BANK OF AMERICA

Investor Relations

Bank of America Announces Earnings of $7.9 Billion for 2000

Printer Friendly Version View printer-friendly version
<< Back

Fourth Quarter 2000 Financial Information for Investors

CHARLOTTE, N.C., Jan. 16 -- Bank of America Corporation (NYSE: BAC) today reported fourth quarter earnings of $1.39 billion, or $.85 per share (diluted), in line with the company's estimates last December that higher loan losses and reduced capital markets related business associated with a slowing economy would impact results.

A year ago, the company reported net income of $1.90 billion, or $1.10 per share, including a $213 million after-tax charge to cover costs associated with the merger of NationsBank and BankAmerica corporations.

Cash-basis earnings -- which exclude the amortization of intangibles -- were $1.60 billion, or $ .98 per share, in the latest quarter.

For the full year, Bank of America's operating earnings were $7.86 billion, or $4.72 per share. A year earlier, the company's operating earnings totaled $8.24 billion, or $4.68 per share.

The return on common equity for 2000 was 16.70 percent while the return on average assets was 1.17 percent.

In 2000, Bank of America's net income was $7.52 billion, or $4.52 per share, compared to $7.88 billion, or $4.48 per share, in 1999. Results in 2000 and 1999 included after-tax charges associated with growth initiatives and mergers of $346 million and $358 million, respectively.

Fourth Quarter Financial Highlights (compared to a year ago)

  • Managed loans increased 9 percent to $422 billion.

  • Deposits grew 5 percent to $358 billion.

  • Deposit and loan growth more than offset the impact of lower spreads and the cost of share repurchases to produce 5 percent growth in net interest income.

  • Card fee revenue rose 7 percent.

  • Investment and Brokerage Service revenues were up 10 percent.

  • Provision expense exceeded net charge-offs by $135 million in the fourth quarter of 2000.

  • Results included a gain from the sale of the company's factoring unit.

Revenue

Revenue declined 1 percent in the fourth quarter from the previous year, mostly reflecting the impact of declines in the market value of equity investments and increased lease residual charges.

Fully taxable-equivalent net interest income increased 5 percent to $4.79 billion, reflecting a 9 percent increase in earning assets, partly offset by continued spread compression and the cost of share repurchases. Despite moderating growth in the fourth quarter due to slowing economic conditions and strategic efforts to reduce portfolio levels, average managed loans were 9 percent above a year ago. Deposits were up 5 percent, in part reflecting initiatives aimed at expanding balances with core relationship customers. The impact of lower estimated auto lease residual values reduced net interest income by $24 million.

Noninterest income declined 8 percent to $3.30 billion, as revenue increases in card services, investment and brokerage services and service charges were offset by declines in equity investment gains, mortgage servicing, investment banking and trading revenue. Debit card fees rose 25 percent as marketing efforts paid off in a sharp increase in market penetration.

Among the factors offsetting these and other improvements were a $208 million decline in the market value of equity investments and a $57 million increase in auto lease residual writedowns. Trading account profits were down 8 percent while investment banking fees declined by 7 percent from a year ago, due to the slowdown in capital markets.

Efficiency

Noninterest expense increased 2 percent to $4.64 billion, reflecting a 5 percent reduction in personnel expense offset by higher marketing and legal expenses plus costs related to the downsizing of operations in Columbia and Venezuela. The efficiency ratio was 57.4 percent.

Credit Quality

As the company projected late last year, loan losses and nonperforming assets increased significantly in the fourth quarter as the economy slowed. Higher provision expense accounted for the majority of the decline in net income.

  • The provision for credit losses in the fourth quarter was $1.21 billion compared to $350 million a year earlier. Provision expense exceeded net charge-offs by $135 million.

  • Net charge-offs were $1.08 billion, or 1.07 percent of loans and leases, up from $501 million, or .55 percent, a year ago. Net charge-offs included a one-time addition of $104 million to conform to new FFIEC standards on consumer loans and a significant writedown of one large credit as announced in the company's 10-Q last November.

  • Nonperforming assets were $5.5 billion, or 1.39 percent of loans, leases and foreclosed properties at December 31, 2000, compared to $3.2 billion, or .86 percent a year earlier. The increase in nonperforming assets was centered in the commercial domestic portfolio, where nonperforming loans were up $1.7 billion from a year earlier. A $497 million increase in consumer finance nonperforming loans, associated with the growth in that portfolio, also contributed to the rise in problem assets.

  • The allowance for credit losses totaled $6.8 billion at December 31, 2000, up $10 million from a year ago, and equaled 1.74 percent of loans and leases.

Capital Management

Total shareholders' equity was $47.6 billion at December 31, 2000, up 7 percent from 12 months earlier. This represented 7.42 percent of period-end assets of $642 billion. The Tier 1 Capital Ratio was 7.50 percent.

During the quarter, the company repurchased 18 million shares. Since June 1999, 146 million shares have been repurchased, representing an investment in Bank of America stock of $8.1 billion. Average (diluted) common shares outstanding were 1.639 billion in the fourth quarter, down 5 percent from 1.725 billion a year earlier.

Full Year Summary

Revenue rose 2 percent over the previous year.

Net interest income increased 2 percent to $18.76 billion.

  • A 9 percent increase in managed loans and higher trading related revenues more than offset spread compression caused in part by a change in mix and the cost of share repurchases.

  • The deterioration in auto lease residual values created a $107 million increase in auto lease residual charges to net interest income.

Noninterest income increased 3 percent to $14.49 billion.

  • Card fee revenue, investment and brokerage service fees and trading revenue all grew by double digits.

  • The absence of loan sales and securitizations, which boosted the year- ago results, and the impact of a $278 million increase in auto lease residual charges were the primary factors in reducing other income to $775 million from $1.5 billion.

Noninterest expense was virtually unchanged.

Deterioration in credit quality in the second half of the year resulted in higher loan losses and provision expense.

  • Provision expense rose 39 percent to $2.5 billion due to an increase in loan losses and nonperforming assets in the fourth quarter.

  • Net charge-offs totaled $2.4 billion compared to $2.0 billion in 1999. A sharp increase in the fourth quarter of 2000, driven by a one-time addition of $104 million to conform to new FFIEC standards on consumer loans and a significant writedown of one large credit, more than accounted for the rise.

  • Nonperforming assets rose 70 percent to $5.5 billion at December 31, 2000.

  • The reserve for loan losses ended 2000 at $6.8 billion, or 1.74 percent of loans and leases, compared to $6.8 billion, or 1.84 percent a year ago.

Consumer and Commercial Banking

For the full year, Consumer and Commercial Banking earnings declined 2 percent to $4.64 billion. Revenue declined 2 percent while expenses fell 4 percent.

The Card businesses, which include consumer, commercial, debit and government cards and merchant processing, all achieved double-digit growth. Total card fee revenue was up 11 percent and purchase volume rose 17 percent. Service charge revenue was up 4 percent in the Banking Regions. A $385 million increase in auto lease residual charges, the impact of divestitures and fewer one-time gains than a year earlier more than offset these positive trends. Personnel expense was lower due to growth and productivity initiatives.

Global Corporate and Investment Banking

Global Corporate and Investment Banking earnings declined 10 percent to $2.1 billion, reflecting higher loan losses and slower capital markets activity at the end of the year. Revenue increased 9 percent and expenses were up 11 percent.

Revenue growth in 2000 was driven by the buildout of the investment banking and trading platforms. Global Capital Raising reported 38 percent revenue growth due to higher investment banking fees and trading revenue. This growth resulted in a steady increase in market shares and rankings. Bank of America ranked in the top ten in all key product areas. The decline in earnings was primarily the result of higher credit costs.

Asset Management

Asset Management earned $601 million, 18 percent above a year earlier. Revenue rose 7 percent while expenses were up 2 percent.

Mutual fund fees grew 30 percent, reflecting an increase in mutual fund assets under management during the year of almost $29 billion to $110 billion. Total assets under management were up $30 billion to $277 billion. Higher expenses reflected the company's investments to expand the number of private banking offices and sales personnel across the asset management businesses.

Equity Investments

Equity Investments earned $460 million, 39 percent above a year earlier.

Revenues rose 26 percent to $864 million, driven by strong gains in strategic investments and alliances as well as in principal investing.

Bank of America is the largest bank in the United States. With full- service operations in 21 states and the District of Columbia, it provides financial products and services to almost 40 percent of the households in its retail footprint and two million businesses. The bank also supports business transactions in 190 countries. Its stock (ticker: BAC) is listed on the New York, Pacific and London stock exchanges. Certain shares also are listed on the Tokyo Stock Exchange.

NOTE: James H. Hance Jr., vice chairman and chief financial officer, will
discuss the results for the fourth quarter and the full year 2000 as well as
the outlook for 2001 in a conference call at 9:30 a.m. (EDT) today. The call
can be accessed through a webcast available on the Bank of America website at
http://www.bankofamerica.com/investor

www.bankofamerica.com

Forward Looking Statements

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

Bank of America

                                       Three Months          Twelve Months
                                     Ended December 31     Ended December 31
                                     2000         1999      2000       1999
    Financial Summary
    (In millions, except per share data)

    Operating net income            $1,385      $2,115     $7,863     $8,240
     Operating earnings
      per common share                0.85        1.24       4.77       4.77
     Diluted operating earnings
      per common share                0.85        1.23       4.72       4.68

    Cash basis earnings (A)          1,599       2,334      8,727      9,128
     Cash basis earnings per
      common share                    0.98        1.37       5.30       5.28
     Cash basis diluted earnings
      per common share                0.98        1.35       5.24       5.19
    Dividends per common share         .56         .50       2.06       1.85
    Closing market price
      per common share               45.88       50.19      45.88      50.19
    Average common shares issued
      and outstanding            1,623.721   1,701.092  1,646.398  1,726.006
    Average diluted common shares
      issued and outstanding     1,638.863   1,725.187  1,664.929  1,760.058

    Summary Income Statement (Operating Basis)
    (Taxable-equivalent basis in millions)

    Net interest income             $4,788      $4,541    $18,764    $18,452
    Provision for credit losses     (1,210)       (350)    (2,535)    (1,820)
    Gains on sales of securities         2          14         25        240
    Noninterest income               3,298       3,596     14,489     14,069
    Other noninterest expense       (4,637)     (4,550)   (18,083)   (17,986)

    Income before income taxes       2,241       3,251     12,660     12,955
    Income taxes - including taxable-
     equivalent basis adjustment       856       1,136      4,797      4,715
    Operating net income            $1,385      $2,115     $7,863     $8,240

    SUMMARY Balance Sheet
    (Average balances in billions)

    Loans and leases              $399.549    $364.210   $392.622   $362.783
    Managed loans and leases (B)   422.171     387.898    418.597    382.445
    Securities                      79.501      86.442     84.211     80.127
    Earning assets                 590.728     543.564    583.467    531.511
    Total assets                   677.458     630.743    671.573    616.838
    Deposits                       357.554     341.913    353.294    341.748
    Shareholders' equity            47.639      46.792     47.132     46.601
    Common shareholders' equity     47.565      46.714     47.057     46.527

    PERFORMANCE INDICES (Operating Basis)

    Return on average common
     shareholders' equity            11.57%      17.95%      16.70%    17.70%
    Return on average tangible
     common shareholders' equity     18.54       28.38       26.06     28.46
    Return on average assets          0.81        1.33        1.17      1.34
    Return on average tangible
     assets                           0.96        1.50        1.33      1.52
    Net interest yield                3.23        3.32        3.22      3.47
    Efficiency ratio                 57.35       55.91       54.38     55.30
    Cash basis efficiency ratio      54.70       53.22       51.78     52.57
    Shareholder Value Added (SVA)     $164        $921      $3,081    $3,544
    Net charge-offs (in millions)    1,075         501       2,400     2,000
     % of average loans and leases    1.07%        .55%        .61%      .55%
    Managed bankcard net charge-offs
     as a % of average managed
     bankcard receivables             4.33        5.29        4.66      5.57

    REPORTED RESULTS (Including Merger and Restructuring Charges)
    (In millions, except per share data)

    Net income                      $1,385      $1,902      $7,517    $7,882
     Earnings per common share        0.85        1.12        4.56      4.56
     Diluted earnings
      per common share                0.85        1.10        4.52      4.48
    Return on average common
     shareholders' equity            11.57%      16.14%      15.96%    16.93%

(A) Cash basis earnings equals operating net income excluding

amortization of intangibles.

(B) Prior periods have been restated for comparability (e.g. acquisitions,

divestitures and securitizations).

                                                            DECEMBER 31
                                                         2000       1999
    Balance Sheet highlights
    (In billions, except per share data)

    Loans and leases                                  $392.193    $370.662
    Securities                                          65.838      83.069
    Earning assets                                     549.736     544.940
    Total assets                                       642.191     632.574
    Deposits                                           364.244     347.273
    Shareholders' equity                                47.628      44.432
    Common shareholders' equity                         47.556      44.355
     Per share                                           29.47       26.44

    Total equity to assets ratio (period-end)             7.42%       7.02%

    Risk-based capital ratios:
     Tier 1                                               7.50        7.35
     Total                                               11.04       10.88

    Leverage ratio                                        6.12        6.26

    Period-end common shares issued
     and outstanding (in millions)                   1,613.632   1,677.273

    Allowance for credit losses                         $6.838      $6.828
    Allowance for credit losses
     as a % of loans and leases                           1.74%       1.84%
    Allowance for credit losses
     as a % of nonperforming loans                      131.30      224.48
    Nonperforming loans                                 $5.208      $3.042
    Nonperforming assets                                 5.457       3.205
    Nonperforming assets as a % of:
     Total assets                                         .85%        .51%
     Loans, leases and foreclosed properties             1.39         .86

    OTHER DATA

    Full-time equivalent employees                     142,724     155,906
    Number of banking centers                            4,390       4,524
    Number of ATM's                                     13,963      14,019

BUSINESS SEGMENT RESULTS - Three Months Ended December 31, 2000

(in millions)

                             TOTAL      OPERATING     AVG LOANS     RETURN ON
                            REVENUE     NET INCOME   AND LEASES      EQUITY

    Consumer and
     Commercial Banking     $5,293       $1,172     $263,222         19.3%
    Asset Management Group     585          129       23,371         28.9
    Global Corporate and
     Investment Banking      2,022          164      112,597          4.7
    Equity Investments        (89)         (73)          462        (13.4)
    Other                      275          (7)          n/m          n/m

n/m = not meaningful

SOURCE Bank of America Corporation

CONTACT: investors, Susan Carr, 704-386-8059, or Kevin Stitt, 704-386-5667, or media, Bob Stickler, 704-386-8465, all of Bank of America Corporation/