BANK OF AMERICA

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Bank of America Second Quarter Net Income Rises 12 Percent

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Supplemental second quarter 2005 financial information

Revenue increases 7 percent as expenses decline Consumer and middle market business loan growth vibrant Efficiency ratio again under 50 percent Retail sales momentum continues

CHARLOTTE, N.C., July 18, 2005 /PRNewswire-FirstCall via COMTEX/ -- Bank of America Corporation today reported that second quarter net income rose 12 percent to $4.30 billion from $3.85 billion a year earlier. Earnings per share increased 14 percent to $1.06 per share (diluted) from $0.93. Return on average common shareholders' equity in the second quarter was 17.54 percent.

Second quarter earnings included merger and restructuring charges of $121 million pre-tax, which reduced earnings per share by 2 cents.

Improved results were driven by a 7 percent increase in revenue and 3 percent decrease in noninterest expense. The revenue increase was primarily due to strong noninterest income growth, led by the growth in card income and service charges. Also contributing were gains from whole loan sales and equity investment gains. Noninterest expense fell due to savings created by the merger with FleetBoston Financial Corporation.

Nearly all major customer-related actions related to the Fleet integration have now been accomplished as several major systems conversions were completed during the quarter. Direct cost savings achieved in the second quarter totaled $441 million. Total savings from the Fleet merger are projected to be $1.85 billion for 2005.

For the first six months of 2005, Bank of America earned $8.99 billion, or $2.20 per share (diluted), compared to $6.53 billion, or $1.85 per share, a year earlier.

During the second quarter Bank of America agreed to buy approximately 9 percent of the stock of China Construction Bank for $3 billion, with the option of increasing its stake in future years. Bank of America also announced a definitive agreement to acquire MBNA Corporation. The MBNA acquisition is expected to close in the fourth quarter.

"I am very pleased with our continued strong performance in 2005," said Kenneth D. Lewis, chairman and chief executive officer. "Our ability to achieve profitable growth in the midst of a challenging interest rate environment demonstrates the value and resilience of our balanced business mix as well as the efficiency advantages of our large-scale enterprise."

"As we successfully complete the Fleet integration, and look ahead to the MBNA acquisition, we will build upon a successful customer-centric formula to provide continued long-term growth for investors from our expanded and enhanced financial services platform," Lewis said. "I am very proud that we are continuing to achieve customer growth while completing our integration of Fleet."

Business Highlights

  • Average managed consumer credit card outstandings rose to $58.5 billion as the company added a record 1.6 million consumer credit card accounts in the quarter.
  • The bank added a record 629,000 net new retail checking accounts in the quarter.
  • Debit card purchase volume rose to over $35 billion in the quarter, an increase of 27 percent from second quarter 2004.
  • Average loans and leases in Global Business and Financial Services grew $5 billion from first quarter 2005, which was an annualized growth rate of more than 11 percent.
  • Total retail deposits grew 11 percent from the second quarter of 2004 to more than $428 billion in the second quarter of 2005.
  • Active online banking users increased to 13.6 million, while 6.6 million active online bill-payers paid more than $30 billion worth of bills, an increase of 41 percent from the second quarter of 2004.
  • Seventy-two percent of Columbia Management Group's total funds were ranked in the top half of Lipper's overall rankings of the mutual fund industry as of the end of second quarter 2005 (Assets under Management weighted over 1 year). Thirty-nine percent were in Lipper's top quartile.(1) Fleet Merger Highlights
  • The accounts of more than 1.9 million customers in Rhode Island, Massachusetts, New Hampshire, Maine and Florida have been converted to Bank of America's retail platform, including all deposit and loan accounts, overdraft protection and online banking and bill pay. Final conversion of remaining customers in the Fleet footprint will take place later this month.
  • Net new retail checking accounts in the former Fleet footprint increased 78,000 in the second quarter of 2005, as compared to 16,000 net new retail checking accounts in the second quarter of 2004.
  • Middle market and business banking loans in the former Fleet footprint grew by more than $600 million during the quarter. This was an annualized increase of more than 17 percent.
2005 Second Quarter Financial Summary Revenue

Revenue on a fully taxable-equivalent basis grew to $14.21 billion from $13.22 billion the same quarter last year.

Net interest income on a fully taxable-equivalent basis was $7.84 billion, up 1 percent from $7.75 billion a year earlier. The increase was due to growth in consumer and business loans, a larger asset-liability management portfolio and higher domestic deposit levels. These increases were partially offset by the impact of further flattening of the yield curve, a lower trading-related contribution and lower levels of large corporate and foreign loans.

Noninterest income rose 16 percent to $6.37 billion from $5.47 billion a year earlier. These results were driven by gains from whole loan sales, card income, service charges and equity investment gains. These improvements were offset by weaker trading profits and investment banking income as well as lower mortgage banking income.

During the quarter, the company realized $325 million in securities gains, down significantly from $795 million in the second quarter of 2004.

Efficiency

Noninterest expense declined 3 percent to $7.02 billion compared to $7.23 billion a year ago. The efficiency ratio improved to 49.42 percent (48.56 percent excluding merger and restructuring charges). For 2005 year-to-date, the company has achieved operating leverage of 13.5 percent.

Credit Quality

Most major credit quality indicators showed positive trends. The company recorded net recoveries on commercial loans. Credit card charge-offs increased from the second quarter of 2004 reflecting growth and seasoning in the portfolio, the impact of last year's changes in minimum payment requirements and bankruptcy reform. Consumer credit quality remained strong in all other categories.

  • Provision for credit losses was $875 million, up from $580 million in the first quarter of 2005 and $789 million a year earlier.
  • Net charge-offs were $880 million, or 0.68 percent of average loans and leases. This compared to $889 million, or 0.69 percent, in the first quarter of 2005 and $829 million, or 0.67 percent of average loans and leases in the second quarter of 2004.
  • Nonperforming assets decreased to $1.90 billion, or 0.36 percent of total loans, leases and foreclosed properties, at June 30, 2005. This compared to $2.34 billion, or 0.44 percent, at March 31, 2005 and $3.18 billion, or 0.64 percent, at June 30, 2004.
  • The allowance for loan and lease losses was $8.32 billion, or 1.57 percent of loans and leases, at June 30, 2005. This compared to $8.31 billion, or 1.57 percent, at March 31, 2005 and $8.77 billion, or 1.76 percent, at June 30, 2004. At June 30, 2005, the allowance for loan and lease losses represented 470 percent of total nonperforming loans and leases, compared to 401 percent at March 31, 2005 and 305 percent at June 30, 2004. Capital Management

Total shareholders' equity was $100.54 billion at June 30, 2005. Period-end assets grew to $1.25 trillion. The Tier 1 Capital Ratio was 8.06 percent, compared to 8.20 percent at March 31, 2005 and a year ago.

During the quarter, Bank of America paid a cash dividend of $0.45 per share. The Board of Directors has increased the quarterly dividend to $0.50 per share, effective with the payment in the third quarter. The company issued 22 million shares, primarily related to employee stock options and ownership plans, and repurchased 40 million shares. Average common shares issued and outstanding were 4.01 billion in the second quarter, compared to 4.03 billion in the first quarter of 2005 and 4.06 billion in the second quarter of 2004.

Second Quarter 2005 Business Segment Results

Global Consumer and Small Business Banking

Global Consumer and Small Business Banking earnings decreased 8 percent to $1.60 billion from $1.74 billion a year earlier. Revenue rose 5 percent to $7.06 billion.

The decline in earnings occurred because of an increase in provision expense due to increased credit card charge-offs. Also, included in this quarter's provision was $210 million to establish a reserve for anticipated net charge-offs from additional minimum payment requirements for consumer credit cardholders, which will be implemented in the fourth quarter.

Business momentum continued to be solid, led by growth in card income and service charges as well as increases in home equity loans. Service charges rose 12 percent and benefited from a growing number of new consumer and business accounts. Card income increased 25 percent from a year ago due to significant growth in debit and credit card volumes as well as the acquisition of NPC, which closed in the fourth quarter of 2004.

Global Business and Financial Services

Global Business and Financial Services earnings rose 43 percent to $1.22 billion from $849 million a year earlier. Revenue increased 11 percent to $2.69 billion.

Strong loan and deposit growth fueled a $149 million increase in net interest income while growth in service charges was the major driver of higher noninterest income. A negative provision expense of $164 million and a 7 percent decline in noninterest expense added to the earnings improvement. The business also recorded gains on sales of debt securities in Latin America.

Global Capital Markets and Investment Banking

Global Capital Markets and Investment Banking earnings increased 12 percent to $461 million from $411 million a year ago. Revenue declined 19 percent to $2.12 billion.

The earnings increase was primarily driven by the absence of litigation expense incurred in the second quarter of 2004. Revenue declined as trading profits and investment banking income decreased in the face of weak market conditions. However, the company outperformed the market in mergers and acquisitions, advisory services and investment grade and high yield debt offerings. Investment and brokerage service fees rose. Credit quality continued to be strong.

Global Wealth and Investment Management

Global Wealth and Investment Management earnings increased 48 percent to $590 million from $398 million a year earlier. Revenue rose 19 percent to $1.84 billion.

Asset management fees rose as assets under management increased. Earnings also benefited from continued strong expense management.

All Other

All Other reflected $433 million of net income for the quarter. This included securities gains of $204 million and whole loan sale gains of $278 million related to asset-liability management. The Equity Investments business earned $167 million compared to a loss of $13 million in the second quarter of 2004.

Note: Marc 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 through more than 5,800 retail banking offices and 16,600 ATMs and through award-winning online banking with more than 13 million active users. Bank of America is ranked 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 85 percent of the Global Fortune 500 companies. Bank of America Corporation stock (NYSE: 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 abroad may adversely affect the company's businesses and economic conditions as a whole; 5) changes in the interest rate environment reduce interest margins and impact funding sources; 6) changes in foreign exchange rates increases exposure; 7) changes in market rates and prices may adversely impact the value of financial products; 8) legislation or regulatory environments, requirements or changes adversely affect the businesses in which the company is engaged; 9) litigation liabilities, including costs, expenses, settlements and judgments, may adversely affect the company or its businesses; and 10) 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.

(1) Lipper Inc. is an independent mutual fund performance monitor. Lipper
        ranks mutual funds' total performance (assuming reinvestment of
        distributions) against other funds having similar investment
        objectives and strategies. Lipper makes no adjustment for the effect
        of sales loads.



    Bank of America
    Selected Financial Data(1)
                                    Three Months              Six Months
                                    Ended June 30            Ended June 30
                                  2005         2004        2005         2004
    (Dollars in millions,
    except per share data;
    shares in thousands)

    Financial Summary

    Earnings                   $  4,296    $  3,849    $  8,991     $  6,530
     Earnings per common
      share                        1.07        0.95        2.23         1.88
     Diluted earnings per common
      share                        1.06        0.93        2.20         1.85

    Dividends paid per common
     share                         0.45        0.40        0.90         0.80
    Closing market price per
     common share                 45.61       42.31       45.61        42.31
    Average common shares
     issued and outstanding   4,005,356   4,062,384   4,019,089    3,471,516
    Average diluted common
     shares issued and
     outstanding              4,065,355   4,131,290   4,081,921    3,531,038

    Summary Income Statement

    Net interest income        $  7,650    $  7,581     $15,523      $13,382
    Total noninterest income      6,365       5,467      12,514        9,197
    Total revenue                14,015      13,048      28,037       22,579
    Provision for credit losses     875         789       1,455        1,413
    Gains on sales of debt
     securities                     325         795         984        1,290
    Other noninterest expense     6,898       7,103      13,843       12,533

    Merger and restructuring
     charges                        121         125         233          125
    Income before income taxes    6,446       5,826      13,490        9,798
    Income tax expense            2,150       1,977       4,499        3,268
    Net income                 $  4,296    $  3,849    $  8,991     $  6,530

    Summary Average Balance Sheet

    Total loans and leases     $520,424    $497,158    $522,672     $435,618
    Securities                  227,182     159,797     215,940      129,776
    Total earning assets      1,118,527     938,520   1,081,924      836,664
    Total assets              1,277,489   1,094,459   1,239,398      963,825
    Total deposits              640,593     582,305     634,043      503,690
    Shareholders' equity         98,417      93,266      98,614       70,976
    Common shareholders' equity  98,145      92,943      98,343       70,787

    Performance Indices

    Return on average assets       1.35 %      1.41 %      1.46 %       1.36 %
    Return on average common
     shareholders' equity         17.54       16.63       18.42        18.54


    Credit Quality

    Net charge-offs            $    880    $    829    $  1,769     $  1,549
      Annualized net charge-offs
      as a % of average loans
      and leases outstanding       0.68 %      0.67 %      0.68 %       0.72 %
    Managed credit card net
     losses as a % of average
     managed credit card
     receivables                   6.23        5.88        6.20         5.54



                                                              At June 30
                                                          2005          2004

    Balance Sheet Highlights

    Loans and leases                                $  529,418    $  498,481
    Total securities                                   233,586       166,653
    Total earning assets                             1,086,666       876,714
    Total assets                                     1,246,330     1,024,731
    Total deposits                                     635,417       575,413
    Total shareholders' equity                         100,540        95,821
    Common shareholders' equity                        100,268        95,499
      Book value per share                               24.96         23.51

    Total equity to assets ratio (period-end)             8.07 %        9.35 %
    Risk-based capital ratios:
      Tier 1                                              8.06 *        8.20
      Total                                              11.12 *       11.97

    Leverage ratio                                        5.59 *        5.83

    Period-end common shares issued and
     outstanding                                     4,016,704     4,062,657

    Allowance for credit losses:
      Allowance for loan and lease losses           $    8,319    $    8,767
      Reserve for unfunded lending commitments             383           486
        Total                                       $    8,702    $    9,253
    Allowance for loan and lease losses as a
     % of total loans and leases                          1.57 %        1.76 %
    Allowance for loan and lease losses as a
     % of total nonperforming loans and leases             470           305
    Total nonperforming loans and leases            $    1,770    $    2,879
    Total nonperforming assets                           1,895         3,179
    Nonperforming assets as a % of:
      Total assets                                        0.15 %        0.31 %
      Total loans, leases and foreclosed
       properties                                         0.36          0.64
    Nonperforming loans and leases as a % of
     total loans and leases                               0.33          0.58

    Other Data

    Full-time equivalent employees                     177,795       179,971
    Number of banking centers - domestic                 5,880         5,774
    Number of ATMs - domestic                           16,687        16,672

    * Preliminary data



        BUSINESS SEGMENT RESULTS
                                    Global         Global           Global
                                 Consumer and   Business and   Capital Markets
                                Small Business    Financial     and Investment
                                   Banking        Services         Banking
     Three Months Ended
      June 30, 2005

    Total revenue (FTE) (2)       $  7,062        $  2,691        $  2,121
    Net income                       1,595           1,217             461
    Shareholder value added            828             458             195
    Return on average equity         19.36 %         16.90 %         18.24 %
    Average loans and leases      $140,255        $176,505        $ 32,639

    Three Months Ended
     June 30, 2004

    Total revenue (FTE) (2)       $  6,723        $  2,430        $  2,634
    Net income                       1,740             849             411
    Shareholder value added          1,022              83             128
    Return on average equity         22.51 %         11.66 %         15.28 %
    Average loans and leases      $129,379        $163,905        $ 38,476

    Six Months Ended
     June 30, 2005

    Total revenue (FTE) (2)       $ 14,024        $  5,425        $  4,753
    Net income                       3,494           2,339           1,182
    Shareholder value added          1,982             810             644
    Return on average equity         21.43 %         16.12 %         23.13 %
    Average loans and leases      $139,467        $174,019        $ 34,065

    Six Months Ended
     June 30, 2004

    Total revenue (FTE) (2)       $ 11,448        $  3,999        $  4,808
    Net income                       2,810           1,441             864
    Shareholder value added          1,739             479             381
    Return on average equity         24.96 %         15.77 %         18.96 %
    Average loans and leases      $107,731        $136,551        $ 33,905



                                              Global
                                            Wealth and
                                            Investment           All
                                            Management          Other
     Three Months Ended
      June 30, 2005

    Total revenue (FTE) (2)                 $  1,837         $    495
    Net income                                   590              433
    Shareholder value added                      329               79
    Return on average equity                   23.18 %            n/m
    Average loans and leases                $ 52,967         $118,058

    Three Months Ended
     June 30, 2004

    Total revenue (FTE) (2)                $  1,546          $   (115)
    Net income                                  398               451
    Shareholder value added                     163               195
    Return on average equity                  17.20 %             n/m
    Average loans and leases               $ 44,117          $121,281

    Six Months Ended
     June 30, 2005

    Total revenue (FTE) (2)                $  3,631          $    594
    Net income                                1,166               810
    Shareholder value added                     657               101
    Return on average equity                  23.45 %             n/m
    Average loans and leases               $ 51,869          $123,252

    Six Months Ended
     June 30, 2004

    Total revenue (FTE) (2)                $  2,647          $     16
    Net income                                  645               770
    Shareholder value added                     290               107
    Return on average equity                  18.70 %             n/m
    Average loans and leases               $ 41,280          $116,151

    n/m = not meaningful



                                   Three Months Ended      Six Months Ended
                                         June 30                June 30
                                     2005       2004        2005       2004

    SUPPLEMENTAL FINANCIAL DATA

    Fully taxable-equivalent
     basis data (2)
    Net interest income           $ 7,841    $ 7,751     $15,913     $13,721
    Total revenue                  14,206     13,218      28,427      22,918
    Net interest yield               2.81 %     3.31 %      2.95 %      3.29 %
    Efficiency ratio                49.42      54.68       49.52       55.23

    Reconciliation of net income
     to operating earnings
    Net income                    $ 4,296    $ 3,849     $ 8,991     $ 6,530
    Merger and restructuring
     charges                          121        125         233         125
    Related income tax benefit        (41)       (42)        (78)        (42)
    Operating earnings            $ 4,376    $ 3,932     $ 9,146     $ 6,613

    Operating Basis
    Diluted earnings per common
     share                        $  1.08    $  0.95     $  2.24     $  1.87
    Return on average assets         1.37 %     1.44 %      1.49 %      1.38 %
    Return on average common
     shareholders' equity           17.87      16.99       18.74       18.77
    Efficiency ratio                48.56      53.73       48.70       54.68

    Reconciliation of net income
     to shareholder value added
    Net income                    $ 4,296    $ 3,849     $ 8,991     $ 6,530
    Amortization of intangibles       204        201         412         255
    Merger and restructuring
     charges, net of tax benefit       80         83         155          83
    Capital charge                 (2,691)    (2,542)     (5,364)     (3,872)
    Shareholder value added       $ 1,889    $ 1,591     $ 4,194     $ 2,996


    (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 Corporation

Investors may contact: Kevin Stitt, +1-704-386-5667, Lee McEntire, +1-704-388-6780, Leyla Pakzad, +1-704-386-2024, or Media may contact: Terry Francisco, +1-704-386-4343, all of Bank of America

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