Bank of America

Investor Relations

Strong Performance in Consumer Banking Continues To Lead Bank of America Growth in Earnings

Supplemental fourth quarter 2002 financial information

Company Reports Fourth Quarter and Full-Year Earnings per Share of $1.69 And $5.91

CHARLOTTE, N.C., Jan. 15 /PRNewswire-FirstCall/ -- Bank of America Corporation (NYSE: BAC) today reported fourth quarter net income of $2.61 billion, or $1.69 per share (diluted) up from $2.06 billion, or $1.28 per share, a year ago.

For the full year, Bank of America reported net income of $9.25 billion, or $5.91 per share (diluted). A year earlier, the company reported net income of $6.79 billion, or $4.18 per share.

In the fourth quarter and full year, the return on average common equity was 21.58 percent and 19.44 percent, respectively.

As previously announced, the company recorded after-tax income of $488 million resulting from a tax settlement during the quarter.

Fourth quarter results were driven by continued growth in consumer revenue from mortgage, debit and credit card, and deposits. These items were partly offset by weak market-related revenue.

"We continue to benefit from our diversified business mix," said Kenneth D. Lewis, chairman and chief executive officer. "Fourth quarter performance was led by the strong growth we saw throughout the year in consumer banking and by tight expense control."

"Although the economy remains challenging," continued Lewis, "it was a successful year. We made great progress on our customer-focused strategy. We added talent, launched new products that deepened relationships, improved our customers' satisfaction scores and increased retention. This intense focus paid off and we will continue to execute this strategy for 2003."

Excluding goodwill amortization in 2001, fourth quarter net income was up 18 percent. Excluding goodwill amortization and $1.25 billion in costs related to the exit of the company's auto leasing and subprime real estate lending business in 2001, full-year net income was up 7 percent.

Fourth quarter financial summary (compared to a year earlier)

Financial highlights

  • Average total customer deposits grew 8 percent to $343 billion.

  • Average consumer loans increased 19 percent to $196 billion.

  • Mortgage banking income rose 23 percent to $206 million.

  • Card income was up 17 percent to $736 million.

  • The loan-to-domestic-deposit ratio was 97 percent versus 99 percent a year earlier.

  • Book value per share rose 8 percent from 2001 to $33.49.

Customer highlights

  • During the fourth quarter, the company announced that it had entered into a definitive agreement with Santander Central Hispano to acquire 24.9 percent of its subsidiary, Grupo Financiero Santander Serfin, the most profitable and third-largest bank in Mexico. The alliance will advance Bank of America's strategy to better serve the Hispanic market. The transaction is expected to close in the first quarter of 2003.

  • The company increased consumer checking accounts by 528,000 in 2002, compared to an increase of 193,000 for 2001. The number of accounts increased by 127,000 in the fourth quarter. The company continues to attract and retain customers with its new MyAccess Checking(TM) product and through increased customer satisfaction.

  • The number of customers expressing their highest level of satisfaction with the company continued to increase: Problem incidence decreased 24 percent. Small-business satisfaction with the bank increased 20 percent. Mortgage loan satisfaction increased 13 percent. Checking account satisfaction increased 10 percent.


Fully taxable-equivalent revenue of $8.97 billion was relatively unchanged from the previous year.

Both fully taxable-equivalent net interest income and noninterest income remained relatively unchanged at $5.54 billion and $3.43 billion, respectively, from fourth quarter 2001 levels. Record refinance levels drove higher mortgage banking income results. Card income rose as a result of higher interchange and other fees. Total service charges increased 7 percent.

Other income was up due primarily to $172 million in gains on whole loan mortgage sales taken to manage prepayment risk. These improvements were offset by lower market-related revenues as investment banking and trading account profits declined a total of $286 million.

During the quarter, the company realized $304 million in net securities gains, down from $393 million in 2001, as the discretionary portfolio was repositioned in line with market conditions.


Expenses were down 9 percent from a year earlier to $4.83 billion, primarily due to tightened expense control, less litigation expense and using Six Sigma tools that resulted in productivity gains and efficiencies. Adjusted for the amortization of goodwill, expenses decreased 6 percent. The efficiency ratio was 53.9 percent.

Credit quality

Credit quality continued to be affected by uncertain economic and market conditions. Consumer credit quality continues to perform well while the franchise-based commercial portfolio improved during the quarter. The large corporate portfolio continued to experience credit issues in a few industries such as airlines, telecom and utilities as well as around specific events.

  • Provision for credit losses was $1.17 billion.

  • Net charge-offs were $1.17 billion, or 1.35 percent of loans and leases, down from $1.19 billion, or 1.42 percent, a year earlier. Included in the fourth quarter were losses associated with the bankruptcy of a major airline and with two credits in the utilities sector. Net charge-offs were 45 percent higher than the third quarter.

  • Nonperforming assets were $5.26 billion, or 1.53 percent of loans, leases and foreclosed properties at Dec. 31, 2002, up 7 percent from $4.91 billion, or 1.49 percent, a year earlier. Nonperforming assets increased 3 percent from levels in the third quarter of 2002 due principally to increases in the large corporate portfolio.

  • The allowance for credit losses was 2.00 percent of loans and leases on Dec. 31, 2002, a decrease in coverage of 9 basis points from 2.09 percent a year ago. The allowance for credit losses, at $6.85 billion, represented 136 percent of nonperforming loans, virtually unchanged from the third quarter of 2002, and down from 153 percent a year earlier.

Capital management

Total shareholders' equity was $50.3 billion on Dec. 31, 2002, up 4 percent from a year ago, and represented 8 percent of period-end assets of $660 billion. The preliminary Tier 1 Capital Ratio was 8.22 percent, a decrease of 8 basis points from a year earlier.

During the quarter, Bank of America repurchased 9.7 million shares and issued 8.2 million shares as stock options were exercised. Average common shares outstanding were 1.50 billion, down 4 percent from 1.57 billion a year earlier, and were unchanged from the third quarter of 2002.

2002 full-year financial summary


Fully taxable-equivalent revenue, at $35.1 billion, remained relatively unchanged from 2001.

Fully taxable-equivalent net interest income rose 4 percent to $21.5 billion. This growth was driven by a larger discretionary portfolio, the impact of interest rates, higher deposit balances and trading-related activities. These factors offset the impact of the exited subprime business in 2001. The net interest yield of 3.75 percent improved 7 basis points, reflecting a favorable change in loan mix and higher deposit levels. These factors somewhat offset the absence of the subprime business and the yield impact of trading-related activities.

Noninterest income declined 5 percent to $13.6 billion. Solid growth in fee income from consumer products such as mortgages and debit and credit cards was unable to offset a sharp decline in equity investments and trading account profits due to the challenging economy. Other income was up, primarily due to higher levels of whole loan mortgage sale gains.


Noninterest expense decreased 11 percent to $18.4 billion from the prior year. This decline was driven by reduced litigation expense, lower business exit costs and lower personnel expense. Adjusted for the amortization of goodwill, expenses were down 8 percent.

Credit quality

Provision expense was $3.70 billion in 2002, a 14 percent decline from 2001. Included in the 2001 expense was $395 million related to the exit of the subprime business. Excluding that charge, provision expense declined 5 percent.

Net charge-offs totaled $3.70 billion, or 1.10 percent of loans and leases, down from $4.24 billion, or 1.16 percent of loans and leases, in 2001. Net charge-offs in 2001 included $635 million in losses related to the exit of the subprime business. Excluding that loss, full year charge-offs rose 2 percent, led by higher losses in the card portfolio.

2002 full-year business segment results

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

Consumer & Commercial Banking

Consumer & Commercial Banking (CCB) earned $6.09 billion, up 13 percent from a year earlier. Total revenue grew 9 percent while expenses increased 5 percent. Return on equity was 33.1 percent and Shareholder Value Added (SVA) grew 23 percent to $4.05 billion.

Net interest income increased 10 percent to $14.5 billion, driven by growth in consumer loans and deposits. Consumer loans grew 16 percent, primarily in residential mortgages and credit cards. Commercial loan levels declined 12 percent as companies paid down loan balances.

Average CCB deposits grew 6 percent, driven by growth in new checking accounts and improved account retention. Growth in consumer deposits continued to be led by increases in money market savings and checking account balances.

Noninterest income was up 8 percent to $8.45 billion, driven by higher consumer service charges from increased customer activity, mortgage activity, growth in new customers, increased use of debit and credit cards by customers and higher commercial account service charges.

Global Corporate and Investment Banking

Global Corporate and Investment Banking (GCIB) earned $1.72 billion, a 17 percent decline from last year. Revenue decreased 8 percent to $8.83 billion, while the provision for loan losses decreased 6 percent. Additionally, expenses declined 5 percent. Return on equity was 15.5 percent and SVA decreased 19 percent to $421 million.

Total trading-related revenue in GCIB, which includes trading-related net interest income and trading-account profits, was $2.80 billion, down 18 percent from 2001 results, primarily due to weaker demand for equity and fixed-income products.

Despite the challenging environment, investment banking income only decreased 3 percent from 2001 to $1.48 billion. This result was driven by increased syndications and advisory fees, which offset weaker market demand for securities underwriting.

Asset Management

Asset Management earnings decreased 29 percent from a year ago to $404 million, primarily due to one large credit. Provision for credit losses rose to $318 million from $121 million a year earlier. Revenue of $2.40 billion was down 3 percent, while expenses remained flat as the business continued to invest in distribution capabilities. Return on equity was 16.3 percent and SVA declined $199 million to $113 million.

Assets under management remained relatively unchanged at $310 billion. Asset Management grew its distribution capabilities to better serve the financial needs of clients across the franchise, surpassing its 20 percent goal of increasing the number of financial advisors and relationship managers in 2002.

Equity Investments

Equity Investments reported a net loss of $329 million, compared to a net loss of $115 million a year ago. In Principal Investing, cash gains of $432 million were offset by impairments of $710 million. In 2001, cash gains of $425 million offset impairments of $335 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.

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 may be found at

Additional financial tables are available at .

Note: James H. Hance, Jr., vice chairman and chief financial officer, will
discuss fourth quarter and full year 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 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) 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; 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           Twelve Months
                                  Ended December 31      Ended December 31
                                  2002         2001      2002          2001

(Dollars in millions,

except per share data;

shares in thousands)

    Financial Summary (1)

    Earnings                      $2,614       $2,057    $9,249        $6,792
     Earnings per common
      share                         1.74         1.31      6.08          4.26
     Diluted earnings per common
      share                         1.69         1.28      5.91          4.18

    Dividends per common
     share                          0.64         0.60      2.44          2.28
    Closing market price per common
     share                         69.57        62.95     69.57         62.95
    Average common shares
     issued and
     outstanding               1,499,557    1,570,083 1,520,042     1,594,957
    Average diluted common
     shares issued and
     outstanding               1,542,482    1,602,886 1,565,467     1,625,654

    Summary Income Statement (1)

    Net interest
     income                       $5,374       $5,417   $20,923       $20,290
     income                        3,430        3,398    13,571        14,348
     revenue                       8,804        8,815    34,494        34,638
    Provision for credit
     losses                        1,165        1,401     3,697         4,287
    Gains on sales of
     securities                      304          393       630           475
     expense                       4,832        5,324    18,436        20,709
    Income before income
     taxes                         3,111        2,483    12,991        10,117
    Income tax
     expense                         497          426     3,742         3,325
     income                       $2,614       $2,057    $9,249        $6,792

    Summary Average Balance Sheet

    Loans and
     leases                     $343,099     $333,354  $336,819      $365,447
    Managed loans and
     leases                      347,970      342,866   343,109       375,624
    Securities                    83,751       71,454    75,298        60,372
     assets                      601,881      555,205   573,521       560,316
     assets                      695,468      651,797   662,401       649,547
    Deposits                     381,381      368,171   371,479       362,652
    Common shareholders'
     equity                       48,015       48,850    47,552        48,609
    Total Shareholders'
     equity                       48,074       48,916    47,613        48,678

    Performance Indices (1)

    Return on average
     assets                         1.49%        1.25%     1.40%         1.05%
    Return on average common
     equity                         21.58       16.70     19.44         13.96

    Credit Quality

    Net Charge-offs (2)           $1,165       $1,194    $3,697        $4,244
     % of average loans and
      leases                        1.35%        1.42%     1.10%         1.16%
    Managed bankcard net charge-offs
     as a % of average
     managed bankcard
     receivables                    4.99         4.90      5.28          4.76

                                          At December 31
                                      2002               2001

    Balance Sheet Highlights

    Loans and leases                $342,755            $329,153
    Securities                        69,148              85,499
    Earning assets                   562,432             517,650
    Total assets                     660,458             621,764
    Deposits                         386,458             373,495
    Common shareholders' equity       50,261              48,455
     Book value per share              33.49               31.07
    Total Shareholders' equity        50,319              48,520

    Total equity to assets ratio
     (period end)                       7.62%               7.80%

    Risk-based capital ratios: (3)
     Tier 1                             8.22                8.30
     Total                             12.43               12.67

    Leverage ratio                      6.31                6.56

    Period-end common shares issued
     and outstanding               1,500,691           1,559,297

    Allowance for credit losses       $6,851              $6,875
    Allowance for credit losses as a %
     of loans and leases                2.00%               2.09%
    Allowance for credit losses as a %
     of nonperforming loans              136                 153
    Nonperforming loans               $5,037              $4,506
    Nonperforming assets               5,262               4,908
    Nonperforming assets as a % of:
     Total assets                        .80%                .79%
     Loans, leases and foreclosed
      properties                        1.53                1.49
    Nonperforming loans as a % of loans
     and leases                         1.47                1.37

    Other Data

    Full-time equivalent employees   133,944             142,670
    Number of banking centers          4,208               4,253
    Number of ATM's                   13,013              13,113

(1) The three months ended December 31, 2001 included goodwill

        amortization of $160 million.  The impact on net income was $149
        million, or $0.09 per share (diluted). The year ended December 31,
        2001 included goodwill amortization of $662 million.  The impact on
        net income was $616 million, or $0.38 per share (diluted).

(2) Net charge-offs in 2001 included $635 million related to the exit of

certain consumer finance businesses.

(3) 2002 ratios are preliminary.


                     Consumer and          Global Corporate
                      Commercial   Asset    and Investment  Equity  Corporate
                       Banking    Management   Banking     Investments  Other
    Twelve months
     December 31,

    Total revenue     $22,989     $2,399        $8,833        $(433)   $1,294
    Net income          6,088        404         1,723         (329)    1,363
    Shareholder value
     added              4,054        113           421         (582)     (246)
    Return on equity     33.1%      16.3%         15.5%       (15.5)%     n/m
    Average loans and
     leases          $183,341    $23,251       $62,934         $440   $66,853

    Twelve months
     ended December 31,

    Total revenue     $21,058     $2,475        $9,586          $29    $1,833
    Net Income (4)      4,953        522         1,956         (115)     (524)
    Shareholder value
     added              3,286        312           519         (388)     (642)
    Return on equity     25.9%      23.5%         14.9%        (4.9)%     n/m
    Average loans and
     leases          $178,116    $24,381       $82,321         $477   $80,152

n/m = not meaningful

(4) Includes goodwill amortization of $421 million for Consumer and

        Commercial Banking, $47 million for Asset Management, $108 million for
        Global Corporate and Investment Banking, $8 million for Equity
        Investments and $32 million for Corporate Other.

                            Three Months Ended     Twelve Months Ended
                                December 31             December 31
                              2002         2001        2002       2001

     DATA (Non-GAAP basis)

    Performance Metrics-
     Excluding exit charges (1,2)
    Earnings excluding exit
     charges                $2,614        $2,057      $9,249    $8,042
    Return on average
     assets                   1.49%         1.25%       1.40%     1.24%
    Return on average common
     shareholders' equity    21.58         16.70       19.44     16.53
    Efficiency ratio
     basis)                  53.90         59.80       52.55     55.47
    Shareholder value added $1,214          $793      $3,760    $3,087

    Taxable-equivalent basis data
    Net interest income      5,537         5,505      21,511    20,633
    Total revenue            8,967         8,903      35,082    34,981
    Net interest yield        3.66%         3.95%       3.75%     3.68%
    Efficiency ratio         53.90         59.80       52.55     59.20

(1) Excludes charges for provision for credit losses of $395 million and

        noninterest expense of $1.3 billion, both of which are related to the
        exit of certain consumer finance businesses in the third quarter of
        2001.  Noninterest expense charges consisted of goodwill write-offs,
        auto lease residual charges, real estate servicing  asset charges and
        other transaction costs.  The impact of business exit charges on net
        income for the year ended December 31, 2001 was $1.25 billion or $0.77
        per share (diluted).

(2) See footnote (1) on page 1. SOURCE Bank of America Corporation

/CONTACT: Investor, Kevin Stitt, +1-704-386-5667, or Lee McEntire, +1-704-388-6780, or media, Eloise Hale, +1-704-387-0013, or e-mail,, all of Bank of America Corporation/

/Web site: /

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