BANK OF AMERICA

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Bank of America Reports Second Quarter Earnings of $3.85 Billion; Earnings per share of $1.86

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Supplemental second quarter 2004 financial information

Ahead of schedule on merger integration

CHARLOTTE, N.C., July 14 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported second quarter earnings of $3.85 billion, or $1.86 per share (diluted), compared to earnings of $2.74 billion, or $1.80 per share, a year ago. Return on common equity was 16.63 percent. Current results reflect the addition of FleetBoston Financial Corporation, which the company acquired on April 1, 2004. Under purchase accounting rules, year-ago and first quarter 2004 results do not include the impact of Fleet.

Second quarter earnings included pre-tax merger-related expenses of $125 million, which reduced earnings per share 4 cents. Estimated cost savings from the merger were $206 million in the quarter.

In addition to the impact of the merger, the company's results were driven by continued strong performance in consumer banking and improved results in the commercial banking sector. The company also achieved record investment banking income and higher trading results, strong control of core expenses and increased securities gains. Significantly higher litigation expense was recorded.

For the first six months of 2004, Bank of America earned $6.53 billion, or $3.70 per share, compared to $5.16 billion, or $3.39 per share, a year earlier.

"Our results indicate the power and potential of the franchise we have built, as well as our customers' desire to do more business with us," said Kenneth D. Lewis, president and chief executive officer. "I am particularly pleased that even as we successfully execute on the merger with FleetBoston Financial, our associates continue to grow customer relationships and gain market share in key products throughout our franchise, including in the Northeast.

"We are ahead of schedule in integrating Fleet. All key consumer and commercial market executives in the Northeast have been named. Commercial Banking, Global Corporate and Investment Banking, Global Treasury Services and Premier have all been rebranded. Loan Solutions and Bank of America Spirit, the company's training program, are being introduced in the Northeast banking centers. Our new Fleet teammates are contributing significantly to the company's progress, which is shown by the net increase in consumer customer accounts at Fleet during the quarter. We look forward to converting Fleet banking centers to the Bank of America brand beginning this quarter."

Second Quarter Business Highlights

To provide a meaningful period-to-period comparison and one that is more reflective of ongoing operations, this section's highlights are calculated by combining Bank of America and Fleet results on a pro forma basis for the applicable comparisons.

  • Product sales in the banking centers increased 32 percent from a year ago.
  • Strong deposit growth continued.
  • Nonperforming assets continued to trend downward.
  • The number of consumer checking accounts grew by net 575,000 during the quarter, including 43,000 opened in the former Fleet franchise. Year to date, the company has increased accounts by 1,003,000 and is on target to meet its combined goal of 2.2 million for the year.
  • The number of consumer savings accounts grew by net 740,000 during the quarter, including 63,000 opened in the former Fleet franchise. Year to date, the company has increased accounts by 1,278,000 and is on target to exceed its combined goal of 2.0 million for the year.
  • The company opened 1.5 million new credit card accounts during the quarter. This growth was driven by the development of more competitive offers, improved technology at the point of sale and an increase in direct mail marketing.
  • The company is on track to meet its target of opening 150 new banking centers this year.
  • Online banking, with more than 11.2 million users, achieved a 48 percent penetration rate among all customers with a checking account. Customers using online banking are 27 percent more profitable than those who do not use it.
  • In the first half of the year, the company's market share in leveraged loans increased to 22.6 percent from 18.9 percent in the same time- period a year ago. Mergers and acquisitions' market share nearly doubled to 7.1 percent.
  • The company also became the top US deal manager in commercial mortgage- backed securities.

Second Quarter Financial Summary

Compared to a year ago, using GAAP-reported results which exclude Fleet results in prior periods

Revenue

Revenue on a fully taxable-equivalent basis grew to $13.19 billion from $9.79 billion the previous year.

Net interest income on a fully taxable-equivalent basis was $7.75 billion compared to $5.52 billion a year earlier. This increase was driven by the impact of the Fleet merger. Other contributing factors, as measured on a combined company comparative basis, included the impact of consumer loan growth, higher asset/liability management portfolio and rate levels, domestic deposit growth, and larger contributions from trading-related activities. These increases were partially offset by the impact of lower large corporate and foreign loan balances.

Noninterest income was $5.44 billion compared to $4.26 billion a year earlier. This increase was driven primarily by the impact of the Fleet merger. Other factors included record investment banking income and higher card income. This was somewhat offset by lower mortgage banking income as mortgage originations declined from year-ago levels.

During the quarter, the company realized $795 million in securities gains as it repositioned its balance sheet for expected movements in interest rates.

Efficiency

Noninterest expense of $7.20 billion included merger costs and approximately $300 million charge for litigation costs, which covered the recently announced settlement of the Enron lawsuit and other issues. Total noninterest expense was $5.07 billion a year ago.

Credit quality

Overall credit quality continued to improve. As a percentage of total loans, both net charge-offs and nonperforming assets continued to decline. All major commercial asset quality indicators showed positive trends and consumer asset quality remained stable and continued to perform well.

  • Provision for credit losses was $789 million compared to $772 million a year earlier and $624 million in the first quarter.

  • Net charge-offs were 0.67 percent of average loans and leases, or $829 million, down from 0.88 percent of loans and leases, or $772 million, a year earlier and 0.77 percent, or $720 million, in the first quarter.
  • Nonperforming assets were 0.64 percent of total loans, leases and foreclosed properties, or $3.18 billion, as of June 30, 2004. This compared to 1.23 percent, or $4.43 billion, on June 30, 2003 and 0.66 percent, or $2.49 billion, on March 31, 2004.
  • The allowance for loan and lease losses stood at 1.76 percent of loans and leases, or $8.77 billion, on June 30, 2004. This compared to 1.77 percent or $6.37 billion on June 30, 2003 and 1.62 percent or $6.08 billion on March 31, 2004. As of June 30, 2004, the allowance for loan and lease losses represented 305 percent of nonperforming loans and leases, compared to 152 percent on June 30, 2003 and 258 percent as of March 31, 2004.

Capital management

Total shareholders' equity was $95.8 billion on June 30, 2004, compared to $51.0 billion a year ago, and represented 9 percent of period-end assets of $1.04 trillion. The Tier 1 Capital Ratio was 8.20 percent, compared to 8.08 percent a year ago and 7.73 percent on March 31, 2004.

During the quarter, Bank of America issued 17.4 million shares related to employee options and stock ownership plans and repurchased 24.5 million shares. Average common shares issued and outstanding were 2.03 billion in the second quarter, up from 1.49 billion a year earlier. In June, the company's board of directors declared a 2-for-1 stock split in the form of a common stock dividend, effective August 27, 2004.

Business Segments Results

With the merger of Fleet, the company reorganized its business segments. What was formerly Consumer and Commercial Banking has been separated into two segments -- Consumer and Small Business Banking; and Commercial Banking. Wealth and Investment Management now includes private banking, asset management, premier banking, brokerage and the NYSE Specialist firm. Global Corporate and Investment Banking is relatively unchanged and Corporate Other includes Latin America, equity investments, liquidating businesses and treasury.

Consumer and Small Business Banking

Consumer and Small Business Banking earned $1.91 billion. Total revenue was $7.15 billion. Expenses were $3.47 billion. Net interest income was $4.51 billion and noninterest income was $2.64 billion.

In addition to the impact of the merger with Fleet, the company continued to see strong benefits from organic growth as average deposits and loans grew significantly. Both credit card purchase volume and the average dollar amount per transaction increased. Debit card purchase volume increased as more customers moved away from writing checks. Home equity lines and balances increased. Growth in the Hispanic market continued to draw strength from the company's Nuevo Futuro checking account and SafeSend, its remittance product that allows customers to send money to friends and family members in Mexico.

Commercial Banking

Commercial Banking earned $642 million. Total revenue was $1.74 billion. Expenses were $714 million. Net interest income was $1.24 billion and noninterest income was $503 million.

In addition to the impact of the merger with Fleet, the results were driven by deposit growth, an increase in investment banking fees and lower provision expense. Loans continued to grow modestly.

Global Corporate and Investment Banking

Global Corporate and Investment Banking earned $429 million. Total revenue was $2.63 billion. Expenses were $2.00 billion, which included the majority of the litigation charge. Net interest income was $1.14 billion and noninterest income was $1.49 billion.

Record levels of investment banking fees and strong trading results drove this growth. The increase in investment banking fees was led by improved deal volume and strong demand for syndications and advisory services. Strong trading results were led by commercial mortgage-backed securities and sales of risk management products. Also driving increased results were improvements in commodities and significantly lower hedging costs of the corporate loan portfolio. Provision expense was negative for the third straight quarter.

Wealth and Investment Management

Wealth and Investment Management earned $392 million. Total revenue was $1.51 billion. Expenses were $887 million. Net interest income was $672 million and noninterest income was $841 million.

Assets under management were $440 billion and continued to see a significant change in mix as equities increased to 43 percent of total assets under management.

Corporate Other

Corporate Other earned $476 million. Principal Investing continued to show improvements, reporting cash gains of $223 million in the second quarter offset by $132 million in impairments and $35 million in mark-to-market adjustments. Latin America earned $66 million on total revenue of $269 million with expenses of $170 million.

Note: Marc D. Oken, 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 http://www.bankofamerica.com/investor/ .

Bank of America is one of the world's largest financial institutions, serving individual consumers, small businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving 33 million consumer relationships with 5,700 retail banking offices, more than 16,000 ATMs and award-winning online banking with more than ten million active users. Bank of America is the No. 1 Small Business Administration Lender in the United States by the SBA. The company serves clients in 150 countries and has relationships with 96 percent of the U.S. Fortune 500 companies and 82 percent of the Global Fortune 500. Bank of America Corporation stock (ticker: BAC) is listed on the New York Stock Exchange.

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 including the threat of future terrorist activity 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; 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 http://www.sec.gov .


    Bank of America

                                 Three Months               Six Months
                                Ended June 30             Ended June 30
                              2004         2003         2004         2003
    (Dollars in millions,
     except per share
     data; shares in
     thousands)

    Financial Summary

    Earnings                  $3,849       $2,738       $6,530       $5,162
        Earnings per
         common share           1.89         1.83         3.76         3.45
        Diluted earnings
         per common share       1.86         1.80         3.70         3.39

    Dividends paid per
     common share               0.80         0.64         1.60         1.28
    Closing market price
     per common share          84.62        79.03        84.62        79.03
    Average common shares
     issued and
     outstanding           2,031,192    1,494,094    1,735,758    1,496,827
    Average diluted common
     shares issued and
     outstanding           2,065,645    1,523,306    1,765,519    1,524,715

    Summary Income
     Statement

    Net interest income       $7,581       $5,365      $13,382      $10,574
    Total noninterest
     income                    5,440        4,262        9,157        7,955
    Total revenue             13,021        9,627       22,539       18,529
    Provision for credit
     losses                      789          772        1,413        1,605
    Gains on sales of debt
     securities                  795          296        1,290          569
    Merger and
     restructuring charges       125          -            125          -
    Other noninterest
     expense                   7,076        5,065       12,493        9,790
    Income before income
     taxes                     5,826        4,086        9,798        7,703
    Income tax expense         1,977        1,348        3,268        2,541
    Net income                $3,849       $2,738       $6,530       $5,162

    Summary Average
     Balance Sheet

    Total loans and leases  $497,158     $350,279     $435,618     $347,983
    Debt securities          159,797       94,017      129,776       80,178
    Total earning assets     944,990      663,500      844,350      638,435
    Total assets           1,108,307      775,084      978,967      744,602
    Total deposits           582,305      405,307      503,690      395,587
    Shareholders' equity      93,266       50,269       70,976       49,837
    Common shareholders'
     equity                   92,943       50,212       70,787       49,780

    Performance Indices

    Return on average
     assets                     1.40 %       1.42 %       1.34 %       1.40 %
    Return on average
     common shareholders'
     equity                    16.63        21.86        18.53        20.90

    Credit Quality

    Net charge-offs             $829         $772       $1,549       $1,605
        Annualized net
         charge-offs as a
         % of average
         loans and leases
         outstanding            0.67 %       0.88 %       0.72  %      0.93 %
    Managed credit card
     net losses as a % of
     average managed credit
     card receivables           5.88         5.74         5.54         5.50


                                                       At June 30
                                                 2004              2003

        Balance Sheet Highlights

    Loans and leases                            $498,481          $360,305
    Total debt securities                        166,653           112,925
    Total earning assets                         882,852           655,684
    Total assets                               1,037,202           769,654
    Total deposits                               575,413           421,935
    Total shareholders' equity                    95,821            51,016
    Common shareholders' equity                   95,499            50,960
        Book value per share                       47.01             34.06

    Total equity to assets ratio (period
     end)                                           9.24 %            6.63 %

    Risk-based capital ratios:
         Tier 1                                     8.20              8.08
         Total                                     11.83             11.95

    Leverage ratio                                  5.83              5.92

    Period-end common shares issued and
     outstanding                               2,031,328         1,496,314

    Allowance for credit losses:
      Allowance for loan and lease losses         $8,767            $6,366
      Reserve for unfunded lending
       commitments                                   486               475
           Total                                  $9,253            $6,841
    Allowance for loan and lease losses
     as a % of total loans and leases               1.76 %            1.77 %
    Allowance for loan and lease losses
     as a % of total nonperforming loans
     and leases                                      305               152
    Total nonperforming loans and leases          $2,879            $4,187
    Total nonperforming assets                     3,179             4,430
    Nonperforming assets as a % of:
         Total assets                               0.31 %            0.58 %
         Total loans, leases and
          foreclosed properties                     0.64              1.23
    Nonperforming loans and leases as a %
     of total loans and leases                      0.58              1.16

    Other Data

    Full-time equivalent employees               177,986           132,796
    Number of banking centers                      5,790             4,200
    Number of ATMs                                16,696            13,250


    BUSINESS SEGMENT RESULTS
                                                                      Global
                                            Consumer                Corporate
                                              and                      and
                                         Small Business Commercial  Investment
                                            Banking      Banking     Banking
     Three Months Ended June 30, 2004
    Total revenue (FTE) (1)                   $7,149      $1,741     $2,630
    Net income                                 1,910         642        429
    Shareholder value added                    1,036          59        145
    Return on average equity                   20.74 %     11.60 %    15.91 %
    Average loans and leases                $145,830    $139,032    $38,125

     Three Months Ended June 30, 2003
    Total revenue (FTE) (1)                   $5,224      $1,144     $2,113
    Net income                                 1,408         378        413
    Shareholder value added                    1,130         173        177
    Return on average equity                   49.19 %     19.78 %    18.78 %
    Average loans and leases                 $91,497     $93,598    $38,475

    n/m = not meaningful

    BUSINESS SEGMENT RESULTS
                                                 Wealth and
                                                 Investment          Corporate
                                                 Management            Other
     Three Months Ended June 30, 2004
    Total revenue (FTE) (1)                        $1,513                $158
    Net income                                        392                 476
    Shareholder value added                           172                 179
    Return on average equity                        18.03  %              n/m
    Average loans and leases                      $44,107            $130,064

     Three Months Ended June 30, 2003
    Total revenue (FTE) (1)                          $987                $318
    Net income                                        300                 239
    Shareholder value added                           186                (252)
    Return on average equity                        27.73  %              n/m
    Average loans and leases                      $37,617             $89,092

    n/m = not meaningful


                                    Three Months Ended    Six Months Ended
                                         June 30              June 30
                                      2004      2003      2004       2003

    SUPPLEMENTAL FINANCIAL DATA

    Fully taxable-equivalent basis
     data (1)
    Net interest income              $7,751    $5,524    $13,721    $10,885
    Total revenue                    13,191     9,786     22,878     18,840
    Net interest yield                 3.29 %    3.33 %     3.26 %     3.42 %
    Efficiency ratio                  54.59     51.76      55.15      51.96

    Reconciliation of net income to
     operating earnings
    Net income                       $3,849    $2,738     $6,530     $5,162
    Merger and restructuring charges    125       -          125        -
    Related income tax benefit          (42)      -          (42)       -
    Operating earnings               $3,932    $2,738     $6,613     $5,162

    Operating Basis
    Diluted earnings per common
     share                            $1.90     $1.80      $3.74      $3.39
    Return on average assets           1.43 %    1.42 %     1.36 %     1.40 %
    Return on avg common
     shareholders' equity             16.99     21.86      18.77      20.99
    Efficiency ratio                  53.64     51.76      54.61      51.96

    Reconciliation of net income to
     shareholder value added
    Net income                       $3,849    $2,738     $6,530     $5,162
    Amortization of intangibles         201        54        255        108
    Merger and restructuring
     charges, net of tax benefit         83       -           83        -
    Capital charge                   (2,542)   (1,378)    (3,872)    (2,716)
    Shareholder value added          $1,591    $1,414     $2,996     $2,554

    (1) Fully taxable-equivalent (FTE) basis is a performance measure used by
        management in operating the business that management believes provides
        investors with a more accurate picture of the interest margin for
        comparative purposes.

SOURCE Bank of America CONTACT: Investors, Kevin Stitt, +1-704-386-5667,or Lee McEntire,704-388-6780, or Leyla Pakzad, 704-386-2024, or Media, Eloise Hale,704-387-0013, all of Bank of America

Web site: http://www.bankofamerica.com
http://www.bankofamerica.com/investor