Bank of America

Investor Relations

Bank of America Earns Record $2.7 Billion in Second Quarter; Earnings Per Share Rise 29%

Supplemental second quarter 2003 financial information

Shareholder Value Added grows 70% to $1.41 billion Revenue rises 12% Mortgage banking income quadruples to $559 million Core deposits grow 9% Equities, Mortgage-backed securities achieve significant market share gains Large corporate charge-offs hit three-year low

CHARLOTTE, N.C., Jul 14, 2003 /PRNewswire-FirstCall via COMTEX/ -- Bank of America Corporation today reported record earnings of $2.74 billion for the second quarter, or $1.80 per share (diluted), 23 and 29 percent increases, respectively, from $2.22 billion, or $1.40 per share, a year ago. The return on common equity increased to 21.86 percent.

Broad-based gains across most product lines reflect the success of the company's customer relationship strategy. Strong gains were achieved in such products as mortgage, debit and credit card, deposits and loans. The company had its best quarter ever in investment banking and continued to make significant progress building its asset management business. In addition, loan charge-offs declined 13 percent from a year earlier.

"These strong results show that we are realizing our potential as the best and most diverse franchise in US banking," said Kenneth D. Lewis, chairman and chief executive officer. "These are the results that our customer-focused strategy intended to produce and they will continue to differentiate Bank of America in the eyes of customers and investors."

"While the consumer bank continues to significantly drive earnings, the core results in our market-related businesses are positive," Lewis said. "And I am especially excited about the increase in customer metrics such as satisfaction across all of these businesses. "

Net income for the first half of 2003 was $5.16 billion, or $3.39 per share (diluted), 17 and 22 percent increases, respectively, from $4.40 billion, or $2.77 per share, a year ago.

    Second Quarter Financial highlights  (compared to a year earlier)

    -- Return on assets grew to 1.42 percent.

    -- Mortgage originations reached a record $40 billion.

    -- Mortgage banking, card and investment banking all achieved record

         - Card income increased 23 percent to $762 million.
         - Mortgage banking income increased 305 percent to $559 million.
         - Investment banking income increased 5 percent to $488 million.

    -- Net loan charge-offs hit a two-year low of $772 million.

    -- Marsico Capital Management increased its assets under management 49
       percent to $20.8 billion on strong inflows amid solid performance.

    -- The consumer and commercial bank's efficiency ratio dropped to 47

    Customer highlights (compared to a year earlier)

    -- The number of customers expressing the highest level of satisfaction
       with the company increased 14 percent.  This equates to an increase of
       1.5 million customers being highly satisfied with their banking
       experience.  These customers are more likely to expand their
       relationships and refer others to the bank.  In addition:

         - Checking account satisfaction increased 9 percent.
         - Small-business satisfaction with the bank increased 7 percent.
         - Online banking satisfaction increased 6 percent.
         - Problem incidence decreased 9 percent.

    -- The company closed the quarter with 74 percent of its mutual fund
       assets in the top two Lipper quartiles for investment performance over
       three years.

    -- Product sales in the banking centers increased 32 percent.

    -- In the first half of the year, the company's market share in the US
       equities and equity-related securities business increased to 7.5
       percent from 2.9 percent in the same time-period a year ago.  Mortgage-
       backed securities' market share increased to 8.5 percent from 5.5

    -- The company is on target to reach its goal of increasing consumer
       checking accounts by one million this year.  Year to date, the company
       has opened 560,000 net new accounts as consumers continue to be
       attracted to the My Access Checking(TM) product.


Revenue grew 12 percent from the previous year to $9.78 billion on a fully-taxable equivalent basis.

Net interest income increased 5 percent to $5.52 billion on a fully-taxable equivalent basis, driven by consumer loan growth, and by higher mortgage warehouse levels, core funding levels, discretionary portfolios levels, and trading-related assets. These factors were partially offset by the impact of lower interest rates and declines in various loan portfolios.

Net interest yield declined 42 basis points to 3.33 percent. Half of the decline was due to asset growth supporting the initiative to increase distribution to Global Corporate & Investment Bank customers.

Noninterest income increased 22 percent to $4.26 billion. Strong refinance levels continued to drive higher mortgage banking income results. Card income rose as a result of an increase in transaction volume. Investment banking income rose as a result of strong securities underwriting. Total service charges increased 6 percent.

Other income was up due primarily to $282 million in gains on residential loan sales taken to reduce prepayment risk.

During the quarter, the company realized $296 million in net securities gains as the discretionary portfolio was repositioned in line with market conditions.


Expenses increased 13 percent from a year ago to $5.06 billion. This growth was driven by the development and launch of several new marketing campaigns, an increase in employee incentives and benefits costs and an increase in litigation reserves. This quarter, the company also recorded a pre-tax impact of $32 million related to expensing employee stock options. The efficiency ratio was 51.73 percent.

Credit quality

Credit losses declined from the prior quarter and year and were at their lowest level since first quarter 2001. While there were significant declines in loan losses, the company continues to remain cautious about the large corporate portfolio. The middle market and consumer portfolios remain stable. Managed consumer credit card losses increased, reflecting the growth and seasoning of the portfolio as well as the impact of the economy.

    -- Provision for credit losses was $772 million, down 7 percent from
       $833 million in the first quarter and down 13 percent from $888 million
       a year earlier.

    -- Net charge-offs were also $772 million, or 0.88 percent of loans and
       leases, down from $833 million, or 0.98 percent, in the first quarter
       and down from $888 million, or 1.06 percent, a year earlier.

    -- Nonperforming assets were $4.43 billion, or 1.23 percent of loans,
       leases and foreclosed properties as of June 30, 2003. This was down
       12 percent from the first quarter and down 10 percent from $4.94
       billion a year earlier.

    -- The allowance for credit losses, at $6.84 billion or 1.90 percent of
       loans and leases, was virtually unchanged from both the first quarter
       and the prior year.  As of June 30, 2003, the allowance for credit
       losses represented 163 percent of nonperforming loans, up from
       143 percent in the first quarter and 148 percent a year earlier.

Capital management

Total shareholders' equity was $51.0 billion at June 30, 2003, up 7 percent from a year ago and represented 7 percent of period-end assets of $769 billion. The preliminary Tier 1 Capital Ratio was 8.08 percent, a decrease of 1 basis point from a year ago and 12 basis points from the March 31, 2003 level.

During the quarter, Bank of America issued 29 million shares related to employee options and stock ownership plans, and repurchased 30 million shares. Average common shares outstanding were 1.49 billion in the second quarter, down 3 percent from 1.53 billion a year earlier.

Consumer and Commercial Banking

Consumer and Commercial Banking (CCB) earnings rose 18 percent from a year ago, to $1.87 billion. Total revenue grew 15 percent to $6.59 billion while noninterest expense was up 12 percent, driven primarily by volume-related expenses in mortgage banking. Return on equity was 39 percent and SVA grew $325 million to $1.38 billion.

Improved results reflected the ongoing strength of the consumer and middle market businesses. Mortgage originations reached a record $40 billion. Credit and debit card purchase volumes increased 9 and 19 percent, respectively, and managed outstandings increased 11 percent. Checking, credit card and debit card accounts also increased.

Noninterest income was up 30 percent to $2.62 billion, driven by higher mortgage banking income, card income and consumer service charges. It was also driven by a 38 percent increase in middle market investment banking income.

Net interest income increased 7 percent to $3.97 billion. Average loans grew 3 percent. Consumer loans grew 6 percent as customers continued to take advantage of the interest rate environment for home equity lines and automobile loans, while credit card increased due to higher outstandings related to growth in new accounts. This was partially offset by a 2 percent decline in the commercial loan portfolio. However, the commercial portfolio grew from the first quarter, as did commercial deposits.

Global Corporate and Investment Banking

Global Corporate and Investment Banking (GCIB) earned $440 million, down 14 percent from a year ago. Revenue decreased 2 percent to $2.26 billion while expenses increased 10 percent. Return on equity was 18 percent and SVA decreased $8 million to $175 million.

The quarter was marked by the strength of the core debt business as investment banking and high yield, high grade and mortgage-backed securities trading continued to show strong results. In addition, there was a significant decline in credit costs. These trends were offset by markdowns of values on credit derivatives and losses in the commodities market.

Investment banking income increased 4 percent to $462 million from last year. The increase in fees was led by the strong demand for fixed income and equities. Total trading-related revenue in GCIB, which includes trading-related net interest income and trading fees, was $661 million, down 12 percent from last year due to mark to market losses on credit derivatives used to manage exposures in the large corporate loan portfolio.

Net interest income was up 4 percent to $1.20 billion from a year ago, primarily driven by the growth in trading assets as the company focuses on the investor/client sector. Period-end corporate loans and leases in the quarter were $46.6 billion, down from $61.7 billion a year earlier.

Asset Management

Asset Management net income rose 118 percent from a year ago to $144 million primarily as a result of lower provision expense. Despite more than 10% declines in average market indices, overall revenue decreased only 2 percent to $612 million. Expenses increased 2 percent, reflecting the increase in distribution capabilities over the last five quarters. Return on equity was 21 percent and SVA increased $72 million to $70 million.

Assets under management increased 7 percent to $315 billion, even as the S&P 500 dropped 2 percent, led by increases in money market and other short- term funds. Balances in equity funds grew 6 percent from a year earlier, led by the strong performance of the Marsico funds.

Continuing to focus on expanding distribution capabilities, Asset Management is on target to increase its number of financial advisors by approximately 20 percent again this year. Additionally, the business has rolled out the advice-focused High Net Worth client service model in 23 markets and will complete the rollout to all markets later this year.

Equity Investments

Equity Investments reported a loss of $28 million, compared to a loss of $55 million a year ago. Principal Investing reported cash gains of $87 million and $41 million in mark-to-market adjustments in the second quarter offset by $107 million in impairments.

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

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. 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.

Shares of Bank of America (ticker: BAC), the second largest banking company in the United States by market capitalization, are listed on the New York, Pacific and London stock exchanges. The company's Web site is News, speeches and other corporate information can be found at

Additional financial tables are available at

Forward-Looking Statements

This press release contains forward-looking statements, including statements about the financial conditions, results of operations and earnings outlook of Bank of America Corporation. The forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, the following: 1) projected business increases following process changes 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) political conditions and related actions by the United States military abroad may adversely affect the company's businesses and economic conditions as a whole; 4) changes in the interest rate environment reduce interest margins and impact funding sources; 5) changes in foreign exchange rates increases exposure; 6) changes in market rates and prices may adversely impact the value of financial products and assets; 7) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 8) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 9) decisions to downsize, sell or close units or otherwise change the business mix of any of the company. For further information regarding Bank of America Corporation, 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
                               2003         2002         2003         2002

    (Dollars in millions, except per share data; shares in thousands)

    Financial Summary

    Earnings                  $2,738       $2,221       $5,162       $4,400
        Earnings per
         common share           1.83         1.45         3.45         2.86
        Diluted earnings
         per common share       1.80         1.40         3.39         2.77

    Dividends per common share  0.64         0.60         1.28         1.20
    Closing market price
     per common share          79.03        70.36        79.03        70.36
    Average common shares
     issued and
     outstanding           1,494,094    1,533,783    1,496,827    1,538,600
    Average diluted common
     shares issued and
     outstanding           1,523,306    1,592,250    1,524,715    1,586,836

    Summary Income Statement

    Net interest income       $5,365       $5,094      $10,574      $10,247
    Noninterest income         4,255        3,481        7,940        6,921
    Total revenue              9,620        8,575       18,514       17,168
    Provision for
     credit losses               772          888        1,605        1,728
    Gains on sales of
     securities                  296           93          569          137
    Noninterest expense        5,058        4,490        9,775        8,984
    Income before income
     taxes                     4,086        3,290        7,703        6,593
    Income tax expense         1,348        1,069        2,541        2,193
    Net income                $2,738       $2,221       $5,162       $4,400

    Summary Average Balance Sheet

    Loans and leases        $350,279     $335,684     $347,983     $331,765
    Securities                95,614       67,291       81,776       70,399
    Earning assets           663,500      562,192      638,435      555,688
    Total assets             774,644      646,599      744,141      642,163
    Deposits                 405,307      365,986      395,587      365,198
    Shareholders' equity      50,269       48,274       49,837       47,867
    Common shareholders'
     equity                   50,212       48,213       49,780       47,805

    Performance Indices

    Return on average assets    1.42 %       1.38 %       1.40 %       1.38 %
    Return on average
     common shareholders'
     equity                    21.86        18.47        20.90        18.55

    Credit Quality

    Net Charge-offs             $772         $888       $1,605       $1,728
     % of average loans
      and leases                0.88 %       1.06 %       0.93 %       1.05 %
    Managed bankcard net
     charge-offs as a % of
     average managed
     bankcard receivables       5.74         5.59         5.50         5.51

                                                         At June 30
                                                  2003              2002
    Balance Sheet Highlights

    Loans and leases                            $360,305          $340,394
    Securities                                   114,529            83,163
    Earning assets                               655,684           552,416
    Total assets                                 769,179           638,448
    Deposits                                     421,935           360,769
    Shareholders' equity                          51,016            47,764
    Common shareholders' equity                   50,960            47,704
        Book value per share                       34.06             31.47

    Total equity to assets ratio (period end)       6.63 %            7.48 %

    Risk-based capital ratios: (1)
         Tier 1                                     8.08              8.09
         Total                                     11.95             12.42

    Leverage ratio                                  5.93              6.47

    Period-end common shares issued and
     outstanding                               1,496,314         1,515,667

    Allowance for credit losses                   $6,841            $6,873
    Allowance for credit losses as a % of
     loans and leases                               1.90 %            2.02 %
    Allowance for credit losses as a % of
     nonperforming loans                             163               148
    Nonperforming loans                           $4,187            $4,642
    Nonperforming assets                           4,430             4,939
    Nonperforming assets as a % of:
         Total assets                               0.58 %            0.77 %
         Loans, leases and foreclosed properties    1.23              1.45
    Nonperforming loans as a % of loans
     and leases                                     1.16              1.36

    Other Data

    Full-time equivalent employees               132,796           135,489
    Number of banking centers                      4,200             4,232
    Number of ATM's                               13,250            12,827

    (1) 2003 ratios are preliminary.


                 Consumer and            Global Corporate
                  Commercial      Asset   and Investment   Equity   Corporate
                    Banking    Management     Banking    Investments  Other

    Three months ended
     June 30, 2003

    Total revenue    $6,590       $612        $2,262         $(12)      $327
    Net income        1,871        144           440          (28)       311
    Shareholder value
     added            1,381         70           175          (84)      (128)
    Return on
     average equity    38.5 %     21.1 %        17.8 %       (5.5) %     n/m
    Average loans
     and leases    $187,811    $22,866       $51,285         $414    $87,903

    Three months ended
     June 30, 2002

    Total revenue    $5,723       $622        $2,306         $(84)      $176
    Net income        1,587         66           509          (55)       114
     value added      1,056         (2)          183         (120)      (283)
    Return on
     average equity    33.1 %     11.4 %        18.3 %      (10.1) %     n/m
    Average loans
     and leases    $182,012    $24,308       $64,114         $448    $64,802

    n/m = not meaningful

                                    Three Months Ended    Six Months Ended
                                          June 30              June 30
                                      2003      2002      2003       2002


    Taxable-equivalent basis data
    Net interest income              $5,524    $5,262    $10,885    $10,509
    Total revenue                     9,779     8,743     18,825     17,430
    Net interest yield                 3.33 %    3.75 %     3.42 %     3.80 %
    Efficiency Ratio                  51.73     51.34      51.93      51.54

    Reconciliation of net income to
     shareholder value added
    Net income                       $2,738    $2,221     $5,162     $4,400
    Amortization expense                 54        55        108        110
    Capital charge                   (1,378)   (1,442)    (2,716)    (2,844)
    Shareholder value added          $1,414      $834     $2,554     $1,666

SOURCE Bank of America Corporation

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

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