BANK OF AMERICA

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Bank of America Reports Third Quarter Earnings of $3.76 Billion, or $.91 Per Share

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Supplemental third quarter 2004 financial information

Successful brand rollout continues across Northeast

Fleet merger transition on target

Consumer bank momentum continues

CHARLOTTE, N.C., Oct. 14 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported third quarter earnings of $3.76 billion, or $.91 per share (diluted), compared to earnings of $2.92 billion, or $.96 per share, a year ago. Under purchase accounting rules, year-ago results do not include the impact of FleetBoston Financial Corporation, which was acquired on April 1, 2004.

Return on common equity in the third quarter was 15.56 percent.

In addition to the impact of Fleet, the company's net income improvement was driven by continued momentum in consumer banking, merger-driven cost savings, lower provision expense and gains on the sale of debt securities.

Third quarter earnings included merger and restructuring charges of $221 million pre-tax, which reduced earnings by 4 cents per share. These included $156 million for the Fleet merger and $65 million for severance related to the infrastructure initiative announced last week.

For the first nine months of 2004, Bank of America earned $10.29 billion, or $2.76 per share, compared to $8.08 billion, or $2.65 per share, a year earlier.

"Business momentum remains strong," said Kenneth D. Lewis, president and chief executive officer. "Our results show we are attracting and deepening customer relationships across the franchise. This is evident from the growth in consumer accounts and card usage to the improvement in market penetration in corporate banking products to the significant growth in Premier Banking relationships. We are also particularly pleased with the progress in integrating Fleet, where we are meeting, or exceeding, the plans we announced last fall."

"We are beginning to tap into the wealth in the Northeast; GCIB is gaining market share in key product lines and should gain strength as we invest more than $600 million into the business. Commercial is seeing positive growth trends and the consumer business remains our workhorse. "

Fleet Merger Highlights from the Quarter

  • The company opened 87,000 net new consumer checking accounts in the former Fleet franchise during the quarter, more than double the 42,000 in the prior quarter.
  • In the Northeast, the company opened 81,000 net new consumer savings accounts, compared to 37,000 in the prior quarter.
  • Product sales in the six new Manhattan banking centers averaged 12 sales per associate per day, which is twice the average rate across the franchise.
  • 399 Premier banking client managers were added, 50 percent in New England and 50 percent in the New York City area.
  • To date, 621 Fleet banking centers, or more than a third of the total, have been re-branded.
  • Attesting to the convenience of the national network, "legacy" Bank of America and Fleet customers have begun to make cross-footprint transactions in increasing volumes. In the last week of September alone, customers completed 25,000 cross-footprint transactions, 60 percent of which were performed by "legacy" Bank of America customers in former Fleet banking centers.

Third 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.

  • The company announced a new national business designed to serve the needs of ultra high net worth individuals and families.
  • Retail deposits grew 11 percent to $399.6 billion.
  • The number of consumer checking accounts grew by net 537,000 during the quarter. Year to date, the company has increased accounts by 1,515,000 and is on target to exceed its goal of 2.0 million for the year.
  • The number of consumer savings accounts grew by net 624,000 during the quarter. Year to date, the company has increased accounts by 1,876,000 and is on target to exceed its goal of 2.0 million for the year.
  • The company opened 1.6 million new credit card accounts during the quarter. This growth was driven by targeted direct mail marketing campaigns, strong co-brand programs and effective cross selling of cards in banking centers.
  • During the quarter, the company opened 38 new banking centers, bringing total openings to 83 for the year.
  • Customers continued to expand their use of debit cards. Both purchase volumes and total transactions increased 19 and 18 percent, respectively, from a year ago.
  • Online banking active users increased 5 percent, to 11.8 million. Of those users, 4.8 million use bill pay. During the quarter, bill pay volume increased 10 percent.
  • In the first nine months of the year, the company became the top U.S. deal manager in commercial mortgage-backed securities.
  • In the first nine months of the year, the company's market share in syndicated loans increased to 20.0 percent. High yield debt market share increased to 12.2 percent.

Third Quarter Financial Summary

These are GAAP-reported results, which exclude Fleet results in the year- ago period.

Revenue

Revenue on a fully taxable-equivalent basis grew to $12.73 billion from $9.92 billion the previous year.

Net interest income on a fully taxable-equivalent basis was $7.84 billion compared to $5.48 billion a year earlier. In addition to the impact of Fleet, this increase was driven by the impact of higher asset/liability management portfolio and rate levels, consumer loan growth and domestic deposit growth. These increases were partially offset by the impact of lower large corporate and foreign loan balances in addition to lower trading-related margins and mortgages held-for-sale.

Noninterest income was $4.90 billion compared to $4.45 billion a year earlier. In addition to the impact of Fleet, these results were driven by record card income, higher service charges, investment and brokerage income and equity investment gains, offset by a loss of $250 million in mortgage banking income, which resulted from lower origination volume and a writedown of mortgage servicing rights.

During the quarter, the company realized $732 million in securities gains as it repositioned its mortgage-backed securities to reduce mortgage prepayment risk.

Efficiency

Noninterest expense was $6.99 billion compared to $5.08 billion a year ago, driven by the addition of Fleet. Pre-tax cost savings from the merger were $309 million during the quarter.

Credit Quality

Overall credit quality continued to improve. 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 as credit card charge-offs grew in line with card portfolio growth.

  • Provision for credit losses was $650 million, down from $789 million in the second quarter of 2004 and $651 million a year earlier.
  • Net charge-offs were 0.57 percent of average loans and leases, or $719 million, down from 0.67 percent, or $829 million, in the second quarter and 0.86 percent of loans and leases, or $776 million, a year earlier.
  • Nonperforming assets were 0.55 percent of total loans, leases and foreclosed properties, or $2.84 billion, as of September 30, 2004. This compared to 0.64 percent, or $3.18 billion, on June 30, 2004 and 0.98 percent, or $3.66 billion, on September 30, 2003.
  • The allowance for loan and lease losses stood at 1.70 percent of loans and leases, or $8.72 billion, on September 30, 2004. This compared to 1.76 percent or $8.77 billion on June 30, 2004 and 1.68 percent or $6.26 billion on September 30, 2003. As of September 30, 2004, the allowance for loan and lease losses represented 343 percent of nonperforming loans and leases, compared to 305 percent on June 30, 2004 and 183 percent on September 30, 2003.

Capital Management

Total shareholders' equity was $98.0 billion on September 30, 2004, compared to $50.4 billion a year ago. This represented 9 percent of period- end assets of $1.09 trillion. The Tier 1 Capital Ratio was 8.08 percent, compared to 8.20 percent on June 30, 2004 and 8.25 percent a year ago.

During the quarter, Bank of America paid a cash dividend of $.45 per share, a 12.5 percent increase from the prior quarter's dividend. The company also issued 26.8 million shares primarily related to employee options and stock ownership plans and repurchased 40.4 million shares. Average common shares issued and outstanding were 4.05 billion in the third quarter compared to 4.06 billion in the second quarter and 2.98 billion a year earlier. The company's stock split 2-for-1 on August 27, 2004.

Business Segment Results

Effective April 1, 2004, 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 has added Premier Banking 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 $1.68 billion on total revenue of $7.03 billion.

During the quarter, successful execution of the company's customer relationship strategy continued to provide momentum for this business. Product sales per associate continued to grow as customer relationships deepened. This trend was reflected in continued solid growth in checking and savings accounts. Home equity and credit card balances increased significantly during the quarter. Credit card purchase volume increased and the number of cardholders continued to grow.

Revenue and profit were negatively impacted by a loss of $250 million in mortgage banking income, which resulted from lower origination volume and a writedown of mortgage servicing rights. Results were also impacted by higher provision expense due to growth in the credit card portfolio.

Commercial Banking

Commercial Banking earned $824 million on total revenue of $1.82 billion.

During the quarter, service charges and investment banking fees grew as the company recorded lower provision and personnel expense. Loans continued to grow modestly.

Global Corporate and Investment Banking

Global Corporate and Investment Banking earned $475 million on total revenue of $2.06 billion.

A slow economy, flattening yield curve, normal summer slowdown and continued geo-political risk impacted results. Investment banking results, while lower than the second quarter, were above year-ago levels, reflecting the company's continuing platform build-out. Growth in loan syndications and advisory services drove investment banking fees.

Trading results were below the record set in second quarter and lower than a year ago. A flattening yield curve and tightening credit spreads created a difficult trading environment. Offsetting this was continued strong demand for commercial mortgage-backed and asset-backed securities. Provision expense was negative for the fourth straight quarter, reflecting continued improvement in credit quality.

Wealth and Investment Management

Wealth and Investment Management earned $469 million on total revenue of $1.57 billion.

The segment benefited from its diversified business model with significant increases in loans and deposits in the Private Bank and Premier Banking. This more than offset lower brokerage fees, which reflected lower retail trading in the debt and equity markets.

Net interest income grew 12 percent during the quarter as deposits in this segment increased 14 percent, reflecting strong deposit efforts by Premier Banking and the Private Bank. Loans increased 3 percent during the quarter. Assets under management were $430 billion, which was down from the prior quarter.

Corporate Other

Corporate Other earned $314 million. Principal Investing continued to show improvements, reporting cash gains of $257 million in the third quarter offset by $59 million in impairments and $27 million in mark-to-market adjustments. Latin America earned $151 million on total revenue of $264 million, primarily due to lower provision.

Note: Marc D. Oken, chief financial officer, will discuss third 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 5,800 retail banking offices, more than 16,500 ATMs and award-winning online banking with more than eleven 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
    Selected Financial Data(1)
                                 Three Months              Nine Months
                              Ended September 30        Ended September 30
                              2004         2003         2004         2003
    (Dollars in millions,
     except per share
     data; shares in
     thousands)

    Financial Summary

    Earnings                  $3,764       $2,922      $10,294       $8,084
        Earnings per
         common share           0.93         0.98         2.80         2.70
        Diluted earnings
         per common share       0.91         0.96         2.76         2.65

    Dividends paid per
     common share               0.45         0.40         1.25         1.04
    Closing market price
     per common share          43.33        39.02        43.33        39.02
    Average common shares
     issued and
     outstanding           4,052,304    2,980,206    3,666,298    2,988,739
    Average diluted common
     shares issued and
     outstanding           4,121,375    3,039,282    3,729,120    3,047,046

    Summary Income Statement

    Net interest income       $7,665       $5,304      $21,047      $15,878
    Total noninterest
     income                    4,895        4,446       14,052       12,401
    Total revenue             12,560        9,750       35,099       28,279
    Provision for credit
     losses                      650          651        2,063        2,256
    Gains on sales of debt
     securities                  732          233        2,022          802
    Other noninterest
     expense                   6,773        5,077       19,266       14,867
    Merger and
     restructuring charges       221            -          346            -
    Income before income
     taxes                     5,648        4,255       15,446       11,958
    Income tax expense         1,884        1,333        5,152        3,874
    Net income                $3,764       $2,922      $10,294       $8,084

    Summary Average
     Balance Sheet

    Total loans and leases  $503,078     $357,288     $458,268     $351,119
    Debt securities          169,515       63,423      143,119       74,532
    Total earning assets     954,626      677,308      881,377      651,535
    Total assets           1,110,124      786,155    1,023,005      758,605
    Total deposits           587,878      414,569      531,958      401,985
    Shareholders' equity      96,392       48,871       79,510       49,512
    Common shareholders'
     equity                   96,120       48,816       79,293       49,455

    Performance Indices

    Return on average
     assets                     1.35 %       1.48 %       1.34 %       1.43 %
    Return on average
     common shareholders'
     equity                    15.56        23.74        17.32        21.85


    Credit Quality

    Net charge-offs             $719         $776       $2,268       $2,381
        Annualized net
         charge-offs as a
         % of average
         loans and leases
         outstanding            0.57 %       0.86 %       0.66  %      0.91 %
    Managed credit card
     net losses as a % of
     average managed credit
     card receivables           5.48         5.33         5.55         5.44



                                                    At September 30
                                                 2004              2003

    Balance Sheet Highlights

    Loans and leases                            $511,639          $373,098
    Total debt securities                        163,858            63,279
    Total earning assets                         933,479           627,721
    Total assets                               1,088,996           737,546
    Total deposits                               591,258           408,510
    Total shareholders' equity                    98,011            50,445
    Common shareholders' equity                   97,740            50,390
        Book value per share                       24.14             16.92

    Total equity to assets ratio (period
     end)                                           9.00 %            6.84 %

    Risk-based capital ratios:
         Tier 1                                     8.08 *            8.25
         Total                                     11.70 *           12.17

    Leverage ratio                                  5.92 *            5.95

    Period-end common shares issued and
     outstanding                               4,049,063         2,978,874

    Allowance for credit losses:
     Allowance for loan and lease losses          $8,723            $6,258
     Reserve for unfunded lending
       commitments                                   446               458
           Total                                  $9,169            $6,716
    Allowance for loan and lease losses
     as a % of total loans and leases               1.70 %            1.68 %
    Allowance for loan and lease losses
     as a % of total nonperforming loans
     and leases                                      343               183
    Total nonperforming loans and leases          $2,546            $3,429
    Total nonperforming assets                     2,836             3,657
    Nonperforming assets as a % of:
         Total assets                               0.26 %            0.50 %
         Total loans, leases and
          foreclosed properties                     0.55              0.98
    Nonperforming loans and leases as a %
     of total loans and leases                      0.50              0.92

    Other Data

    Full-time equivalent employees               175,523           132,749
    Number of banking centers - domestic           5,829             4,211
    Number of ATMs - domestic                     16,728            13,120

    * Preliminary data

      Information for periods after April 1, 2004 includes the FleetBoston
               acquisition; prior periods have not been restated.


    BUSINESS SEGMENT RESULTS
                                                                     Global
                                                                   Corporate
                                        Consumer and                  and
                                       Small Business  Commercial  Investment
                                           Banking       Banking    Banking
     Three Months Ended September 30,
      2004
    Total revenue (FTE) (2)                  $7,025       $1,821      $2,064
    Net income                                1,682          824         475
    Shareholder value added                     754          222         185
    Return on average equity                  17.35 %      14.42 %     17.30 %
    Average loans and leases               $150,334     $139,983     $35,881

     Three Months Ended September 30,
      2003
    Total revenue (FTE) (2)                  $5,561       $1,165      $2,064
    Net income                                1,679          400         435
    Shareholder value added                   1,348          244         216
    Return on average equity                  50.13 %      27.26 %     21.30 %
    Average loans and leases                $92,509      $93,451     $33,805

    n/m = not meaningful

      Information for periods after April 1, 2004 includes the FleetBoston
               acquisition; prior periods have not been restated.


    BUSINESS SEGMENT RESULTS
                                                 Wealth and
                                                 Investment         Corporate
                                                 Management           Other
     Three Months Ended September 30,
      2004
    Total revenue (FTE) (2)                         $1,573               $248
    Net income                                         469                314
    Shareholder value added                            246                 46
    Return on average equity                         21.27  %             n/m
    Average loans and leases                       $45,646           $131,234

     Three Months Ended September 30,
      2003
    Total revenue (FTE) (2)                           $959               $174
    Net income                                         256                152
    Shareholder value added                            166               (350)
    Return on average equity                         29.70  %             n/m
    Average loans and leases                       $37,159           $100,364

    n/m = not meaningful



                                    Three Months Ended   Nine Months Ended
                                       September 30         September 30
                                      2004      2003      2004       2003

    SUPPLEMENTAL FINANCIAL DATA

    Fully taxable-equivalent basis
     data (2)
    Net interest income              $7,836    $5,477    $21,557    $16,362
    Total revenue                    12,731     9,923     35,609     28,763
    Net interest yield                 3.28 %    3.22 %     3.26 %     3.35 %
    Efficiency ratio                  54.94     51.16      55.07      51.69


    Reconciliation of net income to
     operating earnings
    Net income                       $3,764    $2,922    $10,294     $8,084
    Merger and restructuring charges    221         -        346          -
    Related income tax benefit          (74)        -       (116)         -
    Operating earnings               $3,911    $2,922    $10,524     $8,084


    Operating Basis
    Diluted earnings per common
     share                            $0.95     $0.96      $2.82      $2.65
    Return on average assets           1.40 %    1.48 %     1.37 %     1.42 %
    Return on avg common
     shareholders' equity             16.17     23.74      17.71      21.85
    Efficiency ratio                  53.20     51.16      54.10      51.69


    Reconciliation of net income to
     shareholder value added
    Net income                       $3,764    $2,922    $10,294     $8,084
    Amortization of intangibles         200        55        455        163
    Merger and restructuring
     charges, net of tax benefit        147         -        230          -
    Capital charge                   (2,658)   (1,353)    (6,530)    (4,069)
    Shareholder value added          $1,453    $1,624     $4,449     $4,178

    (1) Certain prior period amounts have been reclassified to conform to
        current period presentation.
    (2) 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.

     Information for periods after April 1, 2004 includes the FleetBoston
              acquisition; prior periods have not been restated.

SOURCE Bank of America

CONTACT:
Investors
Kevin Stitt, +1-704-386-5667
or
Lee McEntire, +1-704-388-6780
or
Leyla Pakzad, +1-704-386-2024
or
Media
Eloise Hale, +1-704-387-0013
all of Bank of America
Web site: http://www.bankofamerica.com>
http://www.bankofamerica.com/investor
(BAC)