Bank of America Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2004

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-6523

Exact name of registrant as specified in its charter:

Bank of America Corporation

State of incorporation:

Delaware

IRS Employer Identification Number: 56-0906609

Address of principal executive offices:

Bank of America Corporate Center

100 N. Tryon Street

Charlotte, North Carolina 28255

Registrant’s telephone number, including area code: (704) 386-8486

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨

On April 30, 2004, there were 2,038,797,417 shares of Bank of America Corporation Common Stock outstanding.

Bank of America Corporation

March 31, 2004 Form 10-Q

INDEX


			Page
Part I Financial Information	Item 1.	Financial Statements:
Part I Financial Information		Consolidated Statement of Income for the Three Months Ended March 31, 2004 and 2003	2

		Consolidated Balance Sheet at March 31, 2004 and December 31, 2003	3

		Consolidated Statement of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2004 and 2003	4

		Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2004 and 2003	5

		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	21

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59

	Item 4.	Controls and Procedures	59

Part II Other Information	Item 1.	Legal Proceedings	59

	Item 2.	Changes in Securities and Use of Proceeds	59

	Item 4.	Submission of Matters to a Vote of Security Holders	59

	Item 6.	Exhibits and Reports on Form 8-K	60

	Signature		62

	Index to Exhibits		63

Part I. Financial Information

Item 1. Financial Statements

Bank of America Corporation and Subsidiaries

Consolidated Statement of Income


	Three Months Ended March 31
*(Dollars in millions, except per share information)*	2004		2003
Interest income
Interest and fees on loans and leases	$	5,549	$	5,348
Interest on debt securities		1,212		754
Federal funds sold and securities purchased under agreements to resell		434		194
Trading account assets		1,009		1,042
Other interest income		368		387

Total interest income		8,572		7,725

Interest expense
Deposits		1,206		1,183
Short-term borrowings		740		453
Trading account liabilities		334		308
Long-term debt		491		572

Total interest expense		2,771		2,516

Net interest income		5,801		5,209

Noninterest income
Consumer service charges		821		777
Corporate service charges		595		577

Total service charges		1,416		1,354

Consumer investment and brokerage services		417		383
Corporate investment and brokerage services		205		165

Total investment and brokerage services		622		548

Mortgage banking income		209		405
Investment banking income		404		378
Equity investment gains (losses)		133		(68	)
Card income		795		681
Trading account profits		3		114
Other income		135		281

Total noninterest income		3,717		3,693

Total revenue		9,518		8,902

Provision for credit losses		624		833

Gains on sales of debt securities		495		273

Noninterest expense
Personnel		2,762		2,459
Occupancy		488		472
Equipment		261		284
Marketing		281		230
Professional fees		147		125
Amortization of intangibles		54		54
Data processing		284		266
Telecommunications		151		124
Other general operating		989		711

Total noninterest expense		5,417		4,725

Income before income taxes		3,972		3,617
Income tax expense		1,291		1,193

Net income	$	2,681	$	2,424

Net income available to common shareholders	$	2,680	$	2,423

Per common share information
Earnings	$	1.86	$	1.62

Diluted earnings	$	1.83	$	1.59

Dividends paid	$	0.80	$	0.64

Average common shares issued and outstanding (in thousands)		1,440,153		1,499,405

Average diluted common shares issued and outstanding (in thousands)		1,466,701		1,526,288

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet


*(Dollars in millions)*	March 31, 2004			December 31, 2003
Assets
Cash and cash equivalents	$	22,296		$	27,084
Time deposits placed and other short-term investments		8,561			8,051
Federal funds sold and securities purchased under agreements to resell (includes $73,018 and $76,446 pledged as collateral)		73,057			76,492
Trading account assets (includes $39,522 and $18,722 pledged as collateral)		75,004			68,547
Derivative assets		36,488			36,507
Debt securities:
Available-for-sale (includes $34,965 and $20,858 pledged as collateral)		139,546			66,382
Held-to-maturity, at cost (market value- $251 and $254)		242			247

Total debt securities		139,788			66,629

Loans and leases		375,968			371,463
Allowance for loan and lease losses		(6,080	)		(6,163	)

Loans and leases, net of allowance		369,888			365,300

Premises and equipment, net		6,076			6,036
Mortgage banking assets		2,184			2,762
Goodwill		11,468			11,455
Core deposit intangibles and other intangibles		854			908
Other assets		70,348			66,674

Total assets	$	816,012		$	736,445

Liabilities
Deposits in domestic offices:
Noninterest-bearing	$	121,629		$	118,495
Interest-bearing		267,850			262,032
Deposits in foreign offices:
Noninterest-bearing		2,805			3,035
Interest-bearing		43,308			30,551

Total deposits		435,592			414,113

Federal funds purchased and securities sold under agreements to repurchase		115,434			78,046
Trading account liabilities		27,402			26,844
Derivative liabilities		24,321			24,526
Commercial paper and other short-term borrowings		64,621			42,478
Accrued expenses and other liabilities (includes $401 and $416 of Reserve for unfunded lending commitments)		18,635			27,115
Long-term debt		81,231			75,343

Total liabilities		767,236			688,465

Commitments and contingencies (Note 7)

Shareholders’ equity
Preferred stock, $0.01 par value; authorized - 100,000,000 shares; issued and outstanding - 1,239,563 and 1,269,600 shares		53			54
Common stock, $0.01 par value; authorized - 7,500,000,000 and 5,000,000,000 shares; issued and outstanding - 1,445,487,313 and 1,441,143,786 shares		14			14
Retained earnings		51,823			50,213
Accumulated other comprehensive loss		(2,743	)		(2,148	)
Other		(371	)		(153	)

Total shareholders’ equity		48,776			47,980

Total liabilities and shareholders’ equity	$	816,012		$	736,445

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity


	Preferred Stock											Accumulated Other Comprehensive Income (Loss) ⁽¹⁾			Other			Total Share- holders’ Equity			Comprehensive Income

				Common Stock					Retained Earnings
*(Dollars in millions, shares in thousands)*				Shares		Amount			Retained Earnings
Balance, December 31, 2002	$	58		1,500,691		$	496		$	48,517		$	1,232		$	16		$	50,319
Net income										2,424									2,424		$	2,424
Net unrealized losses on available-for-sale debt and marketable equity securities													(9	)					(9	)		(9	)
Net unrealized gains on foreign currency translation adjustments													33						33			33
Net unrealized losses on derivatives													(1,182	)					(1,182	)		(1,182	)
Cash dividends paid:
Common										(961	)								(961	)
Preferred										(1	)								(1	)
Common stock issued under employee plans and related tax benefits				15,206			818									(173	)		645
Common stock repurchased				(18,400	)		(1,260	)											(1,260	)
Conversion of preferred stock		(1	)	34			1												—
Other				—			72			(1	)					(27	)		44

Balance, March 31, 2003	$	57		1,497,531		$	127		$	49,978		$	74		$	(184	)	$	50,052		$	1,266

Balance, December 31, 2003	$	54		1,441,144		$	14		$	50,213		$	(2,148	)	$	(153	)	$	47,980
Net income										2,681									2,681		$	2,681
Net unrealized gains on available-for-sale debt and marketable equity securities													661						661			661
Net unrealized gains on foreign currency translation adjustments													3						3			3
Net unrealized losses on derivatives													(1,259	)					(1,259	)		(1,259	)
Cash dividends paid:
Common										(1,158	)								(1,158	)
Preferred										(1	)								(1	)
Common stock issued under employee plans and related tax benefits				16,446			1,060									(218	)		842
Common stock repurchased				(12,153	)		(1,061	)		88									(973	)
Conversion of preferred stock		(1	)	50			1												—

Balance, March 31, 2004	$	53		1,445,487		$	14		$	51,823		$	(2,743	)	$	(371	)	$	48,776		$	2,086

(1)

At March 31, 2004 and December 31, 2003, Accumulated Other Comprehensive Income (Loss) included net unrealized gains (losses) on available-for-sale debt and marketable equity securities of $591 and $(70), respectively; net unrealized losses on foreign currency translation adjustments of $163 and $166, respectively; and net unrealized losses on derivatives of $3,067 and $1,808, respectively.

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Cash Flows


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Operating activities
Net income	$	2,681		$	2,424
Reconciliation of net income to net cash provided by (used in) operating activities:
Provision for credit losses		624			833
Gains on sales of debt securities		(495	)		(273	)
Depreciation and premises improvements amortization		209			224
Amortization of intangibles		54			54
Deferred income tax benefit		(66	)		(94	)
Net increase in trading and hedging instruments		(10,471	)		(6,854	)
Net increase in other assets		(3,614	)		(7,042	)
Net decrease in accrued expenses and other liabilities		(8,252	)		(711	)
Other operating activities, net		3,275			590

Net cash used in operating activities		(16,055	)		(10,849	)

Investing activities
Net (increase) decrease in time deposits placed and other short-term investments		(510	)		1,290
Net (increase) decrease in federal funds sold and securities purchased under agreements to resell		3,435			(4,931	)
Proceeds from sales of available-for-sale debt securities		11,460			27,258
Proceeds from maturities of available-for-sale debt securities		1,889			6,847
Purchases of available-for-sale debt securities		(84,978	)		(41,280	)
Proceeds from maturities of held-to-maturity debt securities		5			99
Proceeds from sales of loans and leases		876			9,182
Other changes in loans and leases, net		(6,133	)		(7,110	)
Purchases and originations of mortgage banking assets		(236	)		(359	)
Net purchases of premises and equipment		(249	)		(150	)
Proceeds from sales of foreclosed properties		49			12
Investment in unconsolidated subsidiary		—			(1,600	)
Acquisition of business activities, net		(15	)		(71	)
Other investing activities, net		787			586

Net cash used in investing activities		(73,620	)		(10,227	)

Financing activities
Net increase in deposits		21,479			8,718
Net increase in federal funds purchased and securities sold under agreements to repurchase		37,388			7,897
Net increase in commercial paper and other short-term borrowings		22,143			4,495
Proceeds from issuance of long-term debt and trust preferred securities		7,558			4,578
Retirement of long-term debt and trust preferred securities		(2,507	)		(3,051	)
Proceeds from issuance of trust preferred securities
Proceeds from issuance of common stock		985			752
Common stock repurchased		(973	)		(1,260	)
Cash dividends paid		(1,159	)		(962	)
Other financing activities, net		(23	)		(32	)

Net cash provided by financing activities		84,891			21,135

Effect of exchange rate changes on cash and cash equivalents		(4	)		37

Net increase (decrease) in cash and cash equivalents		(4,788	)		96
Cash and cash equivalents at January 1		27,084			24,973

Cash and cash equivalents at March 31	$	22,296		$	25,069

There were no net transfers of loans and leases from loans held for sale (included in Other assets) to the loan portfolio for Asset and Liability Management (ALM) purposes for the three months ended March 31, 2004. Net transfers of loans and leases from loans held for sale (included in Other assets) to the loan portfolio for ALM purposes amounted $3,621 for the three months ended March 31, 2003.

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Bank of America Corporation and its subsidiaries (the Corporation) through its banking and nonbanking subsidiaries, provide a diverse range of financial services and products throughout the United States and in selected international markets. At March 31, 2004, the Corporation operated its banking activities primarily under two charters: Bank of America, National Association (Bank of America, N.A.) and Bank of America, N.A. (USA).

Note 1 – Summary of Significant Accounting Principles

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Corporation and its majority-owned subsidiaries, and those variable interest entities (VIEs) where the Corporation is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated.

The information contained in the consolidated financial statements is unaudited. In the opinion of management, all normal recurring adjustments necessary for a fair statement of the interim period results have been made. Certain prior period amounts have been reclassified to conform to current period presentation.

Recently Issued Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (Revised December 2003) “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (FIN 46R). FIN 46R is an update of FASB Interpretation No. 46 “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (FIN 46) and contains different implementation dates based on the types of entities subject to the standard and based on whether a company has adopted FIN 46. The Corporation adopted FIN 46R as of March 31, 2004. Adoption of this rule did not have a material impact on the Corporation’s results of operations or financial condition. For additional information on VIEs, see Note 6 of the consolidated financial statements.

Stock-based Compensation

In accordance with Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123,” (SFAS 148), the Corporation provides disclosures as if the Corporation had adopted the fair value-based method of measuring all outstanding employee stock options during the three months ended March 31, 2004 and 2003 as indicated in the following table. The prospective method of accounting for stock options that the Corporation has elected to follow, as allowed by SFAS 148, recognizes the impact of only newly issued employee stock options. The following table presents the effect on net income and earnings per common share had the fair value-based method been applied to all outstanding and unvested awards for the three months ended March 31, 2004 and 2003.


	Three Months Ended March 31
*(Dollars in millions, except per share data)*	2004			2003
Net income (as reported)	$	2,681		$	2,424
Stock-based employee compensation expense recognized during period, net of related tax effects		35			17
Stock-based employee compensation expense determined under fair value-based method, net of related tax effects⁽¹⁾		(54	)		(76	)

Pro forma net income	$	2,662		$	2,365

As reported
Earnings per common share	$	1.86		$	1.62
Diluted earnings per common share		1.83			1.59
Pro forma
Earnings per common share		1.85			1.58
Diluted earnings per common share		1.82			1.55

(1)

Includes all awards granted, modified or settled for which the fair value was required to be measured under SFAS 123, except restricted stock. Restricted stock expense, included in Net income, for the three months ended March 31, 2004 and 2003 was $64 and $87, respectively.

For additional information on recently issued accounting pronouncements and other significant accounting principles, see Note 1 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

Note 2 - Merger-related Activity

Pursuant to the Agreement and Plan of Merger, dated October 27, 2003, by and between the Corporation and FleetBoston Financial Corporation (FleetBoston) (the Merger Agreement), the Corporation acquired 100 percent of the outstanding stock of FleetBoston on April 1, 2004 (the Merger). FleetBoston’s results of operations will be included in the Corporation’s results beginning April 1, 2004.

As provided by the Merger Agreement, approximately 1.068 billion shares of FleetBoston common stock were exchanged for approximately 593 million shares of the Corporation’s common stock. This represents approximately 29 percent of the Corporation’s outstanding common stock. FleetBoston shareholders also received cash of $4 million instead of any fractional shares of the Corporation’s common stock that would have otherwise been issued on April 1, 2004. Holders of FleetBoston preferred stock received 1.1 million shares of the Corporation’s preferred stock. The Corporation’s preferred stock that was exchanged was valued using the book value of FleetBoston preferred stock. The depositary shares underlying the FleetBoston preferred stock, each representing a one-fifth interest in the FleetBoston preferred stock prior to the Merger, now represent a one-fifth interest in a share of the Corporation’s preferred stock. FleetBoston shares in the amount of 15.7 million that were previously held by the Corporation were cancelled.

The Merger is being accounted for in accordance with SFAS No. 141 “Business Combinations” (SFAS 141). Accordingly, the purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the Merger date as summarized below. The final allocation of the purchase price will be determined after completion of a final analysis to determine the fair values of FleetBoston’s tangible, and identifiable intangible assets and liabilities and final decisions regarding integration activities.


*(Dollars in millions)*
Purchase price
FleetBoston common stock exchanged (in thousands)		1,068,335
Exchange ratio		0.5553

Total shares of the Corporation’s common stock exchanged (in thousands)		593,246
Purchase price per share of the Corporation’s common stock⁽¹⁾	$	76.88

Total value of the Corporation’s common stock exchanged			$	45,609
FleetBoston preferred stock converted to the Corporation’s preferred stock				271
Fair value of outstanding stock options, direct acquisition costs and the effect of FleetBoston shares already owned by the Corporation				1,354

Total purchase price			$	47,234
Estimated fair value of net assets acquired				14,161

Estimated goodwill resulting from the Merger			$	33,073

(1)

The value of the shares of common stock exchanged with FleetBoston shareholders was based upon the average of the closing prices of the Corporation’s common stock for the period commencing two trading days before, and ending two trading days after, October 27, 2003, the date of the Merger Agreement.

Note 3—Trading Account Assets and Liabilities

The Corporation engages in a variety of trading–related activities that are either for clients or its own account.

The fair values of the components of trading account assets and liabilities at March 31, 2004 and December 31, 2003 were:


*(Dollars in millions)*	March 31 2004		December 31 2003
Trading account assets
U.S. government and agency securities	$	20,272	$	16,073
Corporate securities, trading loans, and other		26,534		25,647
Equity securities		11,310		11,445
Mortgage trading loans and asset-backed securities		10,102		8,221
Foreign sovereign debt		6,786		7,161

Total	$	75,004	$	68,547

Trading account liabilities
U.S. government and agency securities	$	9,506	$	7,304
Equity securities		8,687		8,863
Corporate securities, trading loans, and other		6,126		5,379
Foreign sovereign debt		2,986		5,276
Mortgage trading loans and asset-backed securities		97		22

Total	$	27,402	$	26,844

Note 4—Derivatives

Credit risk associated with derivatives is measured as the fair value should the counterparties with contracts in a gain position to the Corporation completely fail to perform under the terms of those contracts assuming no recoveries of underlying collateral. A detailed discussion of derivative trading activities and the ALM process is presented in Note 6 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

The following table presents the contract/notional and credit risk amounts at March 31, 2004 and December 31, 2003 of the Corporation’s derivative positions held for trading and hedging purposes. These derivative positions are primarily executed in the over-the-counter market. The credit risk amounts presented in the following table do not consider the value of any collateral held but take into consideration the effects of legally enforceable master netting agreements. The Corporation held $21.3 billion of collateral on derivative positions, of which $15.8 billion could be applied against credit risk at March 31, 2004.

Derivatives ⁽¹⁾


	March 31, 2004				December 31, 2003
*(Dollars in millions)*	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Interest rate contracts
Swaps	$	9,285,606	$	16,184	$	8,873,600	$	14,893
Futures and forwards		2,415,153		182		2,437,907		633
Written options		845,388		—		1,174,014		—
Purchased options		996,542		3,556		1,132,486		3,471
Foreign exchange contracts
Swaps		262,394		4,428		260,210		4,473
Spot, futures and forwards		926,894		2,926		775,105		4,202
Written options		154,124		—		138,474		—
Purchased options		146,445		455		133,512		669
Equity contracts
Swaps		25,280		438		30,850		364
Futures and forwards		4,162		—		3,234		—
Written options		26,695		—		25,794		—
Purchased options		25,409		5,552		24,119		5,370
Commodity contracts
Swaps		12,776		1,964		15,491		1,554
Futures and forwards		6,016		—		5,726		—
Written options		9,228		—		11,695		—
Purchased options		5,323		386		7,223		294
Credit derivatives		167,109		417		136,788		584

Total derivative assets			$	36,488			$	36,507

(1)

Includes both long and short derivative positions.

The average fair value of derivative assets for the three months ended March 31, 2004 and 2003 was $37.0 billion and $35.2 billion, respectively. The average fair value of derivative liabilities for the three months ended March 31, 2004 and 2003 was $25.1 billion and $23.6 billion, respectively.

Fair Value and Cash Flow Hedges

The Corporation uses various types of interest rate and foreign currency exchange rate derivative contracts to protect against changes in the fair value of its fixed-rate assets and liabilities due to fluctuations in interest rates and exchange rates. The Corporation also uses these contracts to protect against changes in the cash flows of its variable-rate assets and liabilities, and anticipated transactions. During the next 12 months, net gains on derivative instruments included in accumulated OCI, of approximately $295 million (pre-tax) are expected to be reclassified into earnings. These net gains reclassified into earnings are expected to increase income or decrease expense on the respective hedged items.

The following table summarizes certain information related to the Corporation’s hedging activities for the three months ended March 31, 2004 and 2003.


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Fair value hedges⁽¹⁾
Hedge ineffectiveness recognized in earnings	$	2		$	—
Net gain (loss) excluded from assessment of effectiveness		(4	)		(79	)

Cash flow hedges
Hedge ineffectiveness recognized in earnings⁽²⁾		49			15
Net gain excluded from assessment of effectiveness		—			—

Net investment hedges
Losses included in foreign currency translation adjustments within Accumulated other comprehensive income		(2	)		(41	)

(1)

Included in interest income in the Consolidated Statement of Income.

(2)

Included in Mortgage banking income in the Consolidated Statement of Income.

Note 5—Outstanding Loans and Leases, and Allowance for Credit Losses

Outstanding loans and leases at March 31, 2004 and December 31, 2003 were:


*(Dollars in millions)*	March 31 2004		December 31 2003
Commercial - domestic	$	96,148	$	96,644
Commercial - foreign		14,513		15,293
Commercial real estate - domestic		19,545		19,043
Commercial real estate - foreign		317		324

Total commercial⁽¹⁾		130,523		131,304

Residential mortgage		142,755		140,513
Home equity lines		24,946		23,859
Direct/Indirect consumer		34,451		33,415
Consumer finance		5,202		5,589
Credit card		36,087		34,814
Foreign consumer		2,004		1,969

Total consumer⁽²⁾		245,445		240,159

Total	$	375,968	$	371,463

(1)

Includes lease financing of $9,291 and $9,692 at March 31, 2004 and December 31, 2003, respectively.

(2)

Includes lease financing of $1,274 and $1,684 at March 31, 2004 and December 31, 2003, respectively.

The following table presents the recorded investment in specific loans, without consideration to the specific component of the allowance for loan and lease losses, that were considered individually impaired in accordance with SFAS No. 114 “Accounting by Creditors for Impairment of a Loan,” (SFAS 114) at March 31, 2004 and December 31, 2003. SFAS 114 impairment includes performing troubled debt restructurings, and excludes all commercial leases.


*(Dollars in millions)*	March 31 2004		December 31 2003
Commercial - domestic	$	1,239	$	1,404
Commercial - foreign		333		581
Commercial real estate - domestic		113		151
Commercial real estate - foreign		2		2

Total impaired loans	$	1,687	$	2,138

At March 31, 2004 and December 31, 2003, nonperforming loans and leases, including impaired loans, totaled $2.4 billion and $2.9 billion, respectively. In addition, included in Other assets was $82 million and $202 million of nonperforming assets at March 31, 2004 and December 31, 2003, respectively. Foreclosed properties amounted to $131 million and $148 million at March 31, 2004 and December 31, 2003, respectively.

The following table summarizes the changes in the allowance for credit losses for the three months ended March 31, 2004 and 2003:


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Allowance for loan and lease losses, January 1	$	6,163		$	6,358

Loans and leases charged off		(893	)		(984	)
Recoveries of loans and leases previously charged off		173			151

Net charge-offs		(720	)		(833	)

Provision for loan and lease losses		639			894
Other, net		(2	)		2

Allowance for loan and lease losses, March 31	$	6,080		$	6,421

Reserve for unfunded lending commitments, January 1	$	416		$	493
Provision for unfunded lending commitments		(15	)		(61	)

Reserve for unfunded lending commitments, March 31	$	401		$	432

Total	$	6,481		$	6,853

Note 6—Special Purpose Financing Entities

Securitizations

The Corporation securitizes assets and may retain a portion or all of the securities, subordinated tranches, interest-only strips and, in some cases, a cash reserve account, all of which are considered retained interests in the securitized assets. Those assets may be serviced by the Corporation or by third parties to whom the servicing has been sold.

Variable Interest Entities

In December 2003, the FASB issued FIN 46R that addresses VIEs. FIN 46R is an update of FIN 46 and contains different implementation dates based on the types of entities subject to the standard and based on whether a

company has adopted FIN 46. The Corporation adopted FIN 46 early in July 2003 and adopted FIN 46R as of March 31, 2004. As a result of the adoption of FIN 46R, there was no material impact on the Corporation’s results of operations or financial condition. At March 31, 2004, the consolidated assets and liabilities of one multi-seller asset-backed commercial paper conduit were reflected in Available-for-sale debt securities, Other assets, and Commercial paper and other short-term borrowings in the Global Corporate and Investment Banking business segment. At March 31, 2004, the Corporation held $5.1 billion of assets of this entity while the Corporation’s maximum loss exposure associated with this entity including unfunded lending commitments was approximately $5.6 billion.

Additionally, the Corporation had significant involvement with other VIEs that it did not consolidate because it was not deemed to be the primary beneficiary. In such cases, the Corporation does not absorb the majority of the entities’ expected losses nor does it receive a majority of the entities’ expected residual returns, or both. These entities facilitate client transactions, and the Corporation typically functions as administrator for these entities and provides either liquidity and letters of credit or derivatives to the VIE. The Corporation typically obtains variable interests in these types of entities at the inception of the transaction. Total assets of these entities at March 31, 2004 and December 31, 2003 were approximately $33.7 billion and $36.9 billion, respectively; revenues associated with administration, liquidity, letters of credit and other services were approximately $49 million and $50 million for the three months ended March 31, 2004 and 2003. At March 31, 2004 and December 31, 2003, the Corporation’s maximum loss exposure associated with these VIEs was approximately $29.4 billion and $28.7 billion, respectively, which is net of amounts syndicated.

Additionally, the Corporation had contractual relationships with other VIEs that engaged in leasing or lending activities and were consolidated by the Corporation prior to FIN 46. The amount of assets of these entities at March 31, 2004 and December 31, 2003 was $2.0 billion and $1.5 billion, respectively, and the Corporation’s maximum loss exposure was $1.7 billion and $1.3 billion, respectively.

Management does not believe losses resulting from its involvement with the entities discussed above will be material. See Notes 1 and 9 of the Corporation’s 2003 Annual Report for additional discussion of special purpose financing entities.

Note 7—Commitments and Contingencies

In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those recorded on the Corporation’s balance sheet. For additional information on commitments and contingencies, see Note 13 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of its customers. The outstanding unfunded lending commitments shown in the following table have been reduced by amounts participated to other financial institutions of $11.0 billion and $10.4 billion at March 31, 2004 and December 31, 2003, respectively.


*(Dollars in millions)*	March 31 2004		December 31 2003
Loan commitments⁽¹⁾	$	218,080	$	211,781
Standby letters of credit and financial guarantees		29,968		31,150
Commercial letters of credit		3,050		3,260

Legally binding commitments		251,098		246,191
Credit card lines		97,013		93,771

Total	$	348,111	$	339,962

(1)

Equity commitments of $1,575 and $1,678 related to obligations to fund existing equity investments were included in loan commitments at March 31, 2004 and December 31, 2003.

Other Commitments

When-issued securities are commitments to purchase or sell securities during the time period between the announcement of a securities offering and the issuance of those securities. Changes in market price between commitment date and issuance are reflected in trading account profits. At March 31, 2004, the Corporation had commitments to purchase and sell when-issued securities of $206.2 billion and $217.3 billion, respectively. At December 31, 2003, the Corporation had commitments to purchase and sell when-issued securities of $155.5 billion and $145.8 billion, respectively.

Interest rate lock commitments associated with mortgages are commitments to extend credit at a specified interest rate and are recorded as derivatives at fair value with changes in fair value recorded in the Consolidated Statement of Income.

At March 31, 2004 and December 31, 2003, charge cards (nonrevolving card lines) to individuals and government entities guaranteed by the U.S. government in the amount of $13.4 billion and $13.7 billion, respectively, were not included in credit card line commitments in the previous table. The outstandings related to these charge cards were $251 million and $233 million, respectively.

At March 31, 2004, the Corporation had forward whole mortgage loan purchase commitments of $3.7 billion, of which $1.7 billion settled in April 2004, and $1.5 billion and $500 million will be settled in May and June 2004, respectively. At December 31, 2003, the Corporation had forward whole mortgage loan purchase commitments of $4.6 billion, all of which were settled in January and February 2004. At March 31, 2004 and December 31, 2003, the Corporation had no forward whole mortgage loan sale commitments. For further discussion on the ALM process, see Interest Rate Risk Management beginning on page 55.

Other Guarantees

The Corporation sells products that offer book value protection primarily to plan sponsors of ERISA-governed pension plans such as 401(k) plans, 457 plans, etc. At March 31, 2004 and December 31, 2003, the notional amount of these guarantees totaled $24.0 billion and $24.9 billion, respectively, with estimated maturity dates between 2005 and 2033. As of March 31, 2004 and December 31, 2003, the Corporation has not made a payment under these products, and management believes that the probability of payments under these guarantees is remote.

The Corporation also sells products that guarantee the return of principal to investors at a preset future date. At March 31, 2004 and December 31, 2003, the notional amount of these guarantees totaled $9.2 billion and $7.4 billion, respectively; however, at March 31, 2004 and December 31, 2003, the Corporation had not made a payment under these products, and management believes that the probability of payments under these guarantees is remote. These guarantees have various maturities ranging from 2005 to 2010.

The Corporation has entered into additional guarantee agreements, including lease end obligation agreements, partial credit guarantees on certain leases, sold risk participation swaps and sold put options that require gross settlement. The maximum potential future payment under these agreements was approximately $1.4 billion and $1.3 billion at March 31, 2004 and December 31, 2003, respectively. The estimated maturity dates of these obligations are between 2004 and 2025. At March 31, 2004 and December 31, 2003, the Corporation had made no material payments under these products.

For additional information on recourse obligations related to mortgage loans sold and other guarantees related to securitizations, see Note 13 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

Litigation and Regulatory Matters

The following disclosure supplements the disclosure in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 and Current Reports on Form 8-K filed since December 31, 2003.

Parmalat Finanziera SpA and its related entities (Parmalat)

On March 24, 2004, the Court of Milan, Italy rejected the Public Prosecutor’s Office of the Court of Milan, Italy’s request for an accelerated trial with respect to the Corporation for administrative liability arising out of the actions of several of the Bank’s former employees who allegedly committed illegal acts relating to Parmalat.

On March 25, 2004, the Public Prosecutor’s office filed notice of its intention to proceed with criminal charges against three former employees, Antonio Luzi, Luis Moncada, and Luca Sala, and with related charges for administrative liability against the Corporation in accordance with the normal rules of criminal procedure.

Mutual Fund Operations

The Corporation is continuing to respond to inquiries from federal and state banking, regulatory and law enforcement agencies concerning the mutual fund-related matters.

The lawsuits filed to date include putative class actions purportedly brought on behalf of shareholders in Nations Funds mutual funds, derivative actions brought on behalf of one or more Nations Funds mutual funds by Nations Funds shareholders, putative ERISA class actions brought on behalf of participants in the Corporation’s 401(k) plan, derivative actions brought against the Corporation’s directors on behalf of the Corporation by shareholders in the Corporation, derivative actions brought on behalf of third-party mutual funds by shareholders in those funds alleging the Corporation facilitated improper trading in those funds, and a private attorney general action brought under California law.

On February 20, 2004, the Judicial Panel on Multidistrict Litigation ordered that all actions pending in federal court with respect to alleged late trading or market timing in mutual funds be transferred to the United States District Court for the District of Maryland for coordinated pretrial proceedings.

On April 5, 2004, the New York Attorney General (the NYAG) unsealed an indictment against Theodore C. Siphol, III, a former employee of Banc of America Securities, LLC (BAS), a subsidiary of the Corporation. The indictment accuses Mr. Siphol of two counts of schemes to defraud, two counts of securities fraud, multiple counts of grand larceny, and multiple counts of falsifying business records in connection with alleged “late trading” by Canary Capital Partners, LLC, et al. of shares of Nations Funds and other mutual funds.

Paul J. Miller v. Bank of America, N.A.

Plaintiff filed a motion to preliminarily enjoin the Bank from continuing to engage in the practices at issue. The motion in the trial court remains pending.

D.E. Shaw Litigation

The D.E. Shaw class action settlement was consummated on April 16, 2004 and is now final in accordance with its terms.

FleetBoston Matters

The following matters have been previously reported by FleetBoston, which merged with and into the Corporation on April 1, 2004. The following disclosure supplements the disclosure in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. See Note 2 for more information on the Merger.

In view of the inherent difficulty of predicting the outcome of such matters, the Corporation cannot state what the eventual outcome, timing or impact of pending matters will be; however, based on current knowledge, management does not believe that liabilities, if any, arising from pending litigation or regulatory matters, including the litigation and regulatory matters described below, will have a material adverse effect on the consolidated financial position or liquidity of the Corporation, but may be material to the Corporation’s operating results for any particular quarter.

Mutual Fund Operations

On February 24, 2004, the Securities and Exchange Commission (SEC) filed a civil action in the United States District Court for the District of Massachusetts against two FleetBoston subsidiaries, Columbia Management Advisors, Inc. and Columbia Funds Distributor, Inc. (the Columbia Subsidiaries), alleging that the Columbia Subsidiaries allowed certain customers to engage in short-term or excessive trading without disclosing this fact in the relevant fund prospectuses. The complaint alleged violations of federal securities laws and requested injunctive and monetary relief. A similar action was filed the same day in New York state court by the NYAG, claiming relief under New York state statutes.

On March 15, 2004, FleetBoston and its subsidiaries reached a settlement in principle with the NYAG and the SEC, agreeing, without admitting or denying wrongdoing, to (1) pay $70 million in disgorgement and $70 million in civil penalties; (2) the issuance of an order requiring the Columbia Subsidiaries to cease and desist from violations of the antifraud and other provisions of the federal securities laws, as well as the implementation of enhanced governance and compliance procedures; and (3) retain an independent consultant to review the Columbia Subsidiaries’ compliance, control and other policies and procedures. In addition, the agreement with the NYAG provides for reduction of mutual fund management fees of the Columbia funds by $80 million over five years.

FleetBoston is continuing to respond to inquiries from federal and state banking, regulatory and law enforcement agencies concerning the mutual fund-related matters.

Separately, putative class actions on behalf of persons who purchased or sold securities in Columbia funds during specified periods of time, derivative actions on behalf of various Columbia funds and trusts, and an individual Columbia fund shareholder action have been filed in the United States District Court for the District of Massachusetts and United States District Court for the Southern District of New York, alleging, among other things, violations of federal securities laws, the Investment Company Act of 1940, the Investment Advisors Act of 1940 and breaches of fiduciary duty in relation to alleged market timing in mutual funds. These actions have been noticed to the Judicial Panel on Multidistrict Litigation as related to those actions that have been transferred to the United States District Court for the District of Maryland for coordinated pretrial proceedings.

In Re Initial Public Offering Securities Litigation

Beginning in 2001, Robertson Stephens, Inc. (Robertson Stephens), an investment banking subsidiary of FleetBoston that ceased operations during 2002, and many other underwriters, as well as various issuers and their officers and directors, were named as defendants in purported class action lawsuits alleging violations of federal securities laws in connection with the underwriting of initial public offerings (IPOs). Robertson Stephens was named in many of the 309 purported class actions that have been consolidated in the United States District Court for the Southern District of New York. (BAS is also named as a defendant in some of the purported class actions.) The plaintiffs contend that the defendants violated the federal securities laws by failing to make certain required disclosures in prospectuses, by manipulating the prices of IPO securities in the aftermarkets through, among other things, alleged agreements with institutional investors receiving allocations to purchase additional shares in the aftermarket, and by disseminating false and misleading analyst reports. Robertson Stephens and other lead underwriters also have been named as defendants in class action lawsuits under the antitrust laws alleging that the underwriters conspired to manipulate the aftermarkets for the IPO securities and to extract anticompetitive fees in connection with the IPOs. Those antitrust lawsuits have been dismissed by the United States District Court for the Southern District of New York. Plaintiffs have appealed that decision.

Argentina Corralito Litigation and Related Matters

In December 2001, the Argentine government issued an order imposing limitations on the ability of FleetBoston bank customers in Argentina to withdraw funds from their deposit accounts in Argentine banks (the corralito). Since the corralito was issued, a large number of customers of FleetBoston Argentine operations (BankBoston Argentina) have filed complaints in a number of Argentine federal and provincial courts against BankBoston Argentina seeking to invalidate the corralito on constitutional grounds and withdraw their funds. The Argentine federal and provincial courts have ordered many of these deposits to be paid out at original dollar value during 2002, 2003, and the first quarter of 2004, resulting in losses for FleetBoston of approximately $363 million.

Fleet Specialist, Inc.

On March 30, 2004, Fleet Specialist and certain other specialist firms entered into agreements with the SEC and the New York Stock Exchange (the NYSE) to settle charges that the firms violated certain federal securities laws and NYSE rules in the course of their specialist trading activity. The settlement, which involves no admission or denial of wrongdoing, includes disgorgement and civil penalties for Fleet Specialist totaling approximately $59.1 million, a censure, cease and desist order, and certain undertakings, including the retention of an independent consultant to review compliance systems, policies, and procedures. The settlement does not resolve any potential regulatory charges against individuals. Separately, putative class action complaints have been filed in the United States District Court for the Southern District of New York against Fleet Specialist, FleetBoston, and other specialist firms (and their parent companies) on behalf of investors who traded stock on the NYSE between 1998 and 2003 and were allegedly disadvantaged by the improper practices of the specialist firms. Also, a putative class action complaint has been filed in California state court against certain specialist firms and individuals, including Fleet Specialist and certain of its officers, alleging violation of California state law in connection with the same alleged practices. The settlement with the SEC and NYSE, described above, does not resolve the putative class actions, although a portion of the payment is expected to be allocated to restitution for allegedly disadvantaged customers.

Note 8 - Shareholders’ Equity and Earnings Per Common Share

The change in Accumulated OCI includes pre-tax net unrealized losses related to available-for-sale debt and marketable equity securities, foreign currency translation adjustments, derivatives and other of $317 million and $1.4 billion for the three months ended March 31, 2004 and 2003, respectively. The change in Accumulated OCI also includes adjustments for gains (losses) in the Consolidated Statement of Income during the current period that had been included in Accumulated OCI in previous period ends. Pre-tax adjustments for gains included in the Consolidated Statement of Income for the three months ended March 31, 2004 and 2003 were $584 million and $130 million, respectively. The adjusted pre-tax net unrealized losses in Accumulated OCI was $901 million with a related income tax benefit of $306 million for the three months ended March 31, 2004 compared to $1.5 billion and $379 million, respectively, for the same period in 2003.

The Corporation has, from time to time, sold put options on its common stock to independent third parties. The put option program was designed to partially offset the cost of share repurchases. For additional information on the put option program, see Note 14 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

The calculation of earnings per common share and diluted earnings per common share for the three months ended March 31, 2004 and 2003 is presented below.


	Three Months Ended March 31
*(Dollars in millions, except per share information; shares in thousands)*	2004			2003
Earnings per common share
Net income	$	2,681		$	2,424
Preferred stock dividends		(1	)		(1	)

Net income available to common shareholders	$	2,680		$	2,423

Average common shares issued and outstanding		1,440,153			1,499,405

Earnings per common share	$	1.86		$	1.62

Diluted earnings per common share
Net income available to common shareholders	$	2,680		$	2,423
Preferred stock dividends		1			1

Net income available to common shareholders and assumed conversions	$	2,681		$	2,424

Average common shares issued and outstanding		1,440,153			1,499,405
Dilutive potential common shares ^{(1, 2)}		26,548			26,883

Total diluted average common shares issued and outstanding		1,466,701			1,526,288

Diluted earnings per common share	$	1.83		$	1.59

(1)

For the three months ended March 31, 2004 and 2003, average options to purchase 20 million and 35 million shares, respectively, were outstanding but not included in the computation of earnings per common share because they were antidilutive.

(2)

Includes incremental shares from assumed conversions of convertible preferred stock, restricted stock units and stock options.

Note 9 – Pension and Postretirement Plans

The Corporation sponsors noncontributory trusteed qualified pension plans that cover substantially all officers and employees, a number of noncontributory, nonqualified pension plans and postretirement health and life plans. A detailed discussion of these plans is provided in Note 16 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

Net periodic benefit cost for the three months ended March 31, 2004 and 2003, included the following components:


	Qualified Pension Plan						Nonqualified Pension Plans				Postretirement Health and Life Plans
	Three Months Ended March 31						Three Months Ended March 31				Three Months Ended March 31
*(Dollars in millions)*	2004			2003			2004		2003		2004			2003
Components of net periodic benefit cost
Service cost	$	54		$	49		$	7	$	6	$	3		$	3
Interest cost		130			129			11		9		17			17
Expected return on plan assets		(190	)		(184	)		—		—		(3	)		(4	)
Amortization of transition obligation		—			—			—		—		8			8
Amortization of prior service cost		14			14			1		1		—			1
Recognized net actuarial loss		20			12			5		1		22			22

Net periodic benefit cost	$	28		$	20		$	24	$	17	$	47		$	47

Contributions

The Corporation previously disclosed that it expected to contribute at least a combined $87 million to its Qualified Pension Plan, Nonqualified Pension Plans and Postretirement Health and Life Plans in 2004. At March 31, 2004, this estimate has not changed. At March 31, 2004, the Corporation had contributed $22 million to these plans.

Note 10 – Business Segment Information

The Corporation reports the results of its operations through four business segments: Consumer and Commercial Banking, Asset Management, Global Corporate and Investment Banking and Equity Investments. Certain operating segments have been aggregated into a single business segment. The Corporation may periodically reclassify business segment results based on modifications to its management reporting and profitability measurement methodologies and changes in organizational alignment.

Consumer and Commercial Banking provides a diversified range of products and services to individuals and small businesses through multiple delivery channels. The segment also includes commercial lending and treasury management services primarily to middle market companies with annual revenue between $10 million and $500 million. Asset Management offers investment, fiduciary and comprehensive banking and credit expertise; asset management services to institutional clients, high-net-worth individuals and retail customers; and investment, securities and financial planning services to affluent and high-net-worth individuals. Global Corporate and Investment Banking provides capital-raising solutions, advisory services, derivatives capabilities, equity and debt sales and trading for our corporate, commercial and institutional clients as well as traditional bank deposit and loan products, cash management and payment services to large corporations and institutional clients. Equity Investments includes Principal Investing, which is comprised of a diversified portfolio of investments in privately-held and publicly-traded companies at all stages, from start-up to buyout.

Corporate Other consists primarily of noninterest income (primarily from the sale of debt securities and whole loan mortgages) and noninterest expense associated with the ALM process and the results of certain consumer finance and commercial lending businesses that are being liquidated.

Total revenue includes net interest income on a fully taxable-equivalent basis and noninterest income. The net interest income of the business segments includes the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Net interest income also reflects an allocation of net interest income generated by assets and liabilities used in the Corporation’s ALM process. The business segments’ Provision for credit losses is based on the corporate method.

Certain expenses not directly attributable to a specific business segment are allocated to the segments based on pre-determined means. The most significant of these expenses include data processing and item processing costs. Data processing costs are allocated to the segments based on equipment usage. Additionally, item processing costs are allocated to the segments based on the volume of items processed for each segment.

The following table presents results of operations, selected performance ratios and selected average balance sheet categories for the three months ended March 31, 2004 and 2003 for each business segment.

Business Segment Summary

For the three months ended March 31


	Total Corporation						Consumer and Commercial Banking ⁽¹⁾						Asset Management ⁽¹⁾
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	5,970		$	5,361		$	4,534		$	3,761		$	214		$	179
Noninterest income		3,717			3,693			2,095			2,300			455			407

Total revenue		9,687			9,054			6,629			6,061			669			586
Provision for credit losses		624			833			429			488			7			(4	)
Gains on sales of debt securities		495			273			1			9			—			—
Amortization of intangibles		54			54			44			44			1			1
Other noninterest expense		5,363			4,671			3,225			2,981			581			375

Income before income taxes		4,141			3,769			2,932			2,557			80			214
Income tax expense		1,460			1,345			1,078			953			27			75

Net income	$	2,681		$	2,424		$	1,854		$	1,604		$	53		$	139

Shareholder value added	$	1,405		$	1,140		$	1,269		$	1,111		$	(27	)	$	67
Net interest yield (fully taxable-equivalent basis)		3.22	%		3.52	%		4.88	%		4.74	%		3.37	%		3.09	%
Return on average equity		22.16			19.92			32.38			32.87			7.18			20.93
Efficiency ratio (fully taxable-equivalent basis)		55.92			52.18			49.31			49.91			87.02			64.13
Average:
Total loans and leases	$	374,077		$	345,662		$	197,681		$	186,706		$	24,430		$	22,706
Total assets		849,625			713,780			396,683			344,438			27,439			25,186
Total deposits		425,075			385,760			326,485			295,504			14,925			13,030
Common equity/Allocated equity		48,632			49,343			23,028			19,785			2,966			2,688

For the three months ended March 31


	Global Corporate and Investment Banking⁽¹⁾						Equity Investments⁽¹⁾						Corporate Other
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	1,127		$	1,254		$	(35	)	$	(37	)	$	130		$	204
Noninterest income		1,143			1,065			17			(70	)		7			(9	)

Total revenue		2,270			2,319			(18	)		(107	)		137			195
Provision for credit losses		(23	)		272			—			1			211			76
Gains (losses) on sales of debt securities		(7	)		(14	)		—			—			501			278
Amortization of intangibles		7			7			1			1			1			1
Other noninterest expense		1,564			1,325			28			24			(35	)		(34	)

Income before income taxes		715			701			(47	)		(133	)		461			430
Income tax expense (benefit)		252			241			(17	)		(48	)		120			124

Net income (loss)	$	463		$	460		$	(30	)	$	(85	)	$	341		$	306

Shareholder value added	$	225		$	173		$	(86	)	$	(142	)	$	24		$	(69	)
Net interest yield (fully taxable-equivalent basis)		1.64	%		2.23	%		n/m			n/m			n/m			n/m
Return on average equity		20.87			17.20			(5.68	)%		(16.48	)%		n/m			n/m
Efficiency ratio (fully taxable-equivalent basis)		69.22			57.43			n/m			n/m			n/m			n/m
Average:
Total loans and leases	$	40,785		$	56,543		$	87		$	434		$	111,094		$	79,273
Total assets		323,673			273,477			6,182			6,115			95,648			64,564
Total deposits		69,186			67,315			—			—			14,479			9,911
Common equity/Allocated equity ⁽²⁾		8,917			10,855			2,093			2,103			11,628			13,912

n/m = not meaningful

(1)

There were no material intersegment revenues among the segments.

(2)

Equity in Corporate Other represents equity of the Corporation not allocated to the business segments.

Reconciliations of the four business segments’ revenue and net income to consolidated totals follow:


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Segments’ revenue	$	9,550		$	8,859
Adjustments:
Revenue associated with unassigned capital		105			164
ALM activities ⁽¹⁾		(18	)		163
Liquidating businesses		84			110
Fully taxable-equivalent basis adjustment		(169	)		(152	)
Other		(34	)		(242	)

Consolidated revenue	$	9,518		$	8,902

Segments’ net income	$	2,340		$	2,118
Adjustments, net of taxes:
Earnings associated with unassigned capital		71			110
ALM activities ^{(1, 2)}		313			294
Liquidating businesses		(31	)		5
Other		(12	)		(103	)

Consolidated net income	$	2,681		$	2,424

(1)

Includes whole mortgage loan sale gains for the three months ended March 31, 2003.

(2)

Includes Gains on sales of debt securities of $338 and $186 for the three months ended March 31, 2004 and 2003, respectively.

The adjustments presented in the table above include consolidated income and expense amounts not specifically allocated to individual business segments.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. Readers of the Bank of America Corporation and its subsidiaries (the Corporation) Form 10-Q should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report as well as those discussed in the Corporation’s 2003 Annual Report. The statements are representative only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement.

Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include the following: changes in general economic conditions and economic conditions in the geographic regions and industries in which the Corporation operates which may affect, among other things, the level of nonperforming assets, charge-offs and provision expense; changes in the interest rate environment which may reduce interest margins and impact funding sources; changes in foreign exchange rates; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial products including securities, loans, deposits, debt and derivative financial instruments and other similar financial instruments; political conditions and related actions by the United States military abroad which may adversely affect the Corporation’s businesses and economic conditions as a whole; liabilities resulting from litigation and regulatory investigations, including costs, expenses, settlements and judgments; changes in domestic or foreign tax laws, rules and regulations as well as Internal Revenue Service (IRS) or other governmental agencies’ interpretations thereof; various monetary and fiscal policies and regulations, including those determined by the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation and state regulators; competition with other local, regional and international banks, thrifts, credit unions and other nonbank financial institutions; ability to grow core businesses; ability to develop and introduce new banking-related products, services and enhancements and gain market acceptance of such products; mergers and acquisitions and their integration into the Corporation; decisions to downsize, sell or close units or otherwise change the business mix of the Corporation; and management’s ability to manage these and other risks.

The Corporation, headquartered in Charlotte, North Carolina, operates in 21 states and the District of Columbia and has offices located in 30 countries. The Corporation provides a diversified range of banking and certain nonbanking financial services and products both domestically and internationally through four business segments: Consumer and Commercial Banking, Asset Management, Global Corporate and Investment Banking and Equity Investments. At March 31, 2004, the Corporation had $816.0 billion in assets and approximately 134,400 full-time equivalent employees. Notes to the consolidated financial statements referred to in Management’s Discussion and Analysis of Results of Operations and Financial Condition are incorporated by reference into Management’s Discussion and Analysis of Results of Operations and Financial Condition.

Performance overview for the three months ended March 31, 2004 compared to the same period in 2003:

Net income totaled $2.7 billion, or $1.83 per diluted common share, 11 percent and 15 percent increases, respectively, from $2.4 billion, or $1.59 per diluted common share. The return on average common shareholders’ equity was 22 percent compared to 20 percent.

Within Consumer and Commercial Banking, customer satisfaction continued to increase, resulting in better retention and increased opportunities to deepen relationships with our customers. Highly satisfied customers, those who rate us a 9 or 10 on a 10- point scale, increased 11 percent. This equates to an increase of 1.4 million customers being highly satisfied with their banking experience.

Our active online banking customers reached 8.1 million, a 55 percent increase. Forty-seven percent of consumer households that hold checking accounts use online banking. Active bill pay customers increased 79 percent to 3.7 million. Active bill pay users paid $16.3 billion of bills compared to $9.6 billion.

Debit card purchase volumes grew 26 percent while consumer credit card purchases increased 24 percent. Total managed card revenue, including interest income, increased 23 percent. Average managed consumer credit card receivables grew 26 percent due to new account growth from direct marketing programs and the branch network.

Within Asset Management, total assets under management increased 14 percent to $337.2 billion at March 31, 2004 led by Marsico Capital Management, LLC’s (Marsico) assets under management, which increased to $33.2 billion at March 31, 2004 compared to $16.5 billion at March 31, 2003.

Global Corporate and Investment Banking gained market share in areas such as high-yield debt and leveraged loans during the quarter. Continued improvements in credit quality in our large corporate portfolio drove the $295 million, or 108 percent, decrease in provision for credit losses in Global Corporate and Investment Banking. Net charge-offs in the large corporate portfolio continued at their recent low levels, decreasing 65 percent from a year ago. In addition, large corporate nonperforming assets dropped $309 million, or 24 percent from year-end levels.

Financial highlights for the three months ended March 31, 2004 compared to the same period in 2003:

Net interest income on a fully taxable-equivalent basis increased $609 million to $6.0 billion. This increase was driven by higher asset and liability management (ALM) portfolio levels (consisting of securities and whole loan mortgages), higher consumer and middle market commercial loan levels, one more day of activity and higher core deposit funding levels. Partially offsetting these increases were reductions in the large corporate and foreign loan balances, and the continued runoff of previously exited consumer businesses, lower mortgage warehouse levels and a decrease in the contribution of trading-related instruments. The net interest yield on a fully taxable-equivalent basis declined 30 basis points (bps) to 3.22 percent due to the negative impact of increases in lower-yielding trading-related assets and our ALM portfolio repositioning partially offset by higher levels of higher-yielding consumer loans.

Noninterest income increased $24 million to $3.7 billion, due to increases in (i) Equity investment gains of $201 million due to higher cash gains on both Principal Investing and Parent Company investments, (ii) Card income of $114 million due to increased fees and interchange income, (iii) Investment and brokerage services of $74 million due to higher volumes related to increased market activity and (iv) Service charges of $62 million caused by account growth and seasonality; offset by decreases in (i) Mortgage banking income of $196 million caused by a decrease in the sales of loans to the secondary market, (ii) Other income of $146 million related to the reduction of

whole loan sale gains during the quarter and (iii) trading account profits of $111 million driven by the increase in the writedown of our mortgage banking assets as compared to a year ago.

Gains on sales of debt securities were $495 million and $273 million, respectively, as we continued to reposition the ALM portfolio in response to interest rate fluctuations.

The provision for credit losses declined $209 million to $624 million driven by a reduction in the provision for the large corporate portfolio of $295 million partially offset by an increase in the provision for credit losses in the held consumer credit card loan portfolio of $87 million, primarily a function of growth and continued seasoning in the portfolio. Nonperforming assets decreased $2.5 billion to $2.5 billion, or 0.66 percent of loans, leases and foreclosed properties at March 31, 2004 compared to 1.46 percent at March 31, 2003. This decline was driven by reduced levels of inflows to nonperforming assets, loan sales, increased returns to performing status and charge-offs. The decrease in nonperforming assets was concentrated in the commercial portfolio.

Noninterest expense increased $692 million, driven by higher Personnel costs of $303 million and increased Other general operating expenses of $278 million. Higher Personnel costs resulted from increased revenue-related incentives of $108 million and higher costs of employee benefits of $93 million. The increase in Other general operating expenses was related to the $375 million mutual fund settlement entered into during the quarter. This settlement amount was offset by a $90 million reserve to produce a net settlement expense of $285 million. This net settlement expense was divided equally between Asset Management and Global Corporate and Investment Banking for management reporting purposes. The financial impact was approximately $0.16 per diluted common share in the first quarter. As part of the mutual fund settlement, we agreed to reduce future fees by $16 million per year for five years for a total of $80 million. For more information on the mutual fund settlement see Note 7 of the consolidated financial statements.

Income tax expense was $1.3 billion reflecting an estimated effective tax rate of 32.5 percent compared to $1.2 billion and 33.0 percent, respectively.

On April 1, 2004, we completed our merger with FleetBoston Financial Corporation (FleetBoston) (the Merger) after obtaining final shareholder and regulatory approvals. FleetBoston is a diversified financial services company providing a comprehensive array of financial solutions to customers both domestically and internationally. We expect the Merger to create a banking institution with a truly national scope, with an increased presence in America’s growth and wealth markets and leading market shares throughout the Northeast, Southeast, Southwest, Midwest and West regions of the United States. For more information on the Merger see Note 2 of the consolidated financial statements.

Table 1

Selected Quarterly Financial Data⁽¹⁾


	2004 Quarter			2003 Quarters
*(Dollars in millions, except per share information)*	First			Fourth			Third			Second			First
Income statement
Net interest income	$	5,801		$	5,586		$	5,304		$	5,365		$	5,209
Noninterest income		3,717			4,049			4,446			4,262			3,693
Total revenue		9,518			9,635			9,750			9,627			8,902
Provision for credit losses		624			583			651			772			833
Gains on sales of debt securities		495			139			233			296			273
Noninterest expense		5,417			5,288			5,077			5,065			4,725
Income before income taxes		3,972			3,903			4,255			4,086			3,617
Income tax expense		1,291			1,177			1,333			1,348			1,193
Net income		2,681			2,726			2,922			2,738			2,424
Average common shares issued and outstanding (in thousands)		1,440,153			1,463,247			1,490,103			1,494,094			1,499,405
Average diluted common shares issued and outstanding (in thousands)		1,466,701			1,489,481			1,519,641			1,523,306			1,526,288

Performance ratios
Return on average assets		1.27	%		1.39	%		1.48	%		1.42	%		1.38	%
Return on average common shareholders’ equity		22.16			22.42			23.74			21.86			19.92
Total equity to total assets (period end)		5.98			6.52			6.84			6.63			7.36
Total average equity to total average assets		5.73			6.19			6.22			6.49			6.92
Dividend payout		43.21			42.70			40.85			35.06			39.64

Per common share data
Earnings	$	1.86		$	1.86		$	1.96		$	1.83		$	1.62
Diluted earnings		1.83			1.83			1.92			1.80			1.59
Dividends paid		0.80			0.80			0.80			0.64			0.64
Book value		33.71			33.26			33.83			34.06			33.38

Average balance sheet
Total loans and leases	$	374,077		$	371,071		$	357,288		$	350,279		$	345,662
Total assets		849,625			780,534			786,153			775,084			713,780
Total deposits		425,075			418,840			414,569			405,307			385,760
Long-term debt ⁽²⁾		78,852			70,596			66,788			68,927			67,399
Common shareholders’ equity		48,632			48,238			48,816			50,212			49,343
Total shareholders’ equity		48,686			48,293			48,871			50,269			49,400

Capital ratios (period end)
Risk-based capital:
Tier 1		7.73	%		7.85	%		8.25	%		8.08	%		8.20	%
Total		11.46			11.87			12.17			11.95			12.29
Leverage		5.43			5.73			5.95			5.92			6.24

Market price per share of common stock
Closing	$	80.98		$	80.43		$	78.04		$	79.03		$	66.84
High closing		82.76			82.50			83.53			79.89			72.48
Low closing		78.30			72.85			74.87			68.00			65.63

(1)

Certain prior period amounts have been reclassified to conform to current period presentation.

(2)

Includes long-term debt related to trust preferred securities (Trust Securities).

Supplemental Financial Data

In managing our business, we use certain performance measures and ratios not defined in accounting principles generally accepted in the United States (GAAP), including shareholder value added (SVA). We also calculate certain measures, such as net interest income, core net interest income, net interest yield and the efficiency ratio, on a fully taxable-equivalent basis. Other companies may define or calculate supplemental financial data differently. See Tables 2 and 3 for supplemental financial data for the three months ended March 31, 2004 and 2003.

SVA is a key measure of performance not defined by GAAP that is used in managing our growth strategy orientation and strengthening our focus on generating long-term growth and shareholder value. SVA is used in measuring the performance of our different business units and is an integral component for allocating resources. Each business segment has a goal for growth in SVA reflecting the individual segment’s business and customer strategy. Investment resources and initiatives are aligned with these SVA growth goals during the planning and forecasting process. Investment, relationship and profitability models all have SVA as a key measure to support the implementation of SVA growth goals. SVA is defined as cash basis earnings on an operating basis less a charge for the use of capital. Cash basis earnings is defined as net income adjusted to exclude amortization of intangibles. The

charge for the use of capital is calculated by multiplying 11 percent (management’s estimate of the shareholders’ minimum required rate of return on capital invested) by average total common shareholders’ equity at the corporate level and by average allocated equity at the business segment level. Equity is allocated to the business segments using a risk-adjusted methodology for each segment’s credit, market and operational risks. The nature of these risks is discussed further beginning on page 41. SVA increased 23 percent to $1.4 billion for the three months ended March 31, 2004 compared to the comparable 2003 period, due to both the $257 million increase in cash basis earnings and the $8 million effect of lower levels of allocated equity. For additional discussion of SVA, see Business Segment Operations beginning on page 30.

We review net interest income on a fully taxable-equivalent basis, which is a performance measure used by management in operating the business that we believe provides investors with a more accurate picture of the interest margin for comparative purposes. In this presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. For purposes of this calculation, we use the federal statutory tax rate of 35 percent. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a fully taxable-equivalent basis is also used in the calculation of the efficiency ratio and the net interest yield. The efficiency ratio, which is calculated by dividing noninterest expense by total revenue, measures how much it costs to produce one dollar of revenue. Net interest income on a fully taxable-equivalent basis is also used in our business segment reporting.

Table 2

Supplemental Financial Data


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Shareholder value added
Net income	$	2,681		$	2,424
Amortization of intangibles		54			54

Cash basis earnings		2,735			2,478
Capital charge		(1,330	)		(1,338	)

Shareholder value added	$	1,405		$	1,140

Fully taxable-equivalent basis data
Net interest income	$	5,970		$	5,361
Total revenue		9,687			9,054
Net interest yield		3.22	%		3.52	%
Efficiency ratio		55.92			52.18

Additionally, we review core net interest income, which adjusts reported net interest income on a fully taxable-equivalent basis for the impact of Global Corporate and Investment Banking trading-related activities and loans that we originated and sold into revolving credit card and commercial securitizations. Noninterest income, rather than net interest income and provision for credit losses, is recorded for assets that have been securitized as we are compensated for servicing the securitized assets and record servicing income and gains or losses on securitizations, where appropriate. We evaluate our trading results by combining trading-related net interest income with trading account profits, as discussed in Trading-related Revenue on page 29 and in the Global Corporate and Investment Banking business segment section beginning on page 33, as trading strategies are evaluated based on total revenue.

Table 3 below provides a reconciliation of net interest income on a fully taxable-equivalent basis presented in Table 4 to core net interest income for the three months ended March 31, 2004 and 2003. Certain prior period amounts have been reclassified to conform to the current period presentation.

Table 3

Core Net Interest Income


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Net interest income
As reported (fully taxable-equivalent basis)	$	5,970		$	5,361
Trading-related net interest income		(577	)		(612	)
Impact of revolving securitizations		38			98

Core net interest income	$	5,431		$	4,847

Average earning assets
As reported	$	743,711		$	613,092
Trading-related earning assets		(218,789	)		(158,392	)
Impact of revolving securitizations		1,553			4,477

Core average earning assets	$	526,475		$	459,177

Net interest yield on earning assets
As reported (fully taxable-equivalent basis)		3.22	%		3.52	%
Impact of trading-related activities		0.90			0.68
Impact of revolving securitizations		0.01			0.04

Core net interest yield on earning assets		4.13	%		4.24	%

Core net interest income increased $584 million for the three months ended March 31, 2004 from the comparable 2003 period as higher ALM portfolio levels, higher consumer and middle market commercial loan levels, one more day of activity and higher core deposit funding levels were partially offset by reductions in the large corporate and foreign loan balances and the continued runoff of previously exited consumer businesses, and lower mortgage warehouse levels.

Core average earning assets increased $67.3 billion for the three months ended March 31, 2004 from the comparable 2003 period primarily due to higher levels of residential mortgages, credit card loans, and debt securities, partially offset by reductions in the levels of commercial loans.

The core net interest yield decreased 11 bps for the three months ended March 31, 2004 from the comparable 2003 period mainly due to the negative impact of declining rates net of ALM repositioning.

Table 4

Quarterly Average Balances and Interest Rates - Fully Taxable-equivalent Basis


	First Quarter 2004						Fourth Quarter 2003
*(Dollars in millions)*	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Time deposits placed and other short-term investments	$	12,268	$	48	1.57	%	$	11,231	$	49	1.71	%
Federal funds sold and securities purchased under agreements to resell		113,761		434	1.53			96,713		506	2.08
Trading account assets		105,033		1,023	3.90			94,630		927	3.91
Debt securities		99,755		1,223	4.91			59,197		742	5.01
Loans and leases ⁽¹⁾:
Commercial - domestic		95,931		1,562	6.55			95,648		1,670	6.93
Commercial - foreign		15,227		139	3.67			16,226		136	3.31
Commercial real estate - domestic		19,491		207	4.27			19,293		207	4.28
Commercial real estate - foreign		324		3	3.63			323		3	3.97

Total commercial		130,973		1,911	5.87			131,490		2,016	6.09

Residential mortgage		141,898		1,960	5.53			142,482		1,931	5.41
Home equity lines		24,379		262	4.31			23,206		255	4.36
Direct/Indirect consumer		34,045		464	5.49			33,422		478	5.67
Consumer finance		5,490		104	7.56			5,798		108	7.38
Credit card		35,303		870	9.92			32,734		810	9.83
Foreign consumer		1,989		16	3.27			1,939		17	3.37

Total consumer		243,104		3,676	6.07			239,581		3,599	5.98

Total loans and leases		374,077		5,587	6.00			371,071		5,615	6.02

Other earning assets		38,817		426	4.41			42,370		388	3.66

Total earning assets ⁽²⁾		743,711		8,741	4.72			675,212		8,227	4.85

Cash and cash equivalents		23,185						22,974
Other assets, less allowance for loan and lease losses		82,729						82,348

Total assets	$	849,625					$	780,534

Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings	$	26,159	$	17	0.27	%	$	25,494	$	19	0.30	%
NOW and money market deposit accounts		155,835		321	0.83			155,369		401	1.02
Consumer CDs and IRAs		75,341		567	3.03			73,246		475	2.58
Negotiable CDs, public funds and other time deposits		5,939		74	5.01			6,195		44	2.81

Total domestic interest-bearing deposits		263,274		979	1.50			260,304		939	1.43

Foreign interest-bearing deposits ⁽³⁾:
Banks located in foreign countries		18,954		171	3.62			13,225		177	5.34
Governments and official institutions		4,701		19	1.63			2,654		11	1.58
Time, savings and other		21,054		37	0.71			20,019		51	1.02

Total foreign interest-bearing deposits		44,709		227	2.04			35,898		239	2.65

Total interest-bearing deposits		307,983		1,206	1.57			296,202		1,178	1.58

Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings		203,398		739	1.46			151,999		537	1.40
Trading account liabilities		34,543		335	3.90			38,298		317	3.28
Long-term debt ⁽⁴⁾		78,852		491	2.49			70,596		450	2.55

Total interest-bearing liabilities ⁽²⁾		624,776		2,771	1.78			557,095		2,482	1.77

Noninterest-bearing sources:
Noninterest-bearing deposits		117,092						122,638
Other liabilities		59,071						52,508
Shareholders’ equity		48,686						48,293

Total liabilities and shareholders’ equity	$	849,625					$	780,534

Net interest spread					2.94						3.08
Impact of noninterest-bearing sources					0.28						0.31

Net interest income/yield on earning assets			$	5,970	3.22	%			$	5,745	3.39	%

(1)

Nonperforming loans are included in the respective average loan balances. Income on such nonperforming loans is recognized on a cash basis.

(2)

Interest income includes the impact of interest rate risk management contracts, which increased interest income on the underlying assets $715 in the first quarter of 2004 and $884, $925, $587 and $576 in the fourth, third, second and first quarters of 2003, respectively. These amounts were substantially offset by corresponding decreases in the income earned on the underlying assets. Interest expense includes the impact of interest rate risk management contracts, which increased interest expense on the underlying liabilities $183 in the first quarter of 2004 and $90, $141, $28 and $46 in the fourth, third, second and first quarters of 2003, respectively. These amounts were substantially offset by corresponding decreases in the interest paid on the underlying liabilities. For further information on interest rate contracts, see “Interest Rate Risk Management” beginning on page 55.

(3)

Primarily consists of time deposits in denominations of $100,000 or more.

(4)

Includes long-term debt related to Trust Securities.


	Third Quarter 2003						Second Quarter 2003						First Quarter 2003
*(Dollars in millions)*	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Time deposits placed and other short-term investments	$	10,062	$	41	1.63	%	$	7,888	$	39	1.99	%	$	6,987	$	43	2.49	%
Federal funds sold and securities purchased under agreements to resell		90,236		479	2.11			70,054		194	1.11			57,873		194	1.35
Trading account assets		96,105		991	4.11			99,129		1,022	4.13			99,085		1,053	4.27
Debt securities		63,423		616	3.89			94,017		1,005	4.28			66,186		769	4.65
Loans and leases ⁽¹⁾:
Commercial - domestic		96,086		1,719	7.10			100,721		1,746	6.95			103,663		1,836	7.18
Commercial - foreign		16,885		151	3.55			18,004		170	3.79			18,876		156	3.35
Commercial real estate - domestic		19,681		210	4.23			20,039		218	4.36			19,955		215	4.37
Commercial real estate - foreign		280		3	4.16			305		3	3.95			301		3	3.88

Total commercial		132,932		2,083	6.22			139,069		2,137	6.16			142,795		2,210	6.27

Residential mortgage		130,948		1,656	5.05			120,754		1,703	5.64			113,695		1,582	5.59
Home equity lines		22,539		255	4.48			22,763		263	4.64			23,054		267	4.70
Direct/Indirect consumer		33,278		488	5.82			32,248		495	6.17			31,393		503	6.49
Consumer finance		6,528		121	7.39			7,244		137	7.58			8,012		154	7.76
Credit card		29,113		742	10.11			26,211		690	10.56			24,684		644	10.57
Foreign consumer		1,950		17	3.43			1,990		17	3.47			2,029		17	3.45

Total consumer		224,356		3,279	5.82			211,210		3,305	6.27			202,867		3,167	6.30

Total loans and leases		357,288		5,362	5.97			350,279		5,442	6.23			345,662		5,377	6.29

Other earning assets		60,194		539	3.56			42,133		452	4.30			37,299		441	4.77

Total earning assets ⁽²⁾		677,308		8,028	4.72			663,500		8,154	4.92			613,092		7,877	5.18

Cash and cash equivalents		22,660						23,203						21,699
Other assets, less allowance for loan and lease losses		86,185						88,381						78,989

Total assets	$	786,153					$	775,084					$	713,780

Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings	$	25,285	$	20	0.31	%	$	24,420	$	35	0.58	%	$	22,916	$	34	0.59	%
NOW and money market deposit accounts		151,424		249	0.65			146,284		295	0.81			142,338		291	0.83
Consumer CDs and IRAs		71,216		872	4.85			69,506		742	4.28			66,937		695	4.21
Negotiable CDs, public funds and other time deposits		7,771		25	1.27			12,912		45	1.41			3,598		16	1.78

Total domestic interest-bearing deposits		255,696		1,166	1.81			253,122		1,117	1.77			235,789		1,036	1.78

Foreign interest-bearing deposits ⁽³⁾:
Banks located in foreign countries		12,273		59	1.90			16,150		87	2.16			14,218		80	2.27
Governments and official institutions		2,032		6	1.21			2,392		8	1.42			1,785		6	1.31
Time, savings and other		18,792		47	1.00			19,209		57	1.18			18,071		61	1.38

Total foreign interest-bearing deposits		33,097		112	1.35			37,751		152	1.61			34,074		147	1.75

Total interest-bearing deposits		288,793		1,278	1.76			290,873		1,269	1.75			269,863		1,183	1.78

Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings		162,080		447	1.09			152,722		514	1.35			123,041		453	1.49
Trading account liabilities		36,903		345	3.71			38,610		316	3.28			34,858		308	3.58
Long-term debt ⁽⁴⁾		66,788		481	2.88			68,927		531	3.08			67,399		572	3.40

Total interest-bearing liabilities ⁽²⁾		554,564		2,551	1.83			551,132		2,630	1.91			495,161		2,516	2.05

Noninterest-bearing sources:
Noninterest-bearing deposits		125,776						114,434						115,897
Other liabilities		56,942						59,249						53,322
Shareholders’ equity		48,871						50,269						49,400

Total liabilities and shareholders’ equity	$	786,153					$	775,084					$	713,780

Net interest spread					2.89						3.01						3.13
Impact of noninterest-bearing sources					0.33						0.32						0.39

Net interest income/yield on earning assets			$	5,477	3.22	%			$	5,524	3.33	%			$	5,361	3.52	%

Trading-related Revenue

Trading account profits represent the net amount earned from our trading positions, which include trading account assets and liabilities as well as derivative positions and mortgage banking certificates. Trading account profits, as reported in the Consolidated Statement of Income, do not include the net interest income recognized on trading positions or the related funding charge or benefit.

Trading-related revenue, which includes net interest income from trading-related positions and trading account profits in Noninterest income is presented in the following table. Not included are commissions from equity transactions which are recorded in Noninterest income as Investment and brokerage service income, however, we consider these to be an integral component to the overall business trading revenues. Trading-related revenue is derived from foreign exchange spot, forward and cross-currency contracts, fixed income and equity securities, and derivative contracts in interest rates, equities, credit, commodities and mortgage banking certificates.

Table 5

Trading-related Revenue⁽¹⁾


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Net interest income (fully taxable-equivalent basis)	$	577		$	612
Trading account profits		3			114

Total trading-related revenue	$	580		$	726

Trading-related revenue by product
Fixed income	$	212		$	308
Interest rate (fully taxable-equivalent basis)		193			158
Foreign exchange		189			136
Equities⁽²⁾		3			121
Commodities		(2	)		51

Market-based trading-related revenue		595			774
Credit portfolio hedges⁽³⁾		(15	)		(48	)

Total trading-related revenue	$	580		$	726

(1)

Certain prior period amounts have been reclassified to conform to the current period presentation.

(2)

Equity revenues do not include commissions from equity transactions which were $172 and $140 for the three months ending March 31, 2004 and 2003, respectively.

(3)

Includes credit default swaps used for credit risk management.

Trading-related revenue decreased 20 percent to $580 million for the three months ended March 31, 2004 as compared to a year ago, driven by decreases in both net interest income and trading account profits. The overall decrease was led by a decline in Equities revenue of $118 million, or 98 percent, but after including commissions on equity transactions, the decline was $86 million or 33 percent. The reduction in Equities revenue was driven by net losses on a single retained stock position. Also contributing to the drop was a decrease in revenue from fixed income products of $96 million. This decrease was due to the increase in losses related to the writedown of our Mortgage banking assets from $95 million in the first quarter of 2003 to $275 million in the first quarter of 2004 due to faster prepayment speeds and changes in other assumptions relative to our portfolio and a decrease of $44 million in mortgage-backed securities sales and trading activities partially offset by increased structured finance trading activities of $101 million. Also decreasing during the current quarter were commodities revenues by $53 million from a year ago due to a reduced risk profile and lower customer activity. The decreases were partially offset by a $53 million or 39 percent increase in foreign exchange revenue, which was the result of the market volatility of the dollar and increased customer activity and a $35 million increase in interest rate revenue.

Complex Accounting Estimates and Principles

Our significant accounting principles are described in Note 1 of the Corporation’s 2003 Annual Report and are essential in understanding Management’s Discussion and Analysis of Results of Operations and Financial Condition. Some of our accounting principles require significant judgment to estimate values of either assets or liabilities. In addition, certain accounting principles require significant judgment in applying the complex accounting principles to complicated transactions to determine the most appropriate treatment. We have established procedures and processes to facilitate making the judgments necessary to estimate the values of our assets and liabilities and to analyze complex transactions to prepare financial statements. For a complete discussion of our more judgmental and complex accounting estimates and principles, see Complex Accounting Estimates and Principles on pages 30 through 32 of the Corporation’s 2003 Annual Report.

See Note 1 of the consolidated financial statements for Recently Issued Accounting Pronouncements.

Business Segment Operations

We provide our customers and clients both traditional banking and nonbanking financial products and services through four business segments: Consumer and Commercial Banking, Asset Management, Global Corporate and Investment Banking and Equity Investments. Descriptions of each business segment and subsegments are disclosed in the Corporation’s 2003 Annual Report on pages 32 through 38.

See Note 10 of the consolidated financial statements for additional business segment information including the allocation of certain expenses, selected financial information for the business segments and reconciliations to consolidated Total revenue and Net income amounts.

Consumer and Commercial Banking

Our Consumer and Commercial Banking strategy is to attract, retain and deepen customer relationships. A critical component of that strategy includes continuously improving customer satisfaction. We believe this focus will help us achieve our goal of being recognized as the best retail bank in America. Customers expressing the highest levels of satisfaction increased 11 percent at March 31, 2004 compared to March 31, 2003. Since first quarter 2003 we have added 1,435,000 net new checking accounts and 1,046,000 net new savings accounts. This growth resulted from the introduction of new products, advancement of our multicultural strategy and strong customer retention. Access to our services through online banking, which saw a 55 percent increase in active online subscribers, our network of domestic banking centers, card products, ATMs, telephone and Internet channels, and our product innovations, such as an expedited mortgage application process and new deposit products, all contributed to success with our customers.

Consumer and Commercial Banking drove our financial results for the three months ended March 31, 2004 as total revenue increased $568 million, or nine percent. Net income rose $250 million, or 16 percent. The increase in net income partially offset by an increase in capital drove a $158 million, or 14 percent, increase in SVA.

Net interest income increased $773 million due to the net results of ALM activities, and overall consumer loan portfolio and deposit growth. Net interest income was positively impacted by the $11.0 billion, or six percent, increase in average loans and leases for the three months ended March 31, 2004, compared to the same period in 2003, driven by a $10.6 billion, or 43 percent, increase in average held credit card outstandings. Average commercial loans increased 4 percent for the three months ended March 31, 2004 compared to a year ago.

Deposit growth also positively impacted net interest income. Higher consumer deposit balances as a result of government tax cuts, higher customer retention and our efforts to add new customers, as evidenced by the increase in net new checking and savings accounts, drove the $31.0 billion, or 10 percent, increase in average deposits for the three months ended March 31, 2004.

Significant Noninterest Income Components


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Service charges	$	1,114		$	1,053
Mortgage banking income		209			405
Card income		795			681
Trading account profits (losses)		(290	)		(121	)

Increases in both consumer and corporate service charges led to the $61 million, or six percent, increase in service charge income. Consumer service charges increased $45 million, or six percent, to $813 million due primarily to a $43 million increase in deposit fees and ATM fees associated with growth in new accounts. Corporate service charges increased $16 million, or six percent, to $301 million mainly due to higher levels of letter of credit and bankers’ acceptance fees, and deposit account growth.

First mortgage loan originations decreased $9.0 billion to $23.8 billion for the three months ended March 31, 2004, resulting from lower refinancing levels driven by relatively higher interest rates. First mortgage loan origination volume was composed of approximately $14.1 billion of retail loans and $9.7 billion of wholesale loans for the three months ended March 31, 2004, compared to $22.0 billion and $10.8 billion, respectively, for the three months ended March 31, 2003. Increased mortgage prepayments, resulting from the refinancing boom, led to a $12.0 billion net decrease in the average portfolio of first mortgage loans serviced to $247.0 billion for the three months ended March 31, 2004, compared to a year ago. Increased loan additions drove the increase in loans serviced for investors to $184.1 billion for the three months ended March 31, 2004 compared to $178.2 billion a year ago. A 30 percent decrease in the sales of loans to the secondary market and spread compression drove the $196 million decrease in Mortgage banking income. For the three months ended March 31, 2004 and 2003, loan sales to the secondary market were $16.3 billion and $23.3 billion, respectively.

Trading account profits (losses) primarily represent the net mark-to-market adjustments on mortgage banking assets and related derivative instruments used as an economic hedge on the assets. Impacting trading account profits (losses) for the three months ended March 31, 2004 was a $275 million negative impact on the value of Mortgage banking assets due to changes in servicing prepayment speeds and other servicing model assumptions. The value of Mortgage banking assets decreased to $2.2 billion at March 31, 2004 compared to $2.8 billion at December 31, 2003 due to negative mark-to-market adjustments, and normal paydowns and amortization offset by additions due to loan sales.

Strong debit and credit card performance resulted in a 17 percent increase in card income overall. The increase in debit card income of $24 million, or 11 percent, was due to a 26 percent increase in purchase volumes, as well as growth in active accounts, partially offset by a lower signature interchange rate. Credit card income increased $90 million, or 19 percent, resulting from higher interchange fees of $39 million (driven mainly by a 24 percent increase in credit card purchase volumes), overlimit fees of $18 million, merchant discount fees of $17 million, late fees of $17 million and cash advance fees of $10 million offset by lower excess servicing income of $27 million. Card income included activity from the securitized credit card portfolio of $14 million and $41 million for the three months ended March 31, 2004 and 2003, respectively. Noninterest income, rather than net interest income and provision for credit losses, is recorded for assets that have been securitized as we are compensated for servicing the securitized assets and record servicing income and gains or losses on securitizations, where appropriate. New advances on previously securitized accounts will be recorded on our balance sheet after the revolving period of the securitization, which has the effect of increasing loans on our balance sheet and increasing net interest income and charge-offs, with a corresponding reduction in noninterest income. Average on-balance sheet credit card outstandings increased 43 percent, due to over 4 million new accounts and an increase of $2.9 billion in new advances on previously securitized balances that are recorded on our balance sheet after the revolving period of the securitization. Average managed credit card outstandings, which include securitized credit card loans, increased 26 percent for the three months ended March 31, 2004 due to new account growth from direct marketing programs and the branch network.

On January 23, 2004, the Federal District Court in the Eastern District of New York approved Visa U.S.A.’s previously entered into agreement in principle to settle the class action anti-trust lawsuit filed against it by Wal-Mart and other retailers (the settlement). The after-tax impact of the resulting reduction in interchange fees on net income for the three months ended March 31, 2004 was $22 million. While it is difficult to predict volume and interchange fees, we believe that, on an after-tax basis, the impact of the reduction in interchange fees will likely reduce net income in 2004 by approximately $21 million in both the second and third quarters and $22 million in the fourth quarter.

The decrease in the provision for credit losses of $59 million, or 12 percent relates to a decline in the provision related to commercial loans of $69 million and banking region products of $63 million partially offset by an increase in provision related to the held consumer credit card loan portfolio of $87 million.

Noninterest expense increased $244 million, or eight percent, due to increases in personnel expense of $95 million, data processing costs of $86 million and occupancy expense of $22 million. Personnel expense increased as a result of higher salaries and benefit cost related to fulfillment and sales groups, as well as new store openings.

Asset Management

Asset Management provides wealth and investment management services through three businesses: The Private Bank, which focuses on high-net-worth individuals and families; Banc of America Investments (BAI), providing investment and financial planning services to individuals; and Banc of America Capital Management (BACAP), the asset management group serving the needs of institutional clients, high-net-worth individuals and retail customers. Together, these businesses are focusing on attracting and deepening client relationships, with the ultimate goal of becoming America’s advisor of choice. Our Asset Management strategy is threefold: (i) to continue to expand distribution capabilities to reach key constituencies and markets; (ii) to complete the expansion and rollout of integrated wealth management models to better serve our clients’ financial needs; and (iii) to continue to strengthen and develop our full array of investment management products and services for individuals and institutions. BAI continued to increase the number of financial advisors and ended the current quarter with 1,215 financial advisors, an increase of 25 percent from a year ago. In addition, the Premier Banking and Investments partnership has developed an integrated financial services model and to date has opened 13 wealth centers. The Private Bank successfully completed the rollout of its high-net-worth model to all markets. BACAP has experienced growth in assets under management led by higher market valuations, sales in assets advised by Marsico and sales in the fee-based assets of BACAP’s consulting services group, which provides investment products to the Private Bank and BAI.

Total revenue increased $83 million, or 14 percent, for the three months ended March 31, 2004 although net income decreased 62 percent, due to the impact of the mutual fund settlement, which had a pre-tax effect of approximately $143 million, partially offset by an increase of $45 million in investment and brokerage services. For more information on the mutual fund settlement see Note 7 of the consolidated financial statements. SVA decreased by $94 million, or 140 percent, as the decrease in net income was combined with a marginal increase in capital levels.

Client Assets


	March 31
*(Dollars in billions)*	2004		2003
Assets under management	$	337.2	$	297.0
Client brokerage assets		91.0		90.8
Assets in custody		50.6		45.1

Total client assets	$	478.8	$	432.9

Assets under management, which consist largely of mutual funds, equities and bonds, generate fees based on a percentage of their market value. Compared to a year ago, assets under management increased $40.2 billion, or 14 percent, primarily due to a $40.7 billion, or 51 percent, increase in equities, led by improved market valuations and sales in assets advised by Marsico, and a $7.6 billion, 14 percent increase in fixed income assets partially offset by a

decline of $5.9 billion, or four percent, in money market assets. Client brokerage assets, a source of commission revenue, were flat versus the prior year. Client brokerage assets consist largely of investments in bonds, annuities, money market mutual funds and equities. Assets in custody increased $5.5 billion, or 12 percent, and represent trust assets administered for customers. Trust assets encompass a broad range of asset types including real estate, private company ownership interest, personal property and investments.

Net interest income increased 20 percent to $214 million as growth in deposits and loan balances combined with the net results of ALM activities drove the increase. Average deposits increased $1.9 billion, or 15 percent, for the three months ended March 31, 2004. Average loans and leases increased $1.7 billion, or eight percent, for the three months ended March 31, 2004.

Significant Noninterest Income Components


	Three Months Ended March 31
*(Dollars in millions)*	2004		2003
Asset management fees ⁽¹⁾	$	318	$	282
Brokerage income		105		96

Total investment and brokerage services	$	423	$	378

⁽¹⁾

Includes personal and institutional asset management fees, mutual fund fees and fees earned on assets in custody.

Noninterest income increased $48 million, or 12 percent, for the three months ended March 31, 2004 due to an increase in Investment and brokerage services of $45 million driven by the $20 million impact of higher Marsico balances reflecting sales and market appreciation and an increase in brokerage sales revenue of $9 million.

Provision for credit losses remained low at $7 million for the three months ended March 31, 2004.

Noninterest expense increased $206 million, or 55 percent, due to Asset Management’s share of the mutual fund settlement, which amounted to approximately $143 million, and increased expenses associated with the addition of financial advisors.

Global Corporate and Investment Banking

Our Global Corporate and Investment Banking strategy is to align our resources with sectors where we can deliver value added financial advisory solutions to our issuer and investor clients. As we broaden and deepen our relationships with our clients, we expect to build leading market shares that should provide our shareholders sustainable revenue and SVA growth.

Our financial performance continues to be strong as total revenue was $2.3 billion, reflecting a $49 million, or two percent decrease from first quarter 2003, as market-based trading revenues, including commissions on equity transactions, declined $71 million with investment banking income and credit related revenues from loans and leases partially offsetting the decline as they increased $16 million and $13 million, respectively. Net income increased $3 million, or one percent and includes the impact of the charge taken for the mutual fund matter. Reduced credit costs, resulting from continued improvement in credit quality, more than offset the mutual fund charge. SVA increased by $52 million, or 30 percent, principally as a result of lower capital attributable to an improvement in credit quality.

Net interest income decreased $127 million, or 10 percent, to $1.1 billion. Driving this decline was the $15.8 billion, 28 percent decrease in average loans and leases for the three months ended March 31, 2004. Also, trading-related earning assets grew by $60.4 billion but the narrower margins from these assets only partially offset the overall decline. Average deposits increased $1.9 billion, or three percent, for the three months ended March 31, 2004, despite decreases in compensating balances by the U.S. Treasury. Noninterest income increased $78 million, or seven percent, for the three months ended March 31, 2004, as increases in investment and brokerage services, investment banking income, and equity investment gains were partially offset by a decline in trading account profits.

Investment banking income increased $16 million, or four percent, for the three months ended March 31, 2004 as we continued to gain market share in leveraged loans and high-yield debt. The continued strong market share in high-yield debt more than offset the overall market decline for securities underwriting of equity offerings to drive a nine percent increase in securities underwriting fees.

Investment Banking Income


	Three Months Ended March 31
*(Dollars in millions)*	2004		2003
Securities underwriting	$	218	$	200
Syndications		85		102
Advisory services		77		59
Other		9		12

Total	$	389	$	373

Trading-related revenue, which includes net interest income from trading-related positions and trading account profits in noninterest income is presented in the following table. Not included are commissions from equity transactions which are recorded in Noninterest income as Investment and brokerage service income, however, we consider these to be an integral component to the overall business trading revenues.

Trading-related Revenue⁽¹⁾


	Three Months Ended March 31
*(Dollars in millions)*	2004			2003
Net interest income (fully taxable-equivalent basis)	$	577		$	612
Trading account profits		268			303

Total trading-related revenue	$	845		$	915

Trading-related revenue by product
Fixed income	$	508		$	425
Interest rate (fully taxable-equivalent basis)		168			235
Foreign exchange		189			136
Equities ⁽²⁾		(3	)		116
Commodities		(2	)		51

Market-based trading-related revenue		860			963
Credit portfolio hedges ⁽³⁾		(15	)		(48	)

Total trading-related revenue	$	845		$	915

⁽¹⁾

Certain prior period amounts have been reclassified among products to conform to the current period presentation.

⁽²⁾

Equity revenues do not include commissions from equity transactions which were $172 and $140 for the three months ending March 31, 2004 and 2003, respectively.

⁽³⁾

Includes credit default swaps used for credit risk management.

Market-based trading-related revenue decreased by $103 million, or 11 percent. Fixed income continued to show strong results increasing $83 million, or 20 percent, driven by high yield debt and structured finance trading activity. Foreign exchange increased $53 million, or 39 percent, which was a result of the market volatility of the dollar and increased customer activity. More than offsetting these increases were declines in equities, interest rate and commodities revenues. Equities revenues declined by $119 million or 103 percent and after including commissions on equity transactions declined $87 million or 34 percent. The overall decline in equity trading-related revenues was driven by net losses on a single retained stock position. Interest rate revenues declined by $67 million or 29 percent largely due to reduced corporate customer activity and lower trading-related profits in the face of market uncertainty over the interest rate environment. Commodities revenue declined $53 million due to a reduced risk profile and lower customer activity.

Continued improvements in credit quality in our large corporate portfolio drove the $295 million, or 108 percent, decrease in provision for credit losses. Driving this decrease was the low level of net charge-offs during the first quarter 2004 of $96 million in the large corporate portfolio, a decline of 65 percent from a year ago. Additionally, the large corporate nonperforming assets and criticized exposure decreases were greater in the first quarter of 2004 as compared to the first quarter of 2003.

Noninterest expense increased $239 million, or 18 percent, due to Global Corporate and Investment Banking’s share of the mutual fund settlement, which amounted to approximately $143 million, higher incentive compensation for market-based activities of $59 million and increased expenses for legal fees of $25 million related to regulatory and compliance matters.

Equity Investments

For the three months ended March 31, 2004, revenue increased $89 million, or 83 percent. Equity Investments had a net loss of $30 million for the three months ended March 31, 2004 compared to a net loss of $85 million for the same period in 2003. The improvements were primarily due to higher cash gains driven by increasing liquidity in the private equity markets. SVA increased by $56 million, or 39 percent, due to the improvement in the net loss.

The following table presents the equity investment portfolio in Principal Investing by major industry at March 31, 2004 and December 31, 2003.

Equity Investments in the Principal Investing Portfolio


*(Dollars in millions)*	March 31, 2004		December 31, 2003
Consumer discretionary	$	1,406	$	1,435
Industrials		792		876
Information technology		746		741
Telecommunications services		587		639
Health care		349		385
Financials		306		332
Materials		262		266
Real estate		228		229
Consumer staples		198		245
Individual trusts, nonprofits, government		48		48
Energy		30		29
Utilities		29		35

Total	$	4,981	$	5,260

The following table presents the equity investment gains (losses) in Principal Investing.

Equity Investment Gains (Losses) in Principal Investing


	Three Months Ended March 31
*(Dollars in millions)*	2004	2003