Bank of America Corporation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 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 July 31, 2004, there were 2,033,806,729 shares of Bank of America Corporation Common Stock outstanding.

Bank of America Corporation

June 30, 2004 Form 10-Q

INDEX


			Page
Part I. Financial Information	Item 1.	Financial Statements:

		Consolidated Statement of Income for the Three Months and Six Months Ended June 30, 2004 and 2003	2

		Consolidated Balance Sheet at June 30, 2004 and December 31, 2003	3

		Consolidated Statement of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2004 and 2003	4

		Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2004 and 2003	5

		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	26

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	76

	Item 4.	Controls and Procedures	76

Part II. Other Information	Item 1.	Legal Proceedings	76

	Item 2.	Changes in Securities and Use of Proceeds	76

	Item 4.	Submission of Matters to a Vote of Security Holders	77

	Item 6.	Exhibits and Reports on Form 8-K	78

	Signature		79

	Index to Exhibits		80

Part I. Financial Information

Item 1. Financial Statements

Bank of America Corporation and Subsidiaries

Consolidated Statement of Income


	Three Months Ended June 30				Six Months Ended June 30
*(Dollars in millions, except per share information)*	2004		2003		2004		2003
Interest income
Interest and fees on loans and leases	$	7,237	$	5,412	$	12,786	$	10,760
Interest on debt securities		1,907		988		3,119		1,742
Federal funds sold and securities purchased under agreements to resell		413		193		847		387
Trading account assets		1,011		1,007		2,020		2,049
Other interest income		440		395		808		782

Total interest income		11,008		7,995		19,580		15,720

Interest expense
Deposits		1,529		1,269		2,735		2,452
Short-term borrowings		1,037		514		1,777		967
Trading account liabilities		298		316		632		624
Long-term debt		563		531		1,054		1,103

Total interest expense		3,427		2,630		6,198		5,146

Net interest income		7,581		5,365		13,382		10,574

Noninterest income
Service charges		1,783		1,370		3,199		2,724
Investment and brokerage services		972		610		1,594		1,158
Mortgage banking income		299		559		508		964
Investment banking income		547		488		951		866
Equity investment gains (losses)		84		43		217		(25	)
Card income		1,156		762		1,951		1,443
Trading account profits		413		93		416		207
Other income		186		337		321		618

Total noninterest income		5,440		4,262		9,157		7,955

Total revenue		13,021		9,627		22,539		18,529

Provision for credit losses		789		772		1,413		1,605

Gains on sales of debt securities		795		296		1,290		569

Noninterest expense
Personnel		3,639		2,695		6,401		5,154
Occupancy		621		498		1,109		970
Equipment		318		253		579		537
Marketing		367		238		648		468
Professional fees		180		281		327		406
Amortization of intangibles		201		54		255		108
Data processing		330		262		614		528
Telecommunications		183		137		334		261
Other general operating		1,237		647		2,226		1,358
Merger and restructuring charges		125		—		125		—

Total noninterest expense		7,201		5,065		12,618		9,790

Income before income taxes		5,826		4,086		9,798		7,703
Income tax expense		1,977		1,348		3,268		2,541

Net income	$	3,849	$	2,738	$	6,530	$	5,162

Net income available to common shareholders	$	3,844	$	2,737	$	6,524	$	5,160

Per common share information
Earnings	$	1.89	$	1.83	$	3.76	$	3.45

Diluted earnings	$	1.86	$	1.80	$	3.70	$	3.39

Dividends paid	$	0.80	$	0.64	$	1.60	$	1.28

Average common shares issued and outstanding (in thousands)		2,031,192		1,494,094		1,735,758		1,496,827

Average diluted common shares issued and outstanding (in thousands)		2,065,645		1,523,306		1,765,519		1,524,715

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet


*(Dollars in millions)*	June 30, 2004			December 31, 2003
Assets
Cash and cash equivalents	$	31,789		$	27,084
Time deposits placed and other short-term investments		10,418			8,051
Federal funds sold and securities purchased under agreements to resell (includes $81,304 and $76,446 pledged as collateral)		81,437			76,492
Trading account assets (includes $27,026 and $18,722 pledged as collateral)		85,972			68,547
Derivative assets		32,241			36,507
Debt securities:
Available-for-sale (includes $61,383 and $20,858 pledged as collateral)		166,175			66,382
Held-to-maturity, at cost (market value - $483 and $254)		478			247

Total debt securities		166,653			66,629

Loans and leases		498,481			371,463
Allowance for loan and lease losses		(8,767	)		(6,163	)

Loans and leases, net of allowance		489,714			365,300

Premises and equipment, net		7,797			6,036
Mortgage servicing rights		3,005			2,762
Goodwill		44,672			11,455
Core deposit intangibles and other intangibles		3,922			908
Other assets		79,582			66,674

Total assets	$	1,037,202		$	736,445

Liabilities
Deposits in domestic offices:
Noninterest-bearing	$	154,061		$	118,495
Interest-bearing		369,446			262,032
Deposits in foreign offices:
Noninterest-bearing		5,499			3,035
Interest-bearing		46,407			30,551

Total deposits		575,413			414,113

Federal funds purchased and securities sold under agreements to repurchase		119,264			78,046
Trading account liabilities		29,689			26,844
Derivative liabilities		20,519			24,526
Commercial paper and other short-term borrowings		69,495			42,478
Accrued expenses and other liabilities (includes $486 and $416 of Reserve for unfunded lending commitments)		28,682			27,115
Long-term debt		98,319			75,343

Total liabilities		941,381			688,465

Commitments and contingencies (Note 9)

Shareholders’ equity
Preferred stock, $0.01 par value; authorized - 100,000,000 shares; issued and outstanding - 2,292,013 and 1,269,600 shares		322			54
Common stock, $0.01 par value; authorized - 7,500,000,000 and 5,000,000,000 shares; issued and outstanding - 2,031,328,433 and 1,441,143,786 shares		45,654			14
Retained earnings		54,045			50,213
Accumulated other comprehensive loss		(3,862	)		(2,148	)
Other		(338	)		(153	)

Total shareholders’ equity		95,821			47,980

Total liabilities and shareholders’ equity	$	1,037,202		$	736,445

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity


*(Dollars in millions, shares in thousands)*	Preferred Stock								Retained Earnings			Accumulated Other Comprehensive Income (Loss)⁽¹⁾			Other			Total Share- holders’ Equity			Comprehensive Income
				Common Stock
				Shares		Amount
Balance, December 31, 2002	$	58		1,500,691		$	496		$	48,517		$	1,232		$	16		$	50,319
Net income										5,162									5,162		$	5,162
Net unrealized gains on available-for-sale debt and marketable equity securities													307						307			307
Net unrealized gains on foreign currency translation adjustments													59						59			59
Net unrealized losses on derivatives													(1,849	)					(1,849	)		(1,849	)
Cash dividends paid:
Common										(1,920	)								(1,920	)
Preferred										(2	)								(2	)
Common stock issued under employee plans and related tax benefits				44,239			2,591									(155	)		2,436
Common stock repurchased				(48,700	)		(3,157	)		(382	)								(3,539	)
Conversion of preferred stock		(2	)	84			2												—
Other				—			83			(1	)					(39	)		43

Balance, June 30, 2003	$	56		1,496,314		$	15		$	51,374		$	(251	)	$	(178	)	$	51,016		$	3,679


Balance, December 31, 2003	$	54		1,441,144		$	14		$	50,213		$	(2,148	)	$	(153	)	$	47,980
Net income										6,530									6,530		$	6,530
Net unrealized losses on available-for-sale debt and marketable equity securities													(2,025	)					(2,025	)		(2,025	)
Net unrealized losses on foreign currency translation adjustments													(18	)					(18	)		(18	)
Net unrealized gains on derivatives													329						329			329
Cash dividends paid:
Common										(2,796	)								(2,796	)
Preferred										(6	)								(6	)
Common stock issued under employee plans and related tax benefits				33,402			2,280									(183	)		2,097
Stocks issued in acquisition⁽²⁾		271		593,364			46,480												46,751
Common stock repurchased				(36,683	)		(3,076	)		88									(2,988	)
Conversion of preferred stock		(3	)	101			1												(2	)
Other							(45	)		16						(2	)		(31	)

Balance, June 30, 2004	$	322		2,031,328		$	45,654		$	54,045		$	(3,862	)	$	(338	)	$	95,821		$	4,816

(1)

At June 30, 2004 and December 31, 2003, Accumulated Other Comprehensive Income (Loss) included Net unrealized losses on available-for-sale debt and marketable equity securities of $2,095 and $70, respectively; Net unrealized losses on foreign currency translation adjustments of $184 and $166, respectively; and Net unrealized losses on derivatives of $1,479 and $1,808, respectively.

(2)

Includes adjustment for the fair value of outstanding FleetBoston Financial Corporation (FleetBoston) stock options of $862.

See accompanying notes to consolidated financial statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Cash Flows


	Six Months Ended June 30
*(Dollars in millions)*	2004			2003
Operating activities
Net income	$	6,530		$	5,162
Reconciliation of net income to net cash provided by (used in) operating activities:
Provision for credit losses		1,413			1,605
Gains on sales of debt securities		(1,290	)		(569	)
Depreciation and premises improvements amortization		477			447
Amortization of intangibles		255			108
Deferred income tax benefit		(11	)		(227	)
Net increase in trading and hedging instruments		(11,960	)		(8,592	)
Net (increase) decrease in other assets		3,060			(23,513	)
Net increase (decrease) in accrued expenses and other liabilities		(7,933	)		12,975
Other operating activities, net		(669	)		1,698

Net cash used in operating activities		(10,128	)		(10,906	)

Investing activities
Net decrease in time deposits placed and other short-term investments		796			23
Net (increase) decrease in federal funds sold and securities purchased under agreements to resell		6,043			(19,436	)
Proceeds from sales of available-for-sale debt securities		37,862			70,968
Proceeds from maturities of available-for-sale debt securities		12,613			17,569
Purchases of available-for-sale debt securities		(124,302	)		(133,939	)
Proceeds from maturities of held-to-maturity debt securities		5			747
Proceeds from sales of loans and leases		2,002			20,699
Other changes in loans and leases, net		(3,497	)		(34,648	)
Purchases and originations of mortgage servicing rights		(635	)		(735	)
Net (purchases) dispositions of premises and equipment		(585	)		371
Proceeds from sales of foreclosed properties		97			30
Investment in unconsolidated subsidiary		—			(1,600	)
Cash equivalents acquired net of purchase acquisitions		5,608			(100	)
Other investing activities, net		(165	)		1,200

Net cash used in investing activities		(64,158	)		(78,851	)

Financing activities
Net increase in deposits		21,266			35,477
Net increase in federal funds purchased and securities sold under agreements to repurchase		35,275			39,742
Net increase in commercial paper and other short-term borrowings		20,835			18,350
Proceeds from issuance of long-term debt and trust preferred securities		12,648			5,917
Retirement of long-term debt and trust preferred securities		(7,385	)		(6,474	)
Proceeds from issuance of common stock		2,170			2,451
Common stock repurchased		(2,988	)		(3,539	)
Cash dividends paid		(2,802	)		(1,922	)
Other financing activities, net		(9	)		(59	)

Net cash provided by financing activities		79,010			89,943

Effect of exchange rate changes on cash and cash equivalents		(19	)		61

Net increase in cash and cash equivalents		4,705			247
Cash and cash equivalents at January 1		27,084			24,973

Cash and cash equivalents at June 30	$	31,789		$	25,220

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 amounted to $250 and $5,341 for the six months ended June 30, 2004 and 2003, respectively.

The fair values of noncash assets acquired and liabilities assumed in the merger with FleetBoston were $224,408 and $182,778, respectively.

Approximately 593 million shares of common stock, valued at approximately $45,622, were issued in connection with the merger with FleetBoston.

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 June 30, 2004, the Corporation operated its banking activities primarily under three charters: Bank of America, National Association (Bank of America, N.A.), Bank of America, N.A. (USA) and Fleet National Bank.

On April 1, 2004, the Corporation acquired all of the outstanding stock of FleetBoston (the Merger). FleetBoston’s results of operations were included in the Corporation’s results beginning on April 1, 2004. The Merger was accounted for as a purchase. For informational and comparative purposes, certain tables have been expanded to include a column entitled FleetBoston, April 1, 2004. This represents balances acquired from FleetBoston as of April 1, 2004, including purchase accounting adjustments.

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 were reclassified to conform to current period presentation and certain conforming accounting adjustments were made in conjunction with the Merger.

Business Combinations

Statement of Financial Accounting Standards (SFAS) No. 141 “Business Combinations” (SFAS 141) requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method. The purchase method of accounting requires that the cost of an acquired entity be allocated to the assets acquired and liabilities assumed based on their estimated fair values at date of acquisition. The difference between the fair values and the purchase price is recorded to Goodwill. Also under SFAS 141, identified intangible assets acquired in a purchase business combination must be separately valued and recognized on the balance sheet if they meet certain requirements.

Recently Issued Accounting Pronouncements

On December 12, 2003, the American Institute of Certified Public Accountants issued Statement of Position No. 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (SOP 03-3). SOP 03-3 requires acquired loans to be recorded at fair value and prohibits carrying over or creation of valuation allowances and initial accounting. SOP 03-3 also limits the yield that may be accreted to income. SOP 03-3 applies to the purchase of an individual loan, a pool of loans, a group of loans, and loans acquired in a business combination. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 31, 2004.

On March 9, 2004, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 105, “Application of Accounting Principles to Loan Commitments” (SAB 105), which specifies that servicing assets embedded in commitments for loans to be held for sale should be recognized only when the servicing asset has been contractually separated from the associated loans by sale or securitization. SAB 105 is effective for commitments entered into after March 31, 2004. SAB 105 had no impact on the Corporation’s results of operations or financial condition.

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 7 of the consolidated financial statements.

Stock-based Compensation

In accordance with 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 and six months ended June 30, 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 and six months ended June 30, 2004 and 2003.


	Three Months Ended June 30						Six Months Ended June 30
*(Dollars in millions, except per share data)*	2004			2003			2004			2003
Net income (as reported)	$	3,849		$	2,738		$	6,530		$	5,162
Stock-based employee compensation expense recognized during period, net of related tax effects		43			21			78			38
Stock-based employee compensation expense determined under fair value-based method, net of related tax effects⁽¹⁾		(55	)		(64	)		(109	)		(140	)

Pro forma net income	$	3,837		$	2,695		$	6,499		$	5,060

As reported
Earnings per common share	$	1.89		$	1.83		$	3.76		$	3.45
Diluted earnings per common share		1.86			1.80			3.70			3.39
Pro forma
Earnings per common share		1.89			1.80			3.74			3.38
Diluted earnings per common share		1.86			1.77			3.68			3.32

(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 June 30, 2004 and 2003 was $105 and $82, respectively, and for the six months ended June 30, 2004 and 2003 was $169 and $168, respectively.

Mortgage Servicing Rights

Pursuant to agreements between the Corporation and its counterparties, $2.2 billion of Excess Spread Certificates (the Certificates) were converted into mortgage servicing rights (MSRs) during the three months ended June 30, 2004. Prior to the conversion of the Certificates into MSRs, changes in the value of the Certificates and changes in the value of derivatives used for risk management of the Certificates were recognized as trading gains and losses. The Corporation recorded these MSRs at the Certificates’ fair market value on the date of the conversion. That value became their new cost basis. The Corporation accounts for MSRs at the lower of cost or market. Impairment is recognized as a reduction in Mortgage banking income. Except for Note 6 of the consolidated financial statements, prior to the conversion, what are now referred to as MSRs includes the Certificates. For additional information on the Certificates, see Note 1 of the consolidated financial statements of the Corporation’s 2003 Annual Report.

The Corporation has discussed the prior accounting for the now terminated Certificates with the Securities and Exchange Commission Staff (the Staff). In the context of those discussions, on July 30, 2004, the Staff stated that it has concerns with respect to the intent and interpretation of certain contractual provisions in the Corporation’s earlier agreements that the Corporation believes supported its prior accounting treatment.

If the Corporation’s accounting treatment had been to treat the Certificates as MSRs and to record them at the lower of cost or market, rather than treat them as securities and mark them to market, the after-tax impact on reported annual results for 2001, 2002 and 2003 would have been $(28.1) million, $29.8 million and $(0.7) million, respectively. For each of the interim periods in 2002, 2003 and 2004, the after-tax impact on reported results would have been $(54.0) million, $79.5 million, $4.3 million, $0, $(1.4) million, $1.4 million, $(0.7) million, $0, $(0.7) million and $0, respectively. The Corporation continues to be in discussion with the Staff regarding the prior accounting.

When applying SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) hedge accounting for derivative financial instruments that have been designated to hedge MSRs, the Corporation’s documented hedge period is daily. Loans underlying the MSRs being hedged are stratified into pools that possess similar interest rate and prepayment risk exposures. The Corporation has designated the hedged risk as the change in the overall fair value of these stratified pools within a hedge period. The Corporation performs both prospective and retroactive hedge effectiveness evaluations, using regression analyses, to determine whether the hedge is expected to be highly effective at the inception of the hedge (prospective) and whether the hedge was actually effective during the reported period (retroactive).

Other derivatives are used as economic hedges of the MSRs, but are not designated as hedges under SFAS 133. These derivatives are marked to market and recognized through Mortgage banking income. Debt securities are also used as economic hedges of MSRs, but do not qualify as hedges under SFAS 133 and, therefore, are accounted for as available-for-sale (AFS) debt securities with realized gains recorded in Gains on sales of debt securities.

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 (the Merger Agreement), the Corporation acquired 100 percent of the outstanding stock of FleetBoston on April 1, 2004 in order to expand the Corporation’s presence in the Northeast. FleetBoston’s results of operations were included in the Corporation’s results beginning April 1, 2004.

As provided by the Merger Agreement, approximately 1.069 billion shares of FleetBoston common stock were exchanged for approximately 593 million shares of the Corporation’s common stock. At the date of the Merger this represented 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 Coporation’s preferred stock. The Corporation’s preferred stock that was exchanged was valued using the book value of FleetBoston preferred stock. The depository 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 totaling 15.7 million that were previously held by the Corporation were cancelled.

The Merger is being accounted for in accordance with 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)		1,068,635
Exchange ratio		0.5553

Total shares of the Corporation’s common stock exchanged (in thousands)		593,413
Purchase price per share of the Corporation’s common stock⁽¹⁾	$	76.88

Total value of the Corporation’s common stock exchanged			$	45,622
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				1,360

Total purchase price			$	47,253

Allocation of the purchase price
FleetBoston stockholders’ equity			$	19,329
FleetBoston goodwill and other intangible assets				(4,709	)
Estimated adjustments to reflect assets acquired and liabilities assumed at fair value:
Securities				(35	)
Loans and leases				(692	)
Premises and equipment				(675	)
Identified intangibles				3,243
Other assets and deferred income tax				95
Deposits				(313	)
Commercial paper and other short-term borrowings				(1	)
Other liabilities				(264	)
Exit and termination liabilities				(680	)
Long-term debt				(1,182	)

Estimated fair value of net assets acquired				14,116

Estimated goodwill resulting from the Merger			$	33,137

(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.

Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial information presents the results of operations of the Corporation had the Merger taken place at January 1, 2003. For more information on the unaudited pro forma condensed combined financial information, refer to the Form 8-K/A filed by the Corporation with the Securities and Exchange Commission on July 14, 2004.


	Three Months Ended June 30 2003		Six Months Ended June 30
*(Dollars in million except per common share information)*	Three Months Ended June 30 2003		2004		2003
Net interest income	$	7,029	$	15,169	$	13,974
Noninterest income		5,509		10,675		10,417
Provision for credit losses		1,057		1,413		2,170
Gains on sales of debt securities		332		1,339		639
Noninterest expense		6,817		14,731		13,277
Income before income taxes		4,996		11,039		9,583
Net income		3,284		7,290		6,293

Per common share information
Earnings	$	1.58	$	3.58	$	3.02
Diluted earnings		1.56		3.53		2.99

Average common shares issued and outstanding (in thousands)		2,075,761		2,033,065		2,078,294

Average diluted common shares issued and outstanding (in thousands)		2,106,836		2,067,878		2,107,583

Merger and Restructuring Charges

Merger and restructuring charges are recorded in the Consolidated Statement of Income, and consist only of incremental costs to integrate Bank of America and FleetBoston’s operations. These charges represent costs associated with one-time Merger integration activities that do not represent on-going costs of the fully integrated combined organization.


*(Dollars in millions)*	Three Months Ended June 30, 2004
Severance and employee-related charges	$	64
System integrations and related charges		29
Other		32

Total Merger and restructuring charges	$	125

Exit Costs and Restructuring Reserves

On April 1, 2004, $680 million of liabilities for FleetBoston’s exit and termination costs were recorded as purchase accounting adjustments resulting in an increase in Goodwill. Included in the $680 million are $507 million for severance, relocation and other employee-related expenses, $168 million for contract terminations, and $5 million for other charges. Through June 30, 2004, cash payments of $62 million have been charged against this liability including $59 million of severance, relocation and other employee-related expenses, and $3 million of contract terminations.

Restructuring charges through June 30, 2004 includes the establishment of a reserve for legacy Bank of America associate severance and other employee-related expenses of $64 million. Through June 30, 2004, cash payments of $10 million have been charged against this accrual.

Payments under these reserves are expected to be substantially completed by the end of 2005.

Exit Cost and Restructuring Reserves



	Three Months Ended June 30, 2004
*(Dollars in millions)*	Exit Costs Reserves⁽¹⁾			Restructuring Reserves⁽²⁾
Balance, March 31, 2004	$	—		$	—
FleetBoston exit costs		680			—
Restructuring charges		—			64
Cash payments		(62	)		(10	)

Balance, June 30, 2004	$	618		$	54

(1)

Exit costs reserves were established in purchase accounting resulting in an increase in Goodwill.

(2)

Restructuring reserve established by a charge to income.

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 following table presents the fair values of the components of trading account assets and liabilities at June 30, 2004 and December 31, 2003. The column entitled FleetBoston April 1, 2004 represents the trading account assets and liabilities which were acquired as of April 1, 2004.


*(Dollars in millions)*	June 30 2004		December 31 2003		FleetBoston April 1, 2004
Trading account assets
U.S. government and agency securities	$	22,959	$	16,073	$	561
Corporate securities, trading loans, and other		28,789		25,647		353
Equity securities		13,881		11,445		2
Mortgage trading loans and asset-backed securities		13,116		8,221		2,199
Foreign sovereign debt		7,227		7,161		94

Total	$	85,972	$	68,547	$	3,209

Trading account liabilities
U.S. government and agency securities	$	9,844	$	7,304	$	64
Equity securities		9,082		8,863		—
Corporate securities, trading loans, and other		6,883		5,379		356
Foreign sovereign debt		3,831		5,276		—
Mortgage trading loans and asset-backed securities		49		22		355

Total	$	29,689	$	26,844	$	775

Note 4—Derivatives

Credit risk associated with derivatives is measured as the net replacement cost 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 June 30, 2004 and December 31, 2003 of the Corporation’s derivative positions held for trading and hedging purposes. The table also includes the contract/notional and credit risk amounts at April 1, 2004 of the derivative positions acquired from FleetBoston. 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 $19.1 billion of collateral on derivative positions, of which $13.2 billion could be applied against credit risk at June 30, 2004.

Derivatives ⁽¹⁾


	June 30, 2004				December 31, 2003				FleetBoston April 1, 2004
*(Dollars in millions)*	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Interest rate contracts
Swaps	$	10,152,120	$	12,313	$	8,873,600	$	14,893	$	105,366	$	1,671
Futures and forwards		2,331,063		293		2,437,907		633		18,383		2
Written options		1,096,100		—		1,174,014		—		104,118		—
Purchased options		1,262,335		2,733		1,132,486		3,471		159,408		91
Foreign exchange contracts
Swaps		264,103		4,421		260,210		4,473		9,928		307
Spot, futures and forwards		1,015,113		2,376		775,105		4,202		33,941		403
Written options		139,937		—		138,474		—		2,854		—
Purchased options		133,127		390		133,512		669		2,776		58
Equity contracts
Swaps		28,243		694		30,850		364		1,026		127
Futures and forwards		3,353		—		3,234		—		—		—
Written options		32,039		—		25,794		—		779		—
Purchased options		29,776		5,910		24,119		5,370		811		55
Commodity contracts
Swaps		13,250		2,248		15,491		1,554		—		—
Futures and forwards		6,241		10		5,726		—		275		—
Written options		10,815		—		11,695		—		—		—
Purchased options		6,793		448		7,223		294		—		—
Credit derivatives		266,588		405		136,788		584		29,763		75

Total derivative assets			$	32,241			$	36,507			$	2,789

(1)

Includes both long and short derivative positions.

The average fair value of derivative assets for both the six months ended June 30, 2004 and 2003 was $36.4 billion. The average fair value of derivative liabilities for the six months ended June 30, 2004 and 2003 was $24.2 billion and $24.6 billion, respectively. Included in the average fair value of derivative assets and liabilities at June 30, 2004 was $1.1 billion and $818 million, respectively, from the addition of derivatives acquired from FleetBoston.

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 various types of interest rate 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 losses on derivative instruments included in Accumulated other comprehensive income (OCI), of approximately $85 million (pre-tax) are expected to be reclassified into earnings. These net losses reclassified into earnings are expected to decrease revenue or increase expense on the respective hedged items.

The following table summarizes certain information related to the Corporation’s hedging activities for the six months ended June 30, 2004 and 2003.


	Six Months Ended June 30
*(Dollars in millions)*	2004			2003
Fair value hedges
Hedge ineffectiveness recognized in earnings⁽¹⁾	$	5		$	—
Net gain (loss) excluded from assessment of effectiveness⁽²⁾		(8	)		(94	)
Cash flow hedges
Hedge ineffectiveness recognized in earnings⁽³⁾		95			13
Net investment hedges
Gains (losses) included in foreign currency translation adjustments within Accumulated other comprehensive income		66			(137	)

(1)

Included $(2) recorded in Net interest income and $7 recorded in Mortgage banking income in the Consolidated Statement of Income for the six months ended June 30, 2004.

(2)

Included $(5) and $(94), respectively, recorded in Net interest income and $(3) and $0, respectively, recorded in Mortgage banking income in the Consolidated Statement of Income for the six months ended June 30, 2004 and 2003.

(3)

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 June 30, 2004 and December 31, 2003, and balances acquired from FleetBoston on April 1, 2004 were:


*(Dollars in millions)*	June 30 2004		December 31 2003		FleetBoston April 1, 2004
Commercial - domestic	$	121,317	$	91,491	$	31,796
Commercial - foreign		18,256		10,754		9,160
Commercial real estate⁽¹⁾		30,955		19,367		9,982
Commercial lease financing		20,379		9,692		10,720

Total commercial		190,907		131,304		61,658

Residential mortgage		173,600		140,513		34,571
Home equity lines		42,315		23,859		13,799
Direct/Indirect consumer		39,252		33,415		6,113
Consumer finance⁽²⁾		7,873		7,558		1,272
Credit card		44,534		34,814		6,848

Total consumer		307,574		240,159		62,603

Total	$	498,481	$	371,463	$	124,261

(1)

Includes domestic and foreign commercial real estate loans of $30,519 and $436 at June 30, 2004, respectively, and $19,043 and $324 at December 31, 2004, respectively.

(2)

Includes foreign consumer and consumer lease financing of $3,268 and $867 at June 30, 2004, respectively, and $1,969 and $1,684 at 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 June 30, 2004 and December 31, 2003, and balances acquired from FleetBoston on April 1, 2004. SFAS 114 impairment includes performing troubled debt restructurings, and excludes all commercial leases.


*(Dollars in millions)*	June 30 2004		December 31 2003		FleetBoston April 1, 2004
Commercial - domestic	$	1,260	$	1,404	$	349
Commercial - foreign		495		581		480
Commercial real estate		113		153		85

Total impaired loans	$	1,868	$	2,138	$	914

At both June 30, 2004 and December 31, 2003, nonperforming loans and leases, including impaired loans and nonaccrual consumer loans, totaled $2.9 billion. Nonperforming securities, which are primarly related to international securities, were obtained through troubled debt restructurings and amounted to $156 million at June 30, 2004. There were no nonperforming securities at December 31, 2003. The increase from December 31, 2003 was due to the addition of FleetBoston. Foreclosed properties amounted to $144 million and $148 million at June 30, 2004 and December 31, 2003, respectively. In addition, included in Other assets was $103 million and $202 million of nonperforming assets at June 30, 2004 and December 31, 2003, respectively.

The following table summarizes the changes in the allowance for credit losses for the three and six months ended June 30, 2004 and 2003:


	Three Months Ended June 30						Six Months Ended June 30
*(Dollars in millions)*	2004			2003			2004			2003
Allowance for loan and lease losses, beginning of period	$	6,080		$	6,421		$	6,163		$	6,358

Addition of FleetBoston allowance, April 1, 2004		2,763			—			2,763			—
Loans and leases charged off		(1,092	)		(933	)		(1,985	)		(1,915	)
Recoveries of loans and leases previously charged off		263			161			436			310

Net charge-offs		(829	)		(772	)		(1,549	)		(1,605	)

Provision for loan and lease losses		789			729			1,428			1,623
Transfers⁽¹⁾		(36	)		(12	)		(38	)		(10	)

Allowance for loan and lease losses, June 30	$	8,767		$	6,366		$	8,767		$	6,366

Reserve for unfunded lending commitments, beginning of period	$	401		$	432		$	416		$	493
Addition of FleetBoston reserve, April 1, 2004		85			—			85			—
Provision for unfunded lending commitments		—			43			(15	)		(18	)

Reserve for unfunded lending commitments, June 30	$	486		$	475		$	486		$	475

Total	$	9,253		$	6,841		$	9,253		$	6,841

(1)

Includes transfers related to loans moved to the held for sale portfolio.

Note 6—Mortgage Servicing Rights

The Corporation has retained MSRs from the sale or securitization of mortgage loans. The activity in MSRs for the three and six months ended June 30, 2004 and 2003 is as follows:


	Three Months Ended June 30				Six Months Ended June 30
*(Dollars in millions)*	2004		2003		2004		2003
Balance, beginning of period	$ 425		$442		$ 479		$499

Additions	2,542		74		2,625		120
Amortization	(56	)	(39	)	(84	)	(82	)
Change in value attributed to hedged risk⁽¹⁾	15		—		15		—
Other, net⁽²⁾	79		(82	)	(30	)	(142	)

Balance, June 30	$3,005		$395		$3,005		$395

(1)

Includes $7 gain on hedge ineffectiveness for the three and six months ended June 30, 2004.

(2)

Represents fair value adjustments to the MSRs. The $79 adjustment during the three months ended June 30, 2004 represents a recovery of previous market value writedowns.

The estimated fair value of MSRs was $3.0 billion and $479 million at June 30, 2004 and December 31, 2003, respectively. The additions during the three and six months ended June 30, 2004 include $2.2 billion of MSRs as a result of the conversion of Certificates discussed in Note 1 of the consolidated financial statements.

At June 30, 2004, key economic assumptions and the sensitivities of the valuations of the MSRs to immediate changes in those assumptions were analyzed. The sensitivity analysis included the impact on fair value of modeled prepayment and discount rate changes under favorable and adverse conditions. The discount rate is the rate used to calculate the present value of the expected future servicing cash flows associated with the MSRs. A decrease of 10 percent and 20 percent in modeled prepayments would result in an increase in value of $125 million and $262 million, respectively, and an increase in modeled prepayments of 10 percent and 20 percent would result in a decrease in value of $115 million and $220 million, respectively. A decrease of 100 and 200 basis points (bps) in the discount rate would result in an increase in value of $126 million and $263 million, respectively, and an increase in the discount rate of 100 and 200 bps would result in a decrease in value of $116 million and $224 million, respectively.

Note 7—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 early adopted FIN 46 in July 2003 and adopted FIN 46R on 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 June 30, 2004, the consolidated assets and liabilities of one multi-seller asset-backed commercial paper conduit were reflected in AFS debt securities, Other assets, and Commercial paper and other short-term borrowings in the Global Corporate and Investment Banking business segment. At June 30, 2004, the Corporation held $5.3 billion of assets of this entity while the Corporation’s maximum loss exposure associated with this entity including unfunded lending commitments was approximately $6.5 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 also provides asset management and related services to other special purpose vehicles. The Corporation typically obtains variable interests in these types of entities at the inception of the transaction. Total assets of these entities at June 30, 2004 and December 31, 2003 were approximately $35.1 billion and $36.9 billion, respectively; revenues associated with administration, liquidity, letters of credit and other services were approximately $62 million and $95 million for the six months ended June 30, 2004 and 2003, respectively. At June 30, 2004 and December 31, 2003, the Corporation’s maximum loss exposure associated with these VIEs was approximately $34.2 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 June 30, 2004 and December 31, 2003 was $2.3 billion and $1.5 billion, respectively, and the Corporation’s maximum loss exposure was $2.0 billion and $1.3 billion, respectively.

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

Note 8—Goodwill and Other Intangibles

At June 30, 2004 and December 31, 2003, allocated goodwill was $21.9 billion and $6.0 billion in Consumer and Small Business Banking, respectively, $13.3 billion and $1.1 billion in Commercial Banking, respectively, $4.5 billion and $2.0 billion in Global Corporate and Investment Banking, respectively, $4.6 billion and $2.2 billion in Wealth and Investment Management, respectively, and $374 million and $135 million in Corporate Other, respectively. The increases from December 31, 2003 were due to the Merger.

The gross carrying value and accumulated amortization related to core deposit intangibles and other intangibles at June 30, 2004 and December 31, 2003 are presented below:


	June 30, 2004				December 31, 2003
*(Dollars in millions)*	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Core deposit intangibles	$	3,669	$	1,071	$	1,495	$	886
Other intangibles		1,882		558		787		488

Total	$	5,551	$	1,629	$	2,282	$	1,374

As a result of the Merger, the Corporation recorded $2.2 billion of core deposit intangibles and $1.1 billion of other intangibles. As of June 30, 2004, the weighted average amortization period for each the core deposit intangibles and other intangibles was approximately 10 years.

Amortization expense on core deposit intangibles and other intangibles was $201 million and $54 million for the three months ended June 30, 2004 and 2003, respectively, and $255 million and $108 million for the six months ended June 30, 2004 and 2003, respectively. The Corporation estimates that aggregate amortization expense will be approximately $198 million and $194 million for the third and fourth quarters of 2004, respectively. In addition, the Corporation estimates that aggregate amortization expense will be $741 million, $678 million, $542 million, $445 million and $342 million for 2005, 2006, 2007, 2008 and 2009, respectively.

Note 9—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 $12.7 billion and $10.4 billion at June 30, 2004 and December 31, 2003, respectively. The carrying amount for these commitments, which represents the liability recorded related to these instruments, at June 30, 2004 and December 31, 2003 was $571 million and $418 million, respectively.


*(Dollars in millions)*	June 30 2004		December 31 2003		FleetBoston April 1, 2004
Loan commitments⁽¹⁾	$	286,441	$	211,781	$	74,903
Standby letters of credit and financial guarantees		41,841		31,150		12,914
Commercial letters of credit		6,056		3,260		1,689

Legally binding commitments		334,338		246,191		89,506
Credit card lines		180,098		93,771		77,997

Total	$	514,436	$	339,962	$	167,503

(1)

Equity commitments of $2,433 and $1,678 related to obligations to fund existing equity investments were included in loan commitments at June 30, 2004 and December 31, 2003, respectively. Included in loan commitments at June 30, 2004, were $1,006 of equity commitments related to obligations to fund existing equity investments acquired from FleetBoston.

Other Commitments

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 June 30, 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 $11.9 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 $285 million and $233 million, respectively.

At June 30, 2004, the Corporation had whole mortgage loan purchase commitments of $6.6 billion, of which $5.0 billion settled in July 2004, and $1.6 billion will settle in August 2004. At December 31, 2003, the Corporation had whole mortgage loan purchase commitments of $4.6 billion, all of which were settled in January and February 2004. At June 30, 2004 and December 31, 2003, the Corporation had no forward whole mortgage loan sale commitments.

Other Guarantees

The Corporation sells products that offer book value protection primarily to plan sponsors of Employee Retirement Income Security Act of 1974 (ERISA)-governed pension plans such as 401(k) plans, 457 plans, etc. At June 30, 2004 and December 31, 2003, the notional amount of these guarantees totaled $24.8 billion and $24.9 billion, respectively, with estimated maturity dates between 2006 and 2034. As of June 30, 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 June 30, 2004 and December 31, 2003, the notional amount of these guarantees totaled $9.9 billion and $7.4 billion, respectively; however, at June 30, 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 2006 to 2011.

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 $1.6 billion and $1.3 billion at June 30, 2004 and December 31, 2003, respectively. The estimated maturity dates of these obligations are between 2004 and 2025. At June 30, 2004 and December 31, 2003, the Corporation had made no material payments under these products.

The Corporation provides credit and debit card processing services to various merchants, processing credit and debit card transactions on their behalf. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor and the merchant defaults upon its obligation to reimburse the cardholder. A cardholder, through its issuing bank, generally has until the later of up to four months after the date a transaction is processed or the delivery of the product or service to present a chargeback to the Corporation as the merchant processor. If the Corporation is unable to collect this amount from the merchant, it bears the loss for the amount paid to the cardholder. For the six months ended June 30, 2004 and the full year ended December 31, 2003, the Corporation processed $42.8 billion and $71.8 billion, respectively, of transactions and recorded losses as a result of these chargebacks of $2 million and $6 million, respectively. At June 30, 2004 and December 31, 2003, the Corporation held as collateral approximately $314 million and $182 million, respectively, of merchant escrow deposits which the Corporation has the right to set off against amounts due from the individual merchants. The Corporation also has the right to offset any payments with cash flows otherwise due to the merchant. Accordingly, the Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure. Management believes the maximum potential exposure for chargebacks would not exceed the total amount of merchant transactions processed through Visa^® and MasterCard^® for the last four months, which represents the claim period for the cardholder, plus any outstanding delayed-delivery transactions. As of June 30, 2004 and December 31, 2003, the maximum potential exposure totaled approximately $30.8 billion and $25.0 billion, respectively.

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, the Current Reports on Form 8-K filed since December 31, 2003 and the quarterly report on Form 10-Q for the quarter ended March 31, 2004.

Parmalat Finanziera SpA and its related entities (Parmalat)

Preliminary hearings regarding the previously reported charge against the Corporation in the Court of Milan, Italy have been scheduled for October 5 and 25, 2004.

On June 21, 2004, Extraordinary Commissioner Dr. Enrico Bondi filed with the Italian Ministry of Production Activities a plan of reorganization for the restructuring of the companies of the Parmalat group that are included in the Italian extraordinary administration proceeding.

On March 5, 2004, a First Amended Complaint (the “First Amended Complaint”) was filed in a putative class action pending in the United States District Court for the Southern District of New York entitled Southern Alaska Carpenters Pension Fund et al. v. Bonlat Financing Corporation et al., which names the Corporation as a defendant. The First Amended Complaint alleges causes of action against the Corporation by Southern Alaska Carpenters Pension Fund on behalf of all similarly situated purchasers of Parmalat’s debt and securities for the Corporation’s involvement in various Parmalat related transactions that are alleged to have been in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated under such statute, and controlling person liability under Section 20 of the Exchange Act.

WorldCom

On May 7, 2004, defendants Citigroup, Inc., Citigroup Global Markets, Inc., formerly known as Salomon Smith Barney, Inc., Citigroup Global Markets Limited, formerly known as Salomon Brothers International Limited, and Jack B. Grubman (the “Citigroup Defendants”) entered into a Memorandum of Agreement with lead plaintiffs in the Worldcom, Inc. Securities Litigation class action to settle all claims held by the class against the Citigroup Defendants in exchange for payment of $2.65 billion. The Memorandum of Agreement extended an offer of settlement to the remaining underwriter defendants in the WorldCom class action, including Banc of America Securities LLC (BAS) and Banc of America Securities Limited (BASL), on the same terms as the Citigroup Defendants, modified to reflect each underwriter’s proportionate share of the relevant offerings. The offer expired by its terms on June 24, 2004, without any underwriter, including BAS and BASL, accepting the terms of the settlement offer.

Note 10 - Shareholders’ Equity and Earnings Per Common Share

The change in Accumulated OCI includes pre-tax net unrealized losses related to AFS debt and marketable equity securities, foreign currency translation adjustments, derivatives and other of $1.6 billion and $1.8 billion for the six months ended June 30, 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 six months ended June 30, 2004 and 2003 were $1.2 billion and $475 million, respectively. The adjusted pre-tax net unrealized losses in Accumulated OCI were $2.8 billion with a related income tax benefit of $1.1 billion for the six months ended June 30, 2004 compared to $2.3 billion and $798 million, respectively, for the same period in 2003.

The calculation of earnings per common share and diluted earnings per common share for the three and six months ended June 30, 2004 and 2003 is presented below.


	Three Months Ended June 30						Six Months Ended June 30
*(Dollars in millions, except per share information; shares in thousands)*	2004			2003			2004			2003
Earnings per common share
Net income	$	3,849		$	2,738		$	6,530		$	5,162
Preferred stock dividends		(5	)		(1	)		(6	)		(2	)

Net income available to common shareholders	$	3,844		$	2,737		$	6,524		$	5,160

Average common shares issued and outstanding		2,031,192			1,494,094			1,735,758			1,496,827

Earnings per common share	$	1.89		$	1.83		$	3.76		$	3.45

Diluted earnings per common share
Net income available to common shareholders	$	3,844		$	2,737		$	6,524		$	5,160
Preferred stock dividends		5			1			6			2

Net income available to common shareholders and assumed conversions	$	3,849		$	2,738		$	6,530		$	5,162

Average common shares issued and outstanding		2,031,192			1,494,094			1,735,758			1,496,827
Dilutive potential common shares^{(1, 2)}		34,453			29,212			29,761			27,888

Total diluted average common shares issued and outstanding		2,065,645			1,523,306			1,765,519			1,524,715

Diluted earnings per common share	$	1.86		$	1.80		$	3.70		$	3.39

(1)

For the three and six months ended June 30, 2004, average options to purchase 5 million and 27 million shares, respectively, were outstanding but not included in the computation of earnings per common share because they were antidilutive. For the three and six months ended June 30, 2003, average options to purchase 13 million and 16 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, restricted stock shares and stock options.

The Corporation’s Board of Directors approved a 2-for-1 stock split in the form of a common stock dividend and increased the quarterly cash dividends 12.5 percent from $0.80 to $0.90 per pre-split share, which will be $0.45 per share after the stock split. The common stock dividend will be effective August 27, 2004 to common shareholders of record on August 6, 2004 and the cash dividend will be effective September 24, 2004 to common shareholders of record on September 3, 2004.

Earnings per common share and diluted earnings per common share, on a pro forma basis to reflect the effect of the 2-for-1 stock split, for the three and six months ended June 30, 2004 and 2003 is presented below.


	Three Months Ended June 30				Six Months Ended June 30
*(Shares in thousands)*	2004		2003		2004		2003
Pro forma average common shares issued and outstanding		4,062,384		2,988,188		3,471,516		2,993,654
Pro forma earnings per common share	$	0.95	$	0.92	$	1.88	$	1.72
Pro forma diluted average common shares issued and outstanding		4,131,290		3,046,612		3,531,038		3,049,430
Pro forma diluted earnings per common share	$	0.93	$	0.90	$	1.85	$	1.69

Earnings per common share and diluted earnings per common share, on a restated basis to reflect the effect of the 2-for-1 stock split, for the three months ended March 31, 2004 and 2003 is presented below.


	Three Months Ended March 31
*(Shares in thousands)*	2004		2003
Pro forma average common shares issued and outstanding		2,880,306		2,998,810
Pro forma earnings per common share	$	0.93	$	0.81
Pro forma diluted average common shares issued and outstanding		2,933,402		3,052,576
Pro forma diluted earnings per common share	$	0.91	$	0.79

Note 11 – 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 of the Corporation’s plans for the three months ended June 30, 2004 and 2003, included the following components:


	Qualified Pension Plan						Nonqualified Pension Plans				Postretirement Health and Life Plans
	Three Months Ended June 30						Three Months Ended June 30				Three Months Ended June 30
*(Dollars in millions)*	2004			2003			2004		2003		2004			2003
Components of net periodic benefit cost
Service cost	$	52		$	49		$	6	$	6	$	2		$	2
Interest cost		136			129			12		12		18			17
Expected return on plan assets		(197	)		(182	)		—		—		(4	)		(3	)
Amortization of transition obligation		—			—			—		—		8			8
Amortization of prior service cost		13			14			—		1		—			1
Recognized net actuarial loss		26			12			2		4		21			23

Net periodic benefit cost	$	30		$	22		$	20	$	23	$	45		$	48

Net periodic benefit cost of the Corporation’s plans for the six months ended June 30, 2004 and 2003, included the following components:


	Qualified Pension Plan						Nonqualified Pension Plans				Postretirement Health and Life Plans
	Six Months Ended June 30						Six Months Ended June 30				Six Months Ended June 30
*(Dollars in millions)*	2004			2003			2004		2003		2004			2003
Components of net periodic benefit cost
Service cost	$	106		$	98		$	13	$	12	$	5		$	5
Interest cost		266			258			23		21		35			34
Expected return on plan assets		(387	)		(366	)		—		—		(7	)		(7	)
Amortization of transition obligation		—			—			—		—		16			16
Amortization of prior service cost		27			28			1		2		—			2
Recognized net actuarial loss		46			24			7		5		43			45

Net periodic benefit cost	$	58		$	42		$	44	$	40	$	92		$	95

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 June 30, 2004, the Corporation now expects to contribute at least a combined $63 million. At June 30, 2004, the Corporation had contributed $34 million to these plans.

As a result of the Merger, the Corporation assumed the obligations related to the plans of former FleetBoston. These plans are substantially similar to the legacy Bank of America plans discussed above. Net periodic benefit cost of the former FleetBoston plans for the three months ended June 30, 2004 included the following components:


	Three Months Ended June 30, 2004
*(Dollars in millions)*	Qualified Pension Plan			Nonqualified Pension Plans		Postretirement Health and Life Plans
Components of net periodic benefit cost
Service cost	$	15		$	—	$	—
Interest cost		30			6		3
Expected return on plan assets		(47	)		—		(1	)

Net periodic benefit cost	$	(2	)	$	6	$	2

The Corporation expects to contribute at least an aggregate of $41 million to the former FleetBoston plans during 2004. At June 30, 2004, the Corporation had contributed $11 million to these plans.

Note 12 – Business Segment Information

In connection with the Merger, the Corporation realigned its business segment reporting to reflect the business model of the combined company. Prior period information has been reclassified to conform to the current period presentation. The Corporation reports the results of its operations through four business segments: Consumer and Small Business, Commercial Banking, Global Corporate and Investment Banking, and Wealth and Investment Management. 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 Small Business provides a diversified range of products and services to individuals and small businesses through multiple delivery channels. Commercial Banking primarily provides commercial lending and treasury management services to middle market companies. Global Corporate and Investment Banking provides capital-raising solutions, advisory services, derivatives capabilities, equity and debt sales and trading for our clients as well as traditional bank deposit and loan products, treasury management and payment services to large corporations and institutional clients. Wealth and Investment Management offers investment, fiduciary and comprehensive banking and credit expertise, asset management services to institutional clients, high-net-worth individuals and retail customers, investment, securities and financial planning services to affluent and high-net-worth individuals, and retail clearing services for broker/dealers.

Corporate Other consists primarily of Equity Investments, Latin America, 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. Latin America consists of the Corporation’s full-service Latin American operations in Brazil, Argentina and Chile, but excludes Mexico.

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 tables present results of operations, selected performance ratios and selected average balance sheet categories for the three and six months ended June 30, 2004 and 2003 for each business segment.


Business Segment Summary
*For the three months ended June 30*

	Total Corporation						Consumer and Small Business⁽¹⁾						Commercial Banking⁽¹⁾
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	7,751		$	5,524		$	4,508		$	2,992		$	1,238		$	789
Noninterest income		5,440			4,262			2,641			2,232			503			355

Total revenue		13,191			9,786			7,149			5,224			1,741			1,144
Provision for credit losses		789			772			661			405			6			116
Gains (losses) on sales of debt securities		795			296			(2	)		2			—			—
Amortization of intangibles		201			54			139			37			26			5
Other noninterest expense		7,000			5,011			3,332			2,551			688			435

Income before income taxes		5,996			4,245			3,015			2,233			1,021			588
Income tax expense		2,147			1,507			1,105			825			379			210

Net income	$	3,849		$	2,738		$	1,910		$	1,408		$	642		$	378

Shareholder value added	$	1,591		$	1,414		$	1,036		$	1,130		$	59		$	173
Net interest yield (fully taxable-equivalent basis)		3.29	%		3.33	%		5.22	%		5.07	%		3.44	%		3.23	%
Return on average equity		16.63			21.86			20.74			49.19			11.60			19.78
Efficiency ratio (fully taxable-equivalent basis)		54.59			51.76			48.54			49.54			41.04			38.44
Average:
Total loans and leases	$	497,158		$	350,279		$	145,830		$	91,497		$	139,032		$	93,598
Total assets		1,108,307			775,084			381,768			252,293			167,087			103,711
Total deposits		582,305			405,307			339,569			236,625			59,605			30,751
Common equity/Allocated equity		92,943			50,212			37,047			11,482			22,246			7,675


*For the three months ended June 30*
	Global Corporate and Investment Banking ⁽¹⁾						Wealth and Investment Management⁽¹⁾						Corporate Other⁽²⁾
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	1,140		$	1,081		$	672		$	501		$	193		$	161
Noninterest income		1,490			1,032			841			486			(35	)		157

Total revenue		2,630			2,113			1,513			987			158			318
Provision for credit losses		(21	)		89			11			5			132			157
Gains (losses) on sales of debt securities		(4	)		(4	)		—			—			801			298
Amortization of intangibles		13			6			19			5			4			1
Other noninterest expense		1,989			1,382			868			503			123			140

Income before income taxes		645			632			615			474			700			318
Income tax expense		216			219			223			174			224			79

Net income	$	429		$	413		$	392		$	300		$	476		$	239

Shareholder value added	$	145		$	177		$	172		$	186		$	179		$	(252	)
Net interest yield (fully taxable-equivalent basis)		1.62	%		1.94	%		3.33	%		3.73	%		n/m			n/m
Return on average equity		15.91			18.78			18.03			27.73			n/m			n/m
Efficiency ratio (fully taxable-equivalent basis)		76.12			65.74			58.66			51.50			n/m			n/m
Average:
Total loans and leases	$	38,125		$	38,475		$	44,107		$	37,617		$	130,064		$	89,092
Total assets		342,810			276,710			88,306			57,219			128,336			85,151
Total deposits		81,060			66,809			77,069			51,892			25,002			19,230
Common equity/Allocated equity		10,831			8,817			8,746			4,342			14,073			17,896


Business Segment Summary (continued)
*For the six months ended June 30*
	Total Corporation						Consumer and Small Business ⁽¹⁾						Commercial Banking ⁽¹⁾
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	13,721		$	10,885		$	7,893		$	5,778		$	2,064		$	1,561
Noninterest income		9,157			7,955			4,338			4,203			881			642

Total revenue		22,878			18,840			12,231			9,981			2,945			2,203
Provision for credit losses		1,413			1,605			1,097			822			33			238
Gains (losses) on sales of debt securities		1,290			569			(1	)		11			—			—
Amortization of intangibles		255			108			176			73			31			11
Other noninterest expense		12,363			9,682			6,018			5,016			1,142			875

Income before income taxes		10,137			8,014			4,939			4,081			1,739			1,079
Income tax expense		3,607			2,852			1,818			1,515			633			385

Net income	$	6,530		$	5,162		$	3,121		$	2,566		$	1,106		$	694

Shareholder value added	$	2,996		$	2,554		$	1,867		$	2,013		$	366		$	280
Net interest yield (fully taxable-equivalent basis)		3.26	%		3.42	%		5.34	%		4.99	%		3.38	%		3.25	%
Return on average equity		18.53			20.90			24.01			45.11			15.78			17.96
Efficiency ratio (fully taxable-equivalent basis)		55.15			51.96			50.64			50.99			39.83			40.19
Average:
Total loans and leases	$	435,618		$	347,983		$	122,119		$	91,575		$	117,805		$	92,518
Total assets		978,967			744,602			321,791			249,067			137,237			102,300
Total deposits		503,690			395,587			290,978			233,554			47,120			30,122
Common equity/Allocated equity		70,787			49,780			26,146			11,472			14,096			7,790


*For the six months ended June 30*
	Global Corporate and Investment Banking ⁽¹⁾						Wealth and Investment Management ⁽¹⁾						Corporate Other ⁽²⁾
*(Dollars in millions)*	2004			2003			2004			2003			2004			2003
Net interest income (fully taxable-equivalent basis)	$	2,178		$	2,239		$	1,279		$	965		$	307		$	342
Noninterest income		2,615			2,098			1,329			929			(6	)		83

Total revenue		4,793			4,337			2,608			1,894			301			425
Provision for credit losses		(120	)		337			2			5			401			203
Gains (losses) on sales of debt securities		(11	)		(17	)		—			—			1,302			575
Amortization of intangibles		19			12			24			10			5			2
Other noninterest expense		3,519			2,673			1,570			983			114			135

Income before income taxes		1,364			1,298			1,012			896			1,083			660
Income tax expense		472			451			369			329			315			172

Net income	$	892		$	847		$	643		$	567		$	768		$	488

Shareholder value added	$	409		$	367		$	286		$	340		$	68		$	(446	)
Net interest yield (fully taxable-equivalent basis)		1.60	%		2.04	%		3.47	%		3.73	%		n/m			n/m
Return on average equity		19.57			18.93			18.57			26.31			n/m			n/m
Efficiency ratio (fully taxable-equivalent basis)		73.81			61.90			61.15			52.43			n/m			n/m
Average:
Total loans and leases	$	33,521		$	40,931		$	41,270		$	37,945		$	120,903		$	85,014
Total assets		328,070			271,284			79,408			55,427			112,461			66,524
Total deposits		75,081			67,024			70,768			50,288			19,743			14,599
Common equity/Allocated equity		9,164			9,026			6,961			4,346			14,420			17,146

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 allocatted to the business segments.

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


	Three Months Ended June 30						Six Months Ended June 30
*(Dollars in millions)*	2004			2003			2004			2003
Segments’ revenue	$	13,033		$	9,468		$	22,577		$	18,415
Adjustments:
Revenue associated with unassigned capital		85			158			204			321
ALM activities⁽¹⁾		(22	)		232			(40	)		396
Latin America		269			13			278			32
Equity investments		—			(11	)		(19	)		(118	)
Liquidating businesses		75			50			159			160
Fully taxable-equivalent basis adjustment		(170	)		(159	)		(339	)		(311	)
Other		(249	)		(124	)		(281	)		(366	)

Consolidated revenue	$	13,021		$	9,627		$	22,539		$	18,529

Segments’ net income	$	3,373		$	2,499		$	5,762		$	4,674
Adjustments, net of taxes:
Earnings associated with unassigned capital		56			106			136			215
ALM activities^{(1, 2)}		520			347			834			640
Latin America		66			(47	)		32			(19	)
Equity investments		(18	)		(26	)		(47	)		(112	)
Liquidating businesses		56			(29	)		25			(24	)
Other		(204	)		(112	)		(212	)		(212	)

Consolidated net income	$	3,849		$	2,738		$	6,530		$	5,162

(1)

Includes whole mortgage loan sale gains.

(2)

Includes Gains on sales of debt securities of $529 and $200 for the three months ended June 30, 2004 and 2003, respectively and $868 and $385 for the six months ended June 30, 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 29 states and the District of Columbia and has offices located in 34 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 Small Business, Commercial Banking, Global Corporate and Investment Banking, and Wealth and Investment Management. At June 30, 2004, the Corporation had $1.0 trillion in assets and approximately 178,000 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.

On April 1, 2004, we completed our merger with FleetBoston Financial Corporation (FleetBoston) (the Merger) after obtaining final shareholder and regulatory approvals. The Merger created a banking institution with leading market shares throughout the Northeast, Southeast, Southwest and West regions of the United States. The Merger was accounted for under the purchase method of accounting. Accordingly, results for the three months and six months ended June 30, 2004 included three months of combined company results. Results for the three months and six months ended June 30, 2003 and at December 31, 2003 excluded FleetBoston. For more information on the Merger, see Note 2 of the consolidated financial statements. For informational and comparative purposes, certain tables have been expanded to include a column entitled FleetBoston, April 1, 2004. This represents balances acquired from FleetBoston as of April 1, 2004, including purchase accounting adjustments.

Our Board of Directors (the Board) approved a 2-for-1 stock split in the form of a common stock dividend and increased the quarterly cash dividends 12.5 percent from $0.80 to $0.90 per pre-split share, which will be $0.45 per share after the stock split. The common stock dividend will be effective August 27, 2004 to common shareholders of record on August 6, 2004 and the cash dividend will be effective September 24, 2004 to common shareholders of record on September 3, 2004.

On July 12, 2004, we entered into an agreement to acquire all outstanding shares of National Processing, Inc. for $1.4 billion in cash. The resulting combination of National Processing, Inc. with Bank of America Merchant Services will create the second largest merchant acquirer in the United States. We expect the transaction to close in the fourth quarter of 2004.

Performance overview for the six months ended June 30, 2004 compared to the same period in 2003:

Net income totaled $6.5 billion, or $3.70 per diluted common share, 27 percent and 9 percent increases, respectively, from $5.2 billion, or $3.39 per diluted common share. The return on average common shareholders’ equity was 19 percent compared to 21 percent.

Within Consumer and Small Business, we continue to attract and retain customers. During the six months ended June 30, 2004, we opened approximately 993,000 net new checking accounts and 1,278,000 net new savings accounts. Our active online banking customers reached 11.2 million, a 98 percent increase, including 42 percent related to the addition of Fleet Boston active online banking customers. Forty-eight percent of consumer households that hold checking accounts use online banking. Active bill pay customers increased 83 percent to 4.5 million. Active bill pay users paid $37.6 billion of bills during the six months ended June 30, 2004 compared to $20.6 billion a year ago.

Debit card purchase volumes grew 24 percent while consumer credit card purchases increased 20 percent. Total managed card revenue, including interest income, increased 59 percent. Average managed consumer credit card receivables grew $15.4 billion, or 52 percent, due to new account growth from balance building programs and $7.6 billion, or 26 percent, impact of the addition of the FleetBoston credit card portfolio.

Commercial Banking Net income increased 59 percent to $1.1 billion for the six months ended June 30, 2004 as compared to the prior year including the $255 million impact of the addition of FleetBoston. Both average loans and deposits grew significantly from the prior year, with increases of $25.3 billion, or 27 percent, and $17.0 billion, or 56 percent, respectively. Impacting these increases were the $20.0 billion effect on average loans and the $12.2 billion effect on average deposits related to the addition of FleetBoston. Also driving the improved results was the 86 percent, or $205 million, decrease in provision expense during the period, driven by lower net charge-offs and the continued improvement in the commercial credit portfolio, including the $117 million of net recoveries related to acquired FleetBoston loans.

Global Corporate and Investment Banking gained market share, as compared to a year ago, in areas such as leveraged loans, mergers and acquisitions, high-yield debt, syndicated loans, public finance and convertible debt, while maintaining its position in mortgage-backed securities. Continued improvements in credit quality in our large corporate portfolio drove the $457 million, or 136 percent, decrease in provision for credit losses in Global Corporate and Investment Banking. Net charge-offs in the large corporate portfolio decreased 45 percent from a year ago. In addition, large corporate nonperforming assets decreased $259 million, or 26 percent from year-end levels. The decrease in nonperforming assets occurred despite the addition of FleetBoston’s large corporate portfolio, which contributed $151 million of nonperforming assets, to the current period total.

Within Wealth and Investment Management, total assets under management increased $160.6 billion, or 58 percent, to $439.6 billion at June 30, 2004 led by the addition of FleetBoston assets under management of $151.3 billion and growth in Marsico Capital Management, LLC’s (Marsico) assets under management.

Financial highlights for the six months ended June 30, 2004 compared to the same period in 2003:

Net interest income on a fully taxable-equivalent basis increased $2.8 billion to $13.7 billion. This increase was driven by the impact of the Merger, higher asset and liability management (ALM) portfolio levels (consisting of securities and whole loan mortgages) and rates, growth in consumer loan levels, primarily credit card, and higher core deposit funding levels. Partially offsetting these increases were reductions in the large corporate and foreign loan balances, the continued runoff of previously exited consumer businesses and lower mortgage warehouse levels. The net interest yield on a fully taxable-equivalent basis declined 16 basis points (bps) to 3.26 percent due to the negative impact of increases in lower-yielding trading-related assets partially offset by higher levels of higher-yielding consumer loans, primarily credit card.

Noninterest income increased $1.2 billion to $9.2 billion, due primarily to the addition of FleetBoston. Card income increased $508 million due to increased fees and interchange income, including the $263 million impact of the addition of the FleetBoston card portfolio. Service charges grew by $475 million caused by account growth, of which approximately $287 million was attributable to the addition of FleetBoston customers. Investment and brokerage services increased $436 million due to higher volumes related to increased market activity, including approximately $334 million related to the addition of FleetBoston business. Equity investment gains increased $242 million due to an increase in cash gains related to the legacy Bank of America portfolio of $271 million and the addition of $70 million of cash gains related to the FleetBoston equity investments portfolio, partially offset by higher levels of impairments during the period. Offsetting these increases was a decrease in Mortgage banking income of $456 million caused by a higher interest rate environment which resulted in lower production levels and a decrease in the sales of loans to the secondary market.

Gains on sales of debt securities were $1.3 billion compared to $569 million, as we continued to reposition the ALM portfolio in response to interest rate fluctuations.

The provision for credit losses decreased $192 million to $1.4 billion driven by the continued improvements in credit quality in both the large corporate and commercial loan portfolios. Despite the addition of FleetBoston criticized commercial exposure of $7.1 billion on April 1, 2004, criticized commercial exposure was up only $770 million over December 31, 2003 driven by overall improvement in the large corporate and commercial loan portfolios including paydowns and payoffs, loans sales, net charge-offs, and returns to performing status. Nonperforming assets increased $158 million to $3.2 billion, or 0.64 percent of loans, leases and foreclosed properties at June 30, 2004 compared to 0.81 percent at December 31, 2003. This increase was driven by the addition of $1.2 billion of FleetBoston nonperforming assets on April 1, 2004 partially offset by the continued reductions in the nonperforming asset levels of the large corporate portfolio. Total commercial net charge-offs were down $359 million for the six months ended June 30, 2004 compared to a year ago. The commercial provision for credit losses decrease was partially offset by increased provision in the on-balance sheet card portfolio driven by an increase in net charge-offs of $327 million, primarily a function of the addition of the FleetBoston card portfolio, growth from new accounts and continued seasoning in the portfolio.

Noninterest expense increased $2.8 billion, driven by higher Personnel costs of $1.2 billion and increased Other general operating expenses of $868 million. Higher Personnel costs resulted from the $822 million impact to salaries, benefits costs and revenue-related incentives of the addition of associates from FleetBoston. The increase in Other general operating expenses was related to $300 million of legal expenses incurred during the second quarter of 2004 primarily related to previously disclosed matters, and the $375 million mutual fund settlement entered into during the period. This settlement amount was offset by a $90 million reserve established in 2003 to produce a net settlement expense of $285 million for the period. This net settlement expense was divided equally between Global Corporate and Investment Banking and Wealth and Investment Management for management reporting purposes. Also impacting Noninterest expense during the period was the $125 million Merger and restructuring charges in connection with the integration of FleetBoston’s operations. For more information on Merger and restructuring charges, see Note 2 of the consolidated financial statements.

Income tax expense was $3.3 billion reflecting an estimated effective tax rate of 33.4 percent compared to $2.5 billion and 33.0 percent, respectively. The increase in the effective tax rate was generally due to the impact of the higher FleetBoston effective tax rate and purchase accounting adjustments related to the Merger.

Table 1

Selected Quarterly Financial Data ⁽¹⁾


	2004 Quarters						2003 Quarters
*(Dollars in millions, except per share information)*	Second			First			Fourth			Third			Second
Income statement
Net interest income	$	7,581		$	5,801		$	5,586		$	5,304		$	5,365
Noninterest income		5,440			3,717			4,049			4,446			4,262
Total revenue		13,021			9,518			9,635			9,750			9,627
Provision for credit losses		789			624			583			651			772
Gains on sales of debt securities		795			495			139			233			296
Noninterest expense		7,201			5,417			5,288			5,077			5,065
Income before income taxes		5,826			3,972			3,903			4,255			4,086
Income tax expense		1,977			1,291			1,177			1,333			1,348
Net income		3,849			2,681			2,726			2,922			2,738
Average common shares issued and outstanding (in thousands)		2,031,192			1,440,153			1,463,247			1,490,103			1,494,094
Average diluted common shares issued and outstanding (in thousands)		2,065,645			1,466,701			1,489,481			1,519,641			1,523,306

Performance ratios
Return on average assets		1.40	%		1.27	%		1.39	%		1.48	%		1.42	%
Return on average common shareholders’ equity		16.63			22.16			22.42			23.74			21.86
Total equity to total assets (period end)		9.24			5.98			6.52			6.84			6.63
Total average equity to total average assets		8.42			5.73			6.19			6.22			6.49
Dividend payout		42.60			43.21			42.70			40.85			35.06

Per common share data
Earnings	$	1.89		$	1.86		$	1.86		$	1.96		$	1.83
Diluted earnings		1.86			1.83			1.83			1.92			1.80
Dividends paid		0.80			0.80			0.80			0.80			0.64
Book value		47.01			33.71			33.26			33.83			34.06

Average balance sheet
Total loans and leases	$	497,158		$	374,077		$	371,071		$	357,288		$	350,279
Total assets		1,108,307			849,627			780,536			786,155			775,084
Total deposits		582,305			425,075			418,840			414,569			405,307
Long-term debt⁽²⁾		96,395			78,852			70,596			66,788			68,927
Common shareholders’ equity		92,943			48,632			48,238			48,816			50,212
Total shareholders’ equity		93,266			48,686			48,293			48,871			50,269

Capital ratios (period end)
Risk-based capital:
Tier 1		8.20	%		7.73	%		7.85	%		8.25	%		8.08	%
Total		11.97			11.46			11.87			12.17			11.95
Leverage		5.83			5.43			5.73			5.95			5.92

Market price per share of common stock
Closing	$	84.62		$	80.98		$	80.43		$	78.04		$	79.03
High closing		85.44			82.76			82.50			83.53			79.89
Low closing		77.17			78.30			72.85			74.87			68.00

(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 Securitites).

Table 2

Selected Year-to-Date Financial Data ⁽¹⁾


	Six Months Ended June 30
*(Dollars in millions, except per share information)*	2004			2003
Income statement
Net interest income	$	13,382		$	10,574
Noninterest income		9,157			7,955
Total revenue		22,539			18,529
Provision for credit losses		1,413			1,605
Gains on sales of debt securities		1,290			569
Noninterest expense		12,618			9,790
Income before income taxes		9,798			7,703
Income tax expense		3,268			2,541
Net income		6,530			5,162
Average common shares issued and outstanding (in thousands)		1,735,758			1,496,827
Average diluted common shares issued and outstanding (in thousands)		1,765,519			1,524,715

Performance ratios
Return on average assets		1.34	%		1.40	%
Return on average common shareholders’ equity		18.53			20.90
Total equity to total assets (period end)		9.24			6.63
Total average equity to total average assets		7.25			6.69
Dividend payout		42.85			37.21

Per common share data
Earnings	$	3.76		$	3.45
Diluted earnings		3.70			3.39
Dividends paid		1.60			1.28
Book value		47.01			34.06

Average balance sheet
Total loans and leases	$	435,618		$	347,983
Total assets		978,967			744,602
Total deposits		503,690			395,587
Long-term debt ⁽²⁾		87,623			68,167
Common shareholders’ equity		70,787			49,780
Total shareholders’ equity		70,976			49,837

Capital ratios (period end)
Risk-based capital:
Tier 1		8.20	%		8.08	%
Total		11.97			11.95
Leverage		5.83			5.92

Market price per share of common stock
Closing	$	84.62		$	79.03
High closing		85.44			79.89
Low closing		77.17			65.63

(1)

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

(2)

Includes long-term debt related to 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 3 and 4 for supplemental financial data for the three and six months ended June 30, 2004 and 2003.

Supplemental financial data presented on an operating basis is a basis of presentation not defined by GAAP that excludes merger and restructuring charges. Table 3 includes earnings, earnings per common share (EPS), SVA, return on average assets, return on average equity, efficiency ratio and dividend payout ratio presented on an operating basis. We believe that the exclusion of the merger and restructuring charges, which represent incremental costs to integrate FleetBoston’s operations, provides a meaningful period-to-period comparison and is more reflective of normalized operations.

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 on an operating basis is defined as net income adjusted to exclude merger and restructuring charges and 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 50. SVA increased 17 percent to $3.0 billion for the six months ended June 30, 2004 compared to the comparable 2003 period, due to the $1.6 billion increase in cash basis earnings partially offset by the $1.2 billion effect of higher levels of equity caused by the FleetBoston merger. For additional discussion of SVA, see Business Segment Operations beginning on page 39.

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 3

Supplemental Financial Data and Reconciliations to GAAP Financial Measures


	Three Months Ended June 30						Six Months Ended June 30
*(Dollars in millions, except per share information)*	2004			2003			2004			2003
Operating basis⁽¹⁾
Operating earnings	$	3,932		$	2,738		$	6,613		$	5,162
Operating earnings per common share		1.93			1.83			3.81			3.45
Diluted operating earnings per common share		1.90			1.80			3.74			3.39
Shareholder value added		1,591			1,414			2,996			2,554
Return on average assets		1.43	%		1.42	%		1.36	%		1.40	%
Return on average common shareholders’ equity		16.99			21.86			18.77			20.90
Efficiency ratio (fully taxable-equivelant basis)		53.64			51.76			54.61

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents