information, please read the Bank of America reports filed with the SEC and available at

Bank of America

                                   Three Months               Six Months
                                  Ended June 30             Ended June 30
                                2002         2001         2002         2001

(Dollars in millions,

except per share

data; shares in


    Financial Summary (1)

    Earnings                  $2,221       $2,023       $4,400       $3,893
        Earnings per
         common share           1.45         1.26         2.86         2.42
        Diluted earnings
         per common share       1.40         1.24         2.77         2.39

    Dividends per common share  0.60         0.56         1.20         1.12
    Closing market price
     per common share          70.36        60.03        70.36        60.03
    Average common shares
     issued and
     outstanding           1,533,783    1,601,537    1,538,600    1,605,193
    Average diluted common
     shares issued and
     outstanding           1,592,250    1,632,964    1,586,836    1,631,892

    Summary Income
     Statement (1)

    Net interest income       $5,262       $5,117      $10,509       $9,838
    Noninterest income         3,481        3,741        6,921        7,521
    Total revenue              8,743        8,858       17,430       17,359
    Provision for
     credit losses               888          800        1,728        1,635
    Gains (losses) on
     sales of securities          93           (7)         137          (15)
    Noninterest expense        4,490        4,821        8,984        9,475
    Income before income
     taxes                     3,458        3,230        6,855        6,234
    Income taxes -
     including taxable-
     equivalent basis
     adjustment                1,237        1,207        2,455        2,341
    Net income                $2,221       $2,023       $4,400       $3,893

    Summary Average
     Balance Sheet

    Loans and leases        $335,684     $383,500     $331,765     $385,683
    Managed loans and
     leases                  342,238      394,065      339,294      396,351
    Securities                67,291       55,719       70,399       55,472
    Earning assets           562,192      567,628      555,688      564,544
    Total assets             646,599      655,557      642,163      652,147
    Deposits                 365,986      363,348      365,198      359,504
    Shareholders' equity      48,274       48,709       47,867       48,290
    Common shareholders'
     equity                   48,213       48,640       47,805       48,219

    Performance Indices

    Return on average
     assets                     1.38 %       1.24 %       1.38 %       1.20 %
    Return on average
     common shareholders'
     equity                    18.47        16.67        18.55        16.27
    Efficiency ratio           51.34        54.44        51.54        54.58

    Net interest yield          3.75         3.61         3.80         3.50
    Shareholder value
     added                      $834         $791       $1,666       $1,470

    Credit Quality

    Net charge-offs             $888         $787       $1,728       $1,560
      % of average loans
      and leases                1.06 %       0.82 %       1.05  %      0.82 %
    Managed bankcard net
     charge-offs as a % of
     average managed
     bankcard receivables       5.59         4.94         5.51         4.66

(1) The three months ended June 30, 2001 included goodwill amortization of

        $169 million.  The impact on net income was $155 million, or $0.09 per
        share.  The six months ended June 30, 2001 included goodwill
        amortization of $337 million.  The impact on net income was
        $314 million, or $0.19 per share.

Bank of America

                                                           At June 30
                                                    2002              2001

(Dollars in millions, except per

share data; shares in thousands)

    Balance Sheet Highlights

    Loans and leases                            $340,394          $380,425
    Securities                                    83,163            54,577
    Earning assets                               552,416           538,926
    Total assets                                 638,448           625,525
    Deposits                                     360,769           363,486
    Shareholders' equity                          47,764            49,302
    Common shareholders' equity                   47,704            49,234
        Per share                                  31.47             30.75

    Total equity to assets ratio (period end)       7.48 %            7.88 %

    Risk-based capital ratios: (2)
         Tier 1                                     8.09              7.90
         Total                                     12.42             12.09

    Leverage ratio                                  6.47              6.50

    Period-end common shares issued and
     outstanding                               1,515,667         1,601,126

    Allowance for credit losses                   $6,873            $6,911
    Allowance for credit losses
     as a % of loans and leases                     2.02 %           $1.82 %
    Allowance for credit losses
     as a % of nonperforming loans                   148               118
    Nonperforming loans                           $4,642            $5,849
    Nonperforming assets(3)                        4,939             6,195
    Nonperforming assets as a % of:
         Total assets                                .77 %             .99 %
         Loans, leases and foreclosed
          properties                                1.45              1.63
    Nonperforming loans as a % of loans
     and leases                                     1.36              1.54

    Other Data

    Full-time equivalent employees               135,489           144,287
    Number of banking centers                      4,232             4,259
    Number of ATM's                               12,827            12,860

                         Consumer and               and
                          Commercial     Asset   Investment  Equity  Corporate
                            Banking   Management   Banking Investments   Other
    Three months ended June
     30, 2002
    Total revenue             $5,527       $624     $2,359    $(78)      $311
    Net income                 1,443         72        560     (53)       199
    Shareholder value added      936          3        236    (118)      (223)
    Return on equity            31.4  %    12.4  %    20.2  % (9.9) %     n/m
    Average loans and
     leases                 $182,863    $23,666    $63,927    $448    $64,780

    Three months ended June
     30, 2001
    Total revenue             $5,212       $631     $2,446     $78       $491
    Net income (4)             1,241        113        472      36        161
    Shareholder value added      823         61         99     (34)      (158)
    Return on equity            25.9  %    20.3  %    13.8  %  5.9  %     n/m
    Average loans and
     leases                 $178,534    $24,352    $86,528    $491    $93,595

n/m = not meaningful

(2) 2002 ratios are preliminary.

(3) In the third quarter of 2001, $1.2 billion of nonperforming subprime

        real estate loans were transferred to loans held for sale as a result
        of the exit of certain consumer finance businesses.

(4) Includes goodwill amortization of $103 million for Consumer and

        Commercial Banking, $12 million for Asset Management, $27 million for
        Global Corporate and Investment Banking, $2 million for Equity
        Investments and $11 million for Corporate Other.

                    MAKE YOUR OPINION COUNT -  Click Here

SOURCE Bank of America Corporation

-0- 07/15/2002

/CONTACT: Investors, Kevin Stitt, +1-704-386-5667, or Lee McEntire, +1-704-388-6780, or Media, Eloise Hale, +1-704-387-0013, or, all of Bank of America/

Bank of America

Terms of Use

The information contained on this Investor Relations web site is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The financial and other information that may be accessed on this Investor Relations web site speaks only as of the particular dates referenced in the information or the dates the information was originally issued. This information may have since become superseded as a result of later circumstances or events. Bank of America does not undertake any obligation, and disclaims any duty, to update this information. In addition, this information may contain forward-looking statements that are subject to various risks and uncertainties that could cause actual outcomes or results to differ materially from those expressed in or implied by any forward-looking statement. The risks and uncertainties that could affect the company's actual outcomes or results are discussed more fully in our most recent Annual Report on Form 10-K, as well as any updated risks and uncertainties contained in subsequent reports filed with the Securities and Exchange Commission.