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 March 31, 2005

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

Commission file number:

1-6523

Exact name of registrant as specified in its charter:

Bank of America Corporation

State of incorporation:

Delaware

IRS Employer Identification Number:

56-0906609

Address of principal executive offices:

Bank of America Corporate Center

100 N. Tryon Street

Charlotte, North Carolina 28255

Registrant’s telephone number, including area code:

(704) 386-8486

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

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

On April 30, 2005, there were 4,021,570,390 shares of Bank of America Corporation Common Stock outstanding.

Bank of America Corporation

March 31, 2005 Form 10-Q


INDEX
			Page
Part I.	Item 1.	Financial Statements:
Financial Information		Consolidated Statement of Income for the Three Months Ended March 31, 2005 and 2004	2

		Consolidated Balance Sheet at March 31, 2005 and December 31, 2004	3

		Consolidated Statement of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2005 and 2004	4

		Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2005 and 2004	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	82

	Item 4.	Controls and Procedures	82

Part II.
Other Information	Item 1.	Legal Proceedings	82

	Item 2.	Unregistered Sales of Equity Securities and the Use of Proceeds	82

	Item 6.	Exhibits	83

	Signature		84

	Index to Exhibits		85

Part I. Financial Information

Item 1. Financial Statements

Bank of America Corporation and Subsidiaries

Consolidated Statement of Income


	Three Months Ended March 31
*(Dollars in millions, except per share information)*	2005		2004
Interest income
Interest and fees on loans and leases	$	8,107	$	5,549
Interest and dividends on securities		2,534		1,212
Federal funds sold and securities purchased under agreements to resell		893		434
Trading account assets		1,182		1,012
Other interest income		437		345

Total interest income		13,153		8,552

Interest expense
Deposits		2,043		1,206
Short-term borrowings		1,969		720
Trading account liabilities		427		334
Long-term debt		841		491

Total interest expense		5,280		2,751

Net interest income		7,873		5,801

Noninterest income
Service charges		1,777		1,416
Investment and brokerage services		1,013		635
Mortgage banking income		221		209
Investment banking income		366		404
Equity investment gains		399		133
Card income		1,289		795
Trading account profits		760		3
Other income		324		135

Total noninterest income		6,149		3,730

Total revenue		14,022		9,531

Provision for credit losses		580		624

Gains on sales of debt securities		659		495

Noninterest expense
Personnel		3,701		2,752
Occupancy		636		488
Equipment		297		261
Marketing		337		281
Professional fees		177		160
Amortization of intangibles		208		54
Data processing		364		284
Telecommunications		206		151
Other general operating		1,019		999
Merger and restructuring charges		112		—

Total noninterest expense		7,057		5,430

Income before income taxes		7,044		3,972
Income tax expense		2,349		1,291

Net income	$	4,695	$	2,681

Net income available to common shareholders	$	4,690	$	2,680

Per common share information
Earnings	$	1.16	$	0.93

Diluted earnings	$	1.14	$	0.91

Dividends paid	$	0.45	$	0.40

Average common shares issued and outstanding (in thousands)		4,032,550		2,880,306

Average diluted common shares issued and outstanding (in thousands)		4,099,062		2,933,402

See accompanying Notes to Consolidated Financial Statements.

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet


*(Dollars in millions)*	March 31 2005			December 31 2004
Assets
Cash and cash equivalents	$	28,698		$	28,936
Time deposits placed and other short-term investments		11,223			12,361
Federal funds sold and securities purchased under agreements to resell (includes $139,305 and $91,243 pledged as collateral)		139,396			91,360
Trading account assets (includes $53,360 and $38,929 pledged as collateral)		124,960			93,587
Derivative assets		26,182			30,235
Securities:
Available-for-sale (includes $59,352 and $45,127 pledged as collateral)		218,675			194,743
Held-to-maturity, at cost (market value - $274 and $329)		275			330

Total securities		218,950			195,073

Loans and leases		529,466			521,837
Allowance for loan and lease losses		(8,313	)		(8,626	)

Loans and leases, net of allowance		521,153			513,211

Premises and equipment, net		7,531			7,517
Mortgage servicing rights		2,668			2,482
Goodwill		45,378			45,262
Core deposit intangibles and other intangibles		3,679			3,887
Other assets		82,421			86,546

Total assets	$	1,212,239		$	1,110,457

Liabilities
Deposits in domestic offices:
Noninterest-bearing	$	166,499		$	163,833
Interest-bearing		403,534			396,645
Deposits in foreign offices:
Noninterest-bearing		5,319			6,066
Interest-bearing		54,635			52,026

Total deposits		629,987			618,570

Federal funds purchased and securities sold under agreements to repurchase		187,652			119,741
Trading account liabilities		53,434			36,654
Derivative liabilities		15,363			17,928
Commercial paper and other short-term borrowings		93,440			78,598
Accrued expenses and other liabilities (includes $394 and $402 of reserve for unfunded lending commitments)		35,081			41,243
Long-term debt		98,763			98,078

Total liabilities		1,113,720			1,010,812

Commitments and contingencies (Note 9)

Shareholders’ equity
Preferred stock, $0.01 par value; authorized - 100,000,000 shares; issued and outstanding - 1,090,189 and 1,090,189 shares		271			271
Common stock and additional paid-in capital, $0.01 par value; authorized - 7,500,000,000 and 5,000,000,000 shares; issued and outstanding - 4,035,318,509 and 4,046,546,212 shares		43,589			44,236
Retained earnings		60,843			58,006
Accumulated other comprehensive income (loss)		(5,559	)		(2,587	)
Other		(625	)		(281	)

Total shareholders’ equity		98,519			99,645

Total liabilities and shareholders’ equity	$	1,212,239		$	1,110,457

See accompanying Notes to Consolidated Financial Statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity


	Preferred Stock											Accumulated Other Comprehensive Income (Loss) ⁽¹⁾						Total Share- holders’ Equity
				Common Stock and Additional Paid-in Capital											Other						Comprehensive Income
				Common Stock and Additional Paid-in Capital					Retained Earnings
*(Dollars in millions, shares in thousands)*				Shares		Amount			Retained Earnings
Balance, December 31, 2003	$	54		2,882,288		$	29		$	50,198		$	(2,148	)	$	(153	)	$	47,980
Net income										2,681									2,681		$	2,681
Net unrealized gains on available-for-sale debt and marketable equity securities													661						661			661
Net unrealized gains on foreign currency translation adjustments													3						3			3
Net unrealized losses on derivatives													(1,259	)					(1,259	)		(1,259	)
Cash dividends paid:
Common										(1,158	)								(1,158	)
Preferred										(1	)								(1	)
Common stock issued under employee plans and related tax benefits				32,892			1,060									(218	)		842
Common stock repurchased				(24,306	)		(1,061	)		88									(973	)
Conversion of preferred stock		(1	)	100			1												—

Balance, March 31, 2004	$	53		2,890,974		$	29		$	51,808		$	(2,743	)	$	(371	)	$	48,776		$	2,086

Balance, December 31, 2004	$	271		4,046,546		$	44,236		$	58,006		$	(2,587	)	$	(281	)	$	99,645
Net income										4,695									4,695		$	4,695
Net unrealized losses on available-for-sale debt and marketable equity securities													(1,541	)					(1,541	)		(1,541	)
Net unrealized losses on foreign currency translation adjustments													(5	)					(5	)		(5	)
Net unrealized losses on derivatives													(1,426	)					(1,426	)		(1,426	)
Cash dividends paid:
Common										(1,830	)								(1,830	)
Preferred										(5	)								(5	)
Common stock issued under employee plans and related tax benefits				31,987			1,343									(344	)		999
Common stock repurchased				(43,214	)		(1,990	)											(1,990	)
Other										(23	)								(23	)

Balance, March 31, 2005	$	271		4,035,319		$	43,589		$	60,843		$	(5,559	)	$	(625	)	$	98,519		$	1,723

⁽¹⁾

At March 31, 2005 and December 31, 2004, Accumulated Other Comprehensive Income (Loss) includes Net Unrealized Gains (Losses) on Available-for-sale (AFS) Debt and Marketable Equity Securities of $(1,738) million and $(196) million; Net Unrealized Gains (Losses) on Foreign Currency Translation Adjustments of $(160) million and $(153) million; Net Unrealized Gains (Losses) on Derivatives of $(3,527) million and $(2,102) million; and Other of $(134) million and $(136) million.

See accompanying Notes to Consolidated Financial Statements.

Bank of America Corporation and Subsidiaries

Consolidated Statement of Cash Flows


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Operating activities
Net income	$	4,695		$	2,681
Reconciliation of net income to net cash provided by (used in) operating activities:
Provision for credit losses		580			624
Gains on sales of debt securities		(659	)		(495	)
Depreciation and premises improvements amortization		240			209
Amortization of intangibles		208			54
Deferred income tax benefit		(85	)		(66	)
Net increase in trading and hedging instruments		(13,041	)		(8,528	)
Net (increase) decrease in other assets		4,283			(5,063	)
Net decrease in accrued expenses and other liabilities		(4,489	)		(8,252	)
Other operating activities, net		(3,707	)		3,275

Net cash used in operating activities		(11,975	)		(15,561	)

Investing activities
Net (increase) decrease in time deposits placed and other short-term investments		1,138			(510	)
Net (increase) decrease in federal funds sold and securities purchased under agreements to resell		(48,036	)		3,435
Proceeds from sales of available-for-sale securities		38,451			11,090
Proceeds from maturities of available-for-sale securities		10,181			1,848
Purchases of available-for-sale securities		(74,552	)		(84,567	)
Proceeds from maturities of held-to-maturity securities		55			5
Proceeds from sales of loans and leases		1,113			876
Other changes in loans and leases, net		(9,560	)		(6,133	)
Originations of mortgage servicing rights		(168	)		(249	)
Net purchases of premises and equipment		(254	)		(249	)
Proceeds from sales of foreclosed properties		26			49
Cash equivalents acquired net of purchase acquisitions		(116	)		(15	)
Other investing activities, net		(72	)		800

Net cash used in investing activities		(81,794	)		(73,620	)

Financing activities
Net increase in deposits		11,417			21,479
Net increase in federal funds purchased and securities sold under agreements to repurchase		67,911			37,388
Net increase in commercial paper and other short-term borrowings		14,842			21,634
Proceeds from issuance of long-term debt		4,768			7,558
Retirement of long-term debt		(2,702	)		(2,507	)
Proceeds from issuance of common stock		1,180			1,000
Common stock repurchased		(1,990	)		(973	)
Cash dividends paid		(1,835	)		(1,159	)
Other financing activities, net		(37	)		(23	)

Net cash provided by financing activities		93,554			84,397

Effect of exchange rate changes on cash and cash equivalents		(23	)		(4	)

Net decrease in cash and cash equivalents		(238	)		(4,788	)
Cash and cash equivalents at January 1		28,936			27,084

Cash and cash equivalents at March 31	$	28,698		$	22,296

Net transfers of Loans and Leases from the loan portfolio to loans held-for-sale (included in Other Assets) amounted to $114 million for the three months ended March 31, 2005. There were no such transfers for the three months ended March 31, 2004.

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 U.S. and in selected international markets. At March 31, 2005, 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 Financial Corporation (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.

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, normal recurring adjustments necessary for a fair statement of the interim period results have been made. Results of operations of companies purchased are included from the date of acquisition. Certain prior period amounts were reclassified to conform to current period presentation.

Recently Issued or Proposed Accounting Pronouncements

The Financial Accounting Standards Board (FASB) is expected to issue an exposure draft, FASB Staff Position (FSP) No. FAS 13-a, “Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction” (FSP 13-a). FSP 13-a is expected to require a recalculation of leveraged lease income recognition when there is a change in the estimated timing of the realization of tax benefits from such lease. If issued, FSP 13-a will be effective for fiscal years ending after December 15, 2005. Management is currently evaluating the effect of the expected recognition provisions of FSP 13-a. As part of this evaluation, management is considering the potential impact of the Internal Revenue Service’s (IRS) recent statements concerning leveraged leases and the impact of such statements on the Corporation’s and its predecessors’ federal income tax returns. Depending on the final wording of FSP 13-a and the final outcome of the IRS’s position, FSP 13-a may have a material impact on our current accounting treatment for leveraged leases. This change in accounting would be reflected as both an adjustment to Goodwill for leveraged leases acquired as part of the Merger and a one-time cumulative effect of a change in accounting principle below net income from operations as of the end of the year of adoption.

On December 16, 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-based Payment” (SFAS 123R) which eliminates the ability to account for share-based compensation transactions, including grants of employee stock options, using Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and generally requires that such transactions be accounted for using a fair value-based method with the resulting compensation cost recognized over the period that the employee is required to provide service in order to receive their compensation. SFAS 123R also amends SFAS No. 95, “Statement of Cash Flows,” requiring the benefits of tax deductions in excess of recognized compensation costs to be reported as financing cash flows, rather than as operating cash flows as currently required. The Corporation adopted the fair value-based method of accounting for stock-based employee compensation prospectively as of January 1, 2003. Under SFAS 123R, the initial effective date for the Corporation was July 1, 2005. However, on April 15, 2005, the Securities and Exchange Commission issued the final rule “Amendment to Rule 4-01(a) of Regulation S-X Regarding the Compliance for SFAS 123 (Revised 2004), Share-Based Payment” which extends the effective date for public companies to the first fiscal year beginning on or after June 15, 2005. As a result, the Corporation is considering adoption of SFAS 123R effective January 1, 2006 under the modified-prospective application. Management is currently evaluating the impact of adoption on the Corporation’s results of operations and financial condition.

Stock-based Compensation

SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123,” (SFAS 148) was adopted prospectively by the Corporation on January 1, 2003. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In accordance with SFAS 148, the Corporation provides disclosures as if it had adopted the fair value-based method of measuring all outstanding employee stock options during the three months ended March 31, 2005 and 2004. The following table presents the effect on Net Income and Earnings per Common Share had the fair value-based method been applied to all outstanding and unvested awards for the three months ended March 31, 2005 and 2004.


	Three Months Ended March 31
*(Dollars in millions, except per share data)*	2005			2004
Net income (as reported)	$	4,695		$	2,681
Stock-based employee compensation expense recognized during the period, net of related tax effects		51			35
Stock-based employee compensation expense determined under fair value-based method, net of related tax effects ⁽¹⁾		(51	)		(54	)

Pro forma net income	$	4,695		$	2,662

As reported
Earnings per common share	$	1.16		$	0.93
Diluted earnings per common share		1.14			0.91
Pro forma
Earnings per common share		1.16			0.93
Diluted earnings per common share		1.14			0.91

⁽¹⁾

Includes all awards granted, modified or settled for which the fair value was required to be measured under SFAS 123, except restricted stock. Restricted stock expense, included in Net Income for the three months ended March 31, 2005 and 2004, was $114 million and $64 million pre-tax.

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 2004 Annual Report.

Note 2 - Merger and Restructuring Activity

FleetBoston

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 a tax-free merger, 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 1.187 billion shares of the Corporation’s common stock, as adjusted for the stock split. 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 in lieu of any fractional shares of the Corporation’s common stock that would have otherwise been issued on April 1, 2004. Holders of FleetBoston preferred stock received 1.1 million shares of the Corporation’s preferred stock. The Corporation’s preferred stock that was exchanged was valued using the book value of FleetBoston preferred stock. The depositary shares underlying the FleetBoston preferred stock, each representing a one-fifth interest in the FleetBoston preferred stock prior to the Merger, represent a one-fifth interest in a share of the Corporation’s preferred stock. The purchase price was adjusted to reflect the effect of the 15.7 million shares of FleetBoston common stock that the Corporation already owned.

The Merger was accounted for under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations”. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values at the Merger date as summarized below.


*(Dollars in millions)*
Purchase price
FleetBoston common stock exchanged (in thousands)		1,068,635
Exchange ratio (as adjusted for the stock split)		1.1106

Total shares of the Corporation’s common stock exchanged (in thousands)		1,186,826
Purchase price per share of the Corporation’s common stock⁽¹⁾	$	38.44

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	)
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Securities				(84	)
Loans and leases				(776	)
Premises and equipment				(766	)
Identified intangibles				3,243
Other assets and deferred income tax				312
Deposits				(313	)
Other liabilities				(313	)
Exit and termination liabilities				(641	)
Long-term debt				(1,182	)

Fair value of net assets acquired				14,100

Goodwill resulting from the Merger			$	33,153

⁽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, as adjusted for the stock split.

Merger and Restructuring Charges

Merger and Restructuring Charges are recorded in the Consolidated Statement of Income, and include incremental costs to integrate Bank of America’s and FleetBoston’s operations. These charges represent costs associated with these one-time activities and do not represent on-going costs of the fully integrated combined organization. Systems integrations and related charges, and other, as shown in the following table, are expensed as incurred.

In addition, Merger and Restructuring Charges include costs related to an infrastructure initiative to simplify the Corporation’s business model. As a result of this initiative, the Corporation will reduce its workforce by approximately 2.5 percent or 4,500 positions. Total severance costs related to this initiative were $151 million. During first quarter 2005, the Corporation incurred $1 million in severance costs recorded in Merger and Restructuring Charges related to this initiative. The Corporation does not expect to incur additional severance costs related to this initiative.


*(Dollars in millions)*	Three Months Ended March 31, 2005
Severance and employee-related charges:
Merger-related	$	9
Infrastructure initiative		1
Systems integrations and related charges		81
Other		21

Total merger and restructuring charges	$	112

Exit Costs and Restructuring Reserves

As of December 31, 2004, there were $382 million of exit costs reserves remaining, which included $291 million for severance, relocation and other employee-related costs, $87 million for contract terminations, and $4 million for other charges. During the first quarter of 2005, $18 million of reductions to the exit costs reserves were recorded as a result of revised estimates. The reductions included $14 million for contract terminations and $4 million for other charges. Also, $1 million of additional liabilities was recorded related to severance costs in connection with the infrastructure initiative for FleetBoston associates resulting in an increase in Goodwill. Cash payments of $92 million were charged against this liability during the first quarter, including $81 million of severance, relocation and other employee-related costs, and $11 million of contract terminations reducing the balance in the liability to $273 million at March 31, 2005.

Restructuring reserves for the first quarter of 2005 included an additional charge for the legacy Bank of America associate severance and other employee-related charges of $10 million, including $1 million that related to the infrastructure initiative. During the first quarter of 2005, cash payments of $54 million for severance and other employee-related costs have been charged against this liability reducing the balance from $166 million at December 31, 2004 to $122 million as of March 31, 2005.

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


Exit Costs and Restructuring Reserves
*(Dollars in millions)*	Exit Costs Reserves⁽¹⁾			Restructuring Reserves⁽²⁾
Balance, December 31, 2004	$	382		$	166
FleetBoston exit costs		(17	)		—
Restructuring charges		—			9
Infrastructure initiative		—			1
Cash payments		(92	)		(54	)

Balance, March 31, 2005	$	273		$	122

⁽¹⁾

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

⁽²⁾

Restructuring reserves were established by a charge to income.

National Processing, Inc.

On October 15, 2004, the Corporation acquired all outstanding shares of National Processing, Inc. (NPC) for $1.4 billion in cash. NPC is a merchant acquirer of card transactions. As a part of the preliminary purchase price allocation, the Corporation allocated $482 million to other intangible assets and $767 million to Goodwill.

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 March 31, 2005 and December 31, 2004.


*(Dollars in millions)*	March 31 2005		December 31 2004
Trading account assets
Corporate securities, trading loans and other	$	42,590	$	35,227
U.S. government and agency securities		35,530		20,462
Equity securities		19,658		19,504
Mortgage trading loans and asset-backed securities		14,518		9,625
Foreign sovereign debt		12,664		8,769

Total	$	124,960	$	93,587

Trading account liabilities
U.S. government and agency securities	$	25,980	$	14,332
Equity securities		10,988		8,952
Corporate securities and other		8,828		8,538
Foreign sovereign debt		7,597		4,793
Mortgage trading loans and asset-backed securities		41		39

Total	$	53,434	$	36,654

Note 4 - Derivatives

All derivatives are recognized on the Consolidated Balance Sheet at fair value, taking into consideration the effects of legally enforceable master netting agreements that allow the Corporation to settle positive and negative positions and offset cash collateral held with the same counterparty on a net basis. For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models or quoted prices for instruments with similar characteristics. The Corporation designates at inception whether the derivative contract is considered hedging or non-hedging for SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) accounting purposes. Non-hedging derivatives held for trading purposes, including credit default swaps used in the management of risk in the loan portfolio, are recorded as Derivative Assets or Derivative Liabilities with changes in fair value reflected in Trading Account Profits. Other non-hedging derivatives for accounting purposes that are considered economic hedges are also recorded as Derivative Assets or Derivative Liabilities with changes in fair value generally recorded in the same Income Statement caption as the related economically hedged item. A detailed discussion of derivative trading activities and the ALM process is presented in Note 4 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report.

The following table presents the contract/notional and credit risk amounts at March 31, 2005 and December 31, 2004 of the Corporation’s derivative positions held for trading and hedging purposes. These derivative positions are primarily executed in the over-the-counter market. Credit risk associated with derivatives is measured as the net replacement cost in the event the counterparties with contracts in a gain position to the Corporation completely fail to perform under the terms of those contracts. The credit risk amounts take into consideration the effects of legally enforceable master netting agreements, and on an aggregate basis have been reduced by the cash collateral applied against Derivative Assets. At March 31, 2005 and December 31, 2004, the cash collateral applied against Derivative Assets on the Consolidated Balance Sheet was $9.3 billion and $9.4 billion. In addition, at March 31, 2005 and December 31, 2004, the cash collateral placed against Derivative Liabilities was $5.6 billion and $6.0 billion.


Derivatives ⁽¹⁾

	March 31, 2005				December 31, 2004
*(Dollars in millions)*	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Interest rate contracts
Swaps	$	12,283,400	$	12,140	$	11,597,813	$	12,705
Futures and forwards		2,208,137		84		1,833,216		332
Written options		1,108,565		—		988,253		—
Purchased options		1,102,481		4,015		1,243,809		4,840
Foreign exchange contracts
Swaps		301,681		6,128		305,999		7,859
Spot, futures and forwards		1,003,750		2,087		956,995		3,593
Written options		169,130		—		167,225		—
Purchased options		176,635		632		163,243		679
Equity contracts
Swaps		32,154		807		34,130		1,039
Futures and forwards		4,936		—		4,078		—
Written options		38,241		—		37,080		—
Purchased options		35,523		5,317		32,893		5,741
Commodity contracts
Swaps		8,433		3,239		10,480		2,099
Futures and forwards		6,736		—		6,307		6
Written options		8,990		—		9,270		—
Purchased options		5,588		558		5,535		301
Credit derivatives		847,958		442		499,741		430

Credit risk before cash collateral				35,449				39,624
Less: Cash collateral applied				9,267				9,389

Total derivative assets			$	26,182			$	30,235

⁽¹⁾

Includes both long and short derivative positions.

The average fair value of Derivative Assets for the three months ended March 31, 2005 and December 31, 2004 was $27.2 billion and $28.0 billion. The average fair value of Derivative Liabilities for the three months ended March 31, 2005 and December 31, 2004 was $16.2 billion and $15.7 billion.

Fair Value and Cash Flow Hedges

The Corporation uses various types of interest rate and foreign currency exchange rate derivative contracts to protect against changes in the fair value of its fixed-rate assets and liabilities due to fluctuations in interest rates and exchange rates. The Corporation also uses these types of contracts to protect against changes in the cash flows of its variable-rate assets and liabilities, and other forecasted transactions.

For cash flow hedges, gains and losses on derivative contracts reclassified from Accumulated Other Comprehensive Income (OCI) to current period earnings are included in the line item in the Consolidated Statement of Income in which the hedged item is recorded and in the same period the hedged item affects earnings. During the next 12 months, net losses on derivative instruments included in Accumulated OCI of approximately $586 million (pre-tax) are expected to be reclassified into earnings. These net losses reclassified into earnings are expected to decrease income or increase expense on the respective hedged items.

The following table summarizes certain information related to the Corporation’s hedging activities for the three months ended March 31, 2005 and 2004:


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Fair value hedges
Hedge ineffectiveness recognized in earnings ⁽¹⁾	$	(22	)	$	2
Net gain (loss) excluded from assessment of effectiveness ⁽²⁾		6			(4	)
Cash flow hedges
Hedge ineffectiveness recognized in earnings ⁽³⁾		62			49
Net gain excluded from assessment of effectiveness		—			—
Net investment hedges
Gains (losses) included in foreign currency translation adjustments within accumulated other comprehensive income		47			(2	)

⁽¹⁾

Included $(27) million and $2 million recorded in Net Interest Income and $5 million and $0 recorded in Mortgage Banking Income in the Consolidated Statement of Income for the three months ended March 31, 2005 and 2004.

⁽²⁾

Included $0 and $(4) million recorded in Net Interest Income and $6 million and $0 recorded in Mortgage Banking Income in the Consolidated Statement of Income for the three months ended March 31, 2005 and 2004, which are related to the excluded time value of certain hedges.

⁽³⁾

Included $59 million and $49 million recorded in Mortgage Banking Income and $3 million and $0 recorded in Net Interest Income from other various cash flow hedges in the Consolidated Statement of Income for the three months ended March 31, 2005 and 2004.

Note 5 - Outstanding Loans and Leases

Outstanding loans and leases at March 31, 2005 and December 31, 2004 were:


*(Dollars in millions)*	March 31 2005		December 31 2004
Consumer
Residential mortgage	$	178,978	$	178,103
Credit card		51,012		51,726
Home equity lines		52,891		50,126
Direct/Indirect consumer		42,694		40,513
Other consumer ⁽¹⁾		7,167		7,439

Total consumer		332,742		327,907

Commercial
Commercial - domestic		124,779		122,095
Commercial real estate ⁽²⁾		33,434		32,319
Commercial lease financing		20,638		21,115
Commercial - foreign		17,873		18,401

Total commercial		196,724		193,930

Total	$	529,466	$	521,837

⁽¹⁾

Includes consumer finance of $3,288 million and $3,395 million; foreign consumer of $3,549 million and $3,563 million; and consumer lease financing of $330 million and $481 million at March 31, 2005 and December 31, 2004.

⁽²⁾

Includes domestic commercial real estate loans of $32,978 million and $31,879 million; and foreign commercial real estate loans of $456 million and $440 million at March 31, 2005 and December 31, 2004.

The following table presents the gross recorded investment in specific loans, without consideration to the specific component of the Allowance for Loan and Lease Losses, that were considered individually impaired in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” (SFAS 114) at March 31, 2005 and December 31, 2004. SFAS 114 impairment includes performing troubled debt restructurings, and excludes all commercial leases.


*(Dollars in millions)*	March 31 2005		December 31 2004
Commercial - domestic	$	812	$	868
Commercial real estate		64		87
Commercial - foreign		236		273

Total impaired loans	$	1,112	$	1,228

At March 31, 2005 and December 31, 2004, nonperforming loans and leases, including impaired loans and nonaccrual consumer loans, totaled $2.1 billion and $2.2 billion. Nonperforming securities, which are primarily related to international securities held in the AFS securities portfolio, amounted to $153 million and $140 million at March 31, 2005 and December 31, 2004. In addition, included in Other Assets were nonperforming loans held-for-sale and leveraged lease partnership interests of $76 million and $151 million at March 31, 2005 and December 31, 2004.

Note 6 - Allowance for Credit Losses

The following table summarizes the changes in the allowance for credit losses for the three months ended March 31, 2005 and 2004:


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Allowance for loan and lease losses, January 1	$	8,626		$	6,163

Loans and leases charged off		(1,158	)		(893	)
Recoveries of loans and leases previously charged off		269			173

Net charge-offs		(889	)		(720	)

Provision for loan and lease losses		588			639
Transfers ⁽¹⁾		(12	)		(2	)

Allowance for loan and lease losses, March 31		8,313			6,080

Reserve for unfunded lending commitments, January 1		402			416
Provision for unfunded lending commitments		(8	)		(15	)

Reserve for unfunded lending commitments, March 31		394			401

Total	$	8,707		$	6,481

⁽¹⁾

Includes primarily transfers to loans held-for-sale.

Note 7 - Special Purpose Financing Entities

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. The Corporation also uses other special purpose financing entities to access the commercial paper market and for other lending, leasing and real estate activities. See Notes 1 and 8 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report for additional discussion of securitizations and other special purpose financing entities.

Mortgage-related

The Corporation has retained mortgage servicing rights (MSRs) from the sale or securitization of mortgage loans. The following table presents activity in MSRs for the three months ended March 31, 2005 and 2004. For more information on the conversion of the Excess Spread Certificates (Certificates) to MSRs, see Note 1 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report.


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Balance, January 1 ⁽¹⁾	$	2,482		$	479

Additions		168			83
Amortization		(150	)		(28	)
Valuation adjustment of MSRs ⁽²⁾		168			(109	)

Balance, March 31^{(1, 3)}	$	2,668		$	425

⁽¹⁾

Includes approximately $2.0 billion of MSRs formerly accounted for as Certificates for the three months ended March 31, 2004. Initial conversion of Certificates to MSRs occurred on June 1, 2004.

⁽²⁾

Includes $150 million and $0 related to change in value attributed to SFAS 133 hedged MSRs and $18 million and $(109) million of recoveries (impairment) for the three months ended March 31, 2005 and 2004.

⁽³⁾

Net of impairment allowance of $236 million and $0 at March 31, 2005 and 2004.

The estimated fair value of MSRs was $2.7 billion and $2.5 billion at March 31, 2005 and December 31, 2004.

The key economic assumptions used in valuations of MSRs include modeled prepayment rates and resultant expected weighted average lives of the MSRs and the option adjusted spread (OAS) levels. An OAS model runs multiple interest rate scenarios and projects prepayments specific to each one of those interest rate scenarios.

For purposes of evaluating and measuring impairment, the Corporation stratifies the portfolio based on the predominant risk characteristics of loan type and note rate. Indicated impairment, by risk stratification, is recognized as a reduction in Mortgage Banking Income, through a valuation allowance, for any excess of adjusted carrying value over estimated fair value. Impairment, net of recoveries of MSRs totaled $18 million for the three months ended March 31, 2005.

Variable Interest Entities

At March 31, 2005, the assets and liabilities of the Corporation’s multi-seller asset-backed commercial paper conduits that have been consolidated in accordance with FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ABR No. 51” were reflected in AFS Securities, Other Assets, and Commercial Paper and Other Short-term Borrowings in the Global Capital Markets and Investment Banking business segment. As of March 31, 2005 and December 31, 2004, the Corporation held $7.5 billion and $7.7 billion of assets in these entities while the Corporation’s maximum loss exposure associated with these entities including unfunded lending commitments was approximately $8.7 billion and $9.4 billion. The Corporation also had contractual relationships with other consolidated VIEs that engage in leasing or lending activities or real estate joint ventures. As of March 31, 2005 and December 31, 2004, the amount of assets of these entities was $553 million and $560 million, and the Corporation’s maximum possible loss exposure was $129 million and $132 million.

Additionally, the Corporation had significant variable interests in 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 typically support the financing needs of the Corporation’s customers by facilitating their access to the commercial paper markets. The Corporation functions as administrator 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 that engage in lending, investing, or real estate activities. Total assets of these entities at March 31, 2005 and December 31, 2004 were approximately $29.4 billion and $32.9 billion; revenues associated with administration, liquidity, letters of credit and other services were approximately $75 million and $45 million for the three months ended March 31, 2005 and 2004. At March 31, 2005 and December 31, 2004, the Corporation’s maximum loss exposure associated with these VIEs was approximately $23.8 billion and $25.0 billion, which is net of amounts syndicated.

Management does not believe losses resulting from its involvement with the entities discussed above will be material. See Notes 1 and 8 of the Corporation’s 2004 Annual Report for additional discussion of special purpose financing entities.

Note 8 - Goodwill and Other Intangibles

The following table presents allocated Goodwill at March 31, 2005 and December 31, 2004 for each business segment. The increase from December 31, 2004 was primarily due to the increase in goodwill related to the acquisition of NPC.


*(Dollars in millions)*	March 31 2005		December 31 2004
Global Consumer and Small Business Banking	$	18,595	$	18,453
Global Business and Financial Services		16,707		16,707
Global Capital Markets and Investment Banking		4,500		4,500
Global Wealth and Investment Management		5,338		5,338
All Other		238		264

Total	$	45,378	$	45,262

The gross carrying value and accumulated amortization related to core deposit intangibles and other intangibles at March 31, 2005 and December 31, 2004 are presented below:


*(Dollars in millions)*	March 31, 2005				December 31, 2004
*(Dollars in millions)*	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Core deposit intangibles	$	3,668	$	1,491	$	3,668	$	1,354
Other intangibles		2,256		754		2,256		683

Total	$	5,924	$	2,245	$	5,924	$	2,037

As a result of the Merger, the Corporation recorded $2.2 billion of core deposit intangibles, $660 million of purchased credit card relationship intangibles and $409 million of other customer relationship intangibles. As of March 31, 2005, the weighted average amortization period for the core deposit intangibles as well as the other intangibles was approximately nine years. As a result of the acquisition of NPC, the Corporation preliminarily allocated $482 million to other intangibles with a weighted average amortization period of approximately 10 years as of March 31, 2005.

Amortization expense on core deposit intangibles and other intangibles was $208 million and $54 million for the three months ended March 31, 2005 and 2004. The Corporation estimates that aggregate amortization expense will be approximately $204 million, $201 million and $196 million for the second, third and fourth quarters of 2005, respectively. In addition, the Corporation estimates that aggregate amortization expense will be $740 million, $594 million, $480 million, $379 million and $305 million for 2006, 2007, 2008, 2009 and 2010, 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 Consolidated Balance Sheet. For additional information on commitments and contingencies, see Note 12 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit 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 $24.2 billion and $23.4 billion at March 31, 2005 and December 31, 2004. The carrying amount for these commitments, which represents the liability recorded related to these instruments, at March 31, 2005 and December 31, 2004 was $516 million and $520 million. At March 31, 2005, the carrying amount included deferred revenue of $122 million and a reserve for unfunded lending commitments of $394 million. At December 31, 2004, the carrying amount included deferred revenue of $118 million and a reserve for unfunded lending commitments of $402 million.

Credit card lines acquired from FleetBoston were moved to a common reporting platform in the first quarter of 2005. The unfunded lending commitments for credit card lines for prior periods have been revised to conform to current period presentation.


*(Dollars in millions)*	March 31 2005		December 31 2004
Loan commitments⁽¹⁾	$	245,849	$	247,094
Home equity lines of credit		64,811		60,128
Standby letters of credit and financial guarantees		42,002		42,850
Commercial letters of credit		4,577		5,653

Legally binding commitments		357,239		355,725
Credit card lines		171,405		165,694

Total	$	528,644	$	521,419

⁽¹⁾

Equity commitments of $1.9 billion and $2.1 billion related to obligations to fund existing equity investments were included in loan commitments at March 31, 2005 and December 31, 2004.

Other Commitments

At March 31, 2005 and December 31, 2004, charge cards (nonrevolving card lines) to individuals and government entities guaranteed by the U.S. government in the amount of $11.2 billion and $10.9 billion were not included in credit card line commitments in the previous table. The outstanding balances related to these charge cards were $224 million and $205 million.

At March 31, 2005, the Corporation had whole mortgage loan purchase commitments of $3.6 billion, all of which will settle in the second quarter of 2005. At December 31, 2004, the Corporation had whole mortgage loan purchase commitments of $3.3 billion, all of which settled in the first quarter of 2005. At March 31, 2005 there were $10.5 billion of forward sale contracts for whole mortgage loans which will settle in the second quarter of 2005. At December 31, 2004, 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 March 31, 2005 and December 31, 2004, the notional amount of these guarantees totaled $28.4 billion and $26.3 billion with estimated maturity dates between 2005 and 2035. As of March 31, 2005 and December 31, 2004, the Corporation has not made a payment under these products, and management believes that the probability of payments under these guarantees is remote.

The Corporation also sells products that guarantee the return of principal to investors at a preset future date. At March 31, 2005 and December 31, 2004, the notional amount of these guarantees totaled $7.6 billion and $8.1 billion; however, at March 31, 2005 and December 31, 2004, 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 2016.

The Corporation has also written puts on highly rated fixed income securities. Its obligation under these agreements is to buy back the assets at predetermined contractual yields in the event of a severe market disruption in the short-term funding market. These agreements have various maturities ranging from two to seven years, and the pre-determined yields are based on the quality of the assets and the structural elements pertaining to the market disruption. The notional amount of these put options was $621 million at March 31, 2005 and $653 million at December 31, 2004. Due to the high quality of the assets and various structural protections, management believes that the probability of incurring a loss under these agreements is remote.

The Corporation has entered into additional guarantee agreements, including lease end obligation agreements, partial credit guarantees on certain leases, real estate joint venture guarantees, sold risk participation swaps and sold put options that require gross settlement. The maximum potential future payment under these agreements was approximately $3.3 billion and $2.1 billion at March 31, 2005 and December 31, 2004. The estimated maturity dates of these obligations are between 2005 and 2033. The Corporation has 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 three months ended March 31, 2005 and the year ended December 31, 2004, the Corporation processed $75.8 billion and $143.1 billion of transactions and recorded losses as a result of these chargebacks of $4 million and $6 million.

At March 31, 2005 and December 31, 2004, the Corporation held as collateral approximately $276 million and $203 million 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. The Corporation 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 March 31, 2005 and December 31, 2004, the maximum potential exposure totaled approximately $92.4 billion and $93.4 billion.

Within the Corporation’s brokerage business, the Corporation has contracted with third parties to provide clearing services that include underwriting margin loans to the Corporation’s clients. These contracts stipulate that the Corporation will indemnify the third parties for any margin loan losses that occur in their issuing margin to the Corporation’s clients. The maximum potential future payment under these indemnifications was $1.2 billion at both March 31, 2005 and December 31, 2004. Historically, any payments made under these indemnifications have been immaterial. As these margin loans are highly collateralized by the securities held by the brokerage clients, the Corporation has assessed the probability of making such payments in the future as remote. These indemnifications would end with the termination of the clearing contracts.

For additional information on recourse obligations related to residential mortgage loans sold and other guarantees related to securitizations, see Note 8 of the Consolidated Financial Statements of the Corporation’s 2004 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, 2004 and the Current Reports on Form 8-K filed since December 31, 2004.

American Express

On April 14, 2005, the U.S. District Court for the Southern District of New York heard argument on the defendants’ motions to dismiss. The Court denied in part the motions, noting that several motions, including the statute of limitations defense, could be refiled after discovery. The Court also rejected American Express’ request to apply collateral estoppel principles to preclude the defendants from litigating issues American Express had claimed were resolved in the United States v. Visa USA litigation, with leave to repeat its request following discovery.

Enron Corporation

On April 11, 2005, the U.S. District Court of the Southern District of Texas held a hearing with respect to final approval to the class settlement entered into between the lead plaintiff and the Corporation. At the conclusion of the hearing, the court took the matter under advisement.

Foreign Currency

On March 9, 2005, the U.S. District Court for the Southern District of New York issued an order that narrowed the scope of the previously certified class, which had included all cardholders of the seven defendant bankcard issuers, including Bank of America, N.A. (USA) and Bank of America, N.A. The order, among other things, limited the class to Chase’s and Citibank’s cardholders. All defendants remain in the case because the class of Chase’s and Citibank’s cardholders brought claims against all defendants.

Miller

On March 4, 2005, the Superior Court of California, County of San Francisco entered judgment on the jury verdict and the claims tried to the court. The judgment awards the plaintiff class restitution in the amount of $284 million, plus attorneys’ fees. The judgment also provides that any class members whose accounts were assessed an insufficient funds fee in violation of law suffered substantial emotional or economic harm and are entitled to an additional $1,000 penalty, and includes injunctive relief, which is temporarily stayed.

Bank of America, N.A. has filed in the trial court post-judgment motions and a motion for a stay of the injunction, which motions are pending.

Mutual Fund Operations

On February 25, 2005, the Corporation and the other defendants filed motions to dismiss the claims in the pending cases.

WorldCom, Inc.

On March 16, 2005, the U.S. District Court for the Southern District of New York granted preliminary approval to the class settlement entered into on March 9, 2005 between the lead plaintiff and defendants Banc of America Securities LLC and Fleet Securities, Inc.

Note 10 - Shareholders’ Equity and Earnings Per Common Share

The following table presents the monthly share repurchase activity for the three months ended March 31, 2005 and 2004, including total common shares repurchased under announced programs, weighted average per share price and the remaining buyback authority under announced programs.


	Number of Common Shares Repurchased under Announced Programs ⁽¹⁾	Weighted Average Per Share Price ⁽¹⁾		Remaining Buyback Authority under Announced Programs ⁽²⁾

*(Dollars in millions, except per share* *information; shares in thousands)*
				Dollars		Shares
January 1-31, 2005	9,637	$	46.20	$	4,233	70,988
February 1-28, 2005	9,375		46.18		3,800	61,613
March 1-31, 2005	24,202		45.94		14,688	237,411

Three months ended March 31, 2005	43,214		46.05

	Number of Common Shares Repurchased under Announced Programs ⁽³⁾	Weighted Average Per Share Price ⁽³⁾
				Remaining Buyback Authority under Announced Programs ⁽⁴⁾
*(Dollars in millions, except per share* *information; shares in thousands)*
				Dollars		Shares
January 1-31, 2004	12,546	$	39.94	$	12,850	215,938
February 1-29, 2004	4,760		40.77		12,656	211,178
March 1-31, 2004	7,000		39.68		12,378	204,178

Three months ended March 31, 2004	24,306		40.03

⁽¹⁾

Reduced Shareholders’ Equity by $2.0 billion and had no effect on diluted earnings per common share for the three months ended March 31, 2005. These repurchases were partially offset by the issuance of approximately 32 million shares of common stock under employee plans, which increased Shareholders’ Equity by $1.0 billion, net of $0.3 billion of deferred compensation related to restricted stock awards, and had no effect on diluted earnings per common share for the three months ended March 31, 2005.

⁽²⁾

On January 28, 2004, the Board authorized a stock repurchase program of up to 180 million shares of the Corporation’s common stock at an aggregate cost not to exceed $9.0 billion and to be completed within a period of 18 months. On March 22, 2005, the Board authorized a stock repurchase program of up to 200 million shares of the Corporation’s common stock at an aggregate cost not to exceed $12.0 billion and to be completed within a period of 18 months.

⁽³⁾

Reduced Shareholders’ Equity by $1.0 billion and increased diluted earnings per common share by $0.01 for the three months ended March 31, 2004. These repurchases were partially offset by the issuance of approximately 33 million shares of common stock under employee plans, which increased Shareholders’ Equity by $0.8 billion, net of $0.2 billion of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.01 for the three months ended March 31, 2004.

⁽⁴⁾

On January 22, 2003, the Board authorized a stock repurchase program of up to 260 million shares of the Corporation’s common stock at an aggregate cost of $12.5 billion. This repurchase plan was completed during the second quarter of 2004. On January 28, 2004, the Board authorized a stock repurchase program of up to 180 million shares of the Corporation’s common stock at an aggregate cost not to exceed $9.0 billion and to be completed within a period of 18 months.

We will continue to repurchase shares, from time to time, in the open market or in private transactions through our approved repurchase plans.

The following table presents the changes in Accumulated OCI for the three months ended March 31, 2005 and 2004.


	Three Months Ended March 31
	2005									2004
*(Dollars in millions)*	Pre-tax Amount			Income Tax Expense (Benefit)			After-tax Amount			Pre-tax Amount			Income Tax Expense (Benefit)			After-tax Amount
Balance, January 1	$	(4,064	)	$	(1,477	)	$	(2,587	)	$	(3,242	)	$	(1,094	)	$	(2,148	)
Net unrealized losses ⁽¹⁾		(3,803	)		(1,419	)		(2,384	)		(317	)		(107	)		(210	)
Less: Net realized gains and amortization recorded to net income		933			345			588			584			199			385

Balance, March 31	$	(8,800	)	$	(3,241	)	$	(5,559	)	$	(4,143	)	$	(1,400	)	$	(2,743	)

⁽¹⁾

Net unrealized losses include the valuation changes of AFS debt and marketable equity securities, foreign currency translation adjustments, derivatives, and other.

The calculation of earnings per common share and diluted earnings per common share for the three months ended March 31, 2005 and 2004 is presented below.


	Three Months Ended March 31
*(Dollars in millions, except per share information; shares in thousands)*	2005			2004
Earnings per common share
Net income	$	4,695		$	2,681
Preferred stock dividends		(5	)		(1	)

Net income available to common shareholders	$	4,690		$	2,680

Average common shares issued and outstanding		4,032,550			2,880,306

Earnings per common share	$	1.16		$	0.93

Diluted earnings per common share
Net income available to common shareholders	$	4,690		$	2,680
Convertible preferred stock dividends		—			1

Net income available to common shareholders and assumed conversions	$	4,690		$	2,681

Average common shares issued and outstanding		4,032,550			2,880,306
Dilutive potential common shares ^{(1, 2)}		66,512			53,096

Total diluted average common shares issued and outstanding		4,099,062			2,933,402

Diluted earnings per common share	$	1.14		$	0.91

⁽¹⁾

For the three months ended March 31, 2005 and 2004, average options to purchase 27 million and 40 million shares 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.

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 15 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report.

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 in Note 15 of the Consolidated Financial Statements of the Corporation’s 2004 Annual Report, however, the FleetBoston Financial Pension Plan does not allow participants to select various earnings measures, rather the earnings rate is based on a benchmark rate. The table within this Note includes the information related to these plans beginning on April 1, 2004.

Net periodic benefit cost of the Corporation’s plans for the three months ended March 31, 2005 and 2004 included the following components:


	Three Months Ended March 31
	Qualified Pension Plans						Nonqualified Pension Plans					Postretirement Health and Life Plans
*(Dollars in millions)*	2005			2004			2005			2004		2005			2004
Components of net periodic benefit cost
Service cost	$	77		$	54		$	3		$	7	$	3		$	3
Interest cost		165			130			16			11		19			17
Expected return on plan assets		(248	)		(190	)		—			—		(4	)		(3	)
Amortization of transition obligation (asset)		12			—			(2	)		—		—			8
Amortization of prior service cost		—			14			—			1		8			—
Recognized net actuarial loss		38			20			5			5		17			22
Recognized loss due to settlements and curtailments		—			—			9			—		—			—

Net periodic benefit cost	$	44		$	28		$	31		$	24	$	43		$	47

The Corporation previously disclosed that its best estimate of its contributions to be made to the Qualified Pension Plans, Nonqualified Pension Plans, and the Postretirement Health and Life Plans in 2005 is $0, $114 million and $37 million, respectively. At March 31, 2005, this estimate has not changed. For the three months ended March 31, 2005, the Corporation had contributed $0, $66 million and $9 million, respectively, to these plans.

Note 12 - Business Segment Information

The Corporation reports the results of its operations through four business segments: Global Consumer and Small Business Banking, Global Business and Financial Services, Global Capital Markets and Investment Banking, and Global 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.

Global Consumer and Small Business Banking provides a diversified range of products and services to individuals and small businesses through multiple delivery channels. Global Business and Financial Services primarily provides commercial lending and treasury management services to middle-market companies. During the first quarter of 2005, Latin America was realigned and is now included in the results of Global Business and Financial Services, rather than All Other. Latin America includes the Corporation’s full-service Latin American operations in Brazil, Argentina, Chile and Uruguay. Also during the first quarter of 2005, Business Banking was realigned and included in the results of Global Business and Financial Services, rather than Global Consumer and Small Business Banking. Business Banking serves our client-managed small business customers. Global Capital Markets and Investment Banking provides capital-raising solutions, advisory services, derivatives capabilities, equity and debt sales and trading for the Corporation’s clients as well as traditional bank deposit and loan products, treasury management and payment services to large corporations and institutional clients. Global 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, and securities and financial planning services to affluent and high-net-worth individuals.

All Other consists primarily of Equity Investments, Noninterest Income and Expense amounts associated with the ALM process (including Gains on Sales of Debt Securities), the allowance for credit losses process residual, the residual impact of allocation methodologies, Merger and Restructuring Charges, intersegment eliminations, and the results of certain consumer finance and commercial lending businesses that are being liquidated.

Total Revenue includes Net Interest Income on a fully taxable-equivalent basis and Noninterest Income. The adjustment of Net Interest Income to a fully taxable-equivalent basis results in a corresponding increase in Income Tax Expense. 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 of the business segments also includes an allocation of Net Interest Income generated by assets and liabilities used in the Corporation’s ALM process.

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 costs, item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The cost of certain centralized or shared functions are allocated based on methodologies which reflect utilization.

The following table presents Total Revenue on a fully taxable-equivalent (FTE) basis and Net Income for the three months ended March 31, 2005 and 2004 for each business segment, as well as All Other.

Business Segments

For the three months ended March 31


	Total Corporation						Global Consumer and Small Business Banking ⁽¹⁾
*(Dollars in millions)*	2005			2004			2005			2004
Net interest income (fully taxable-equivalent basis)	$	8,072		$	5,970		$	4,251		$	3,094
Noninterest income		6,149			3,730			2,710			1,630

Total revenue		14,221			9,700			6,961			4,724
Provision for credit losses		580			624			714			429

Gains (losses) on sales of debt securities		659			495			(1	)		1

Amortization of intangibles		208			54			142			35
Other noninterest expense		6,849			5,376			3,167			2,566

Income before income taxes		7,243			4,141			2,937			1,695
Income tax expense		2,548			1,460			1,038			625

Net income	$	4,695		$	2,681		$	1,899		$	1,070

Average total assets	$	1,200,883		$	833,192		$	332,773		$	234,539


	Global Business and Financial Services ⁽¹⁾						Global Capital Markets and Investment Banking ⁽¹⁾
*(Dollars in millions)*	2005			2004			2005			2004
Net interest income (fully taxable-equivalent basis)	$	1,915		$	1,138		$	939		$	1,030
Noninterest income		819			431			1,693			1,143

Total revenue		2,734			1,569			2,632			2,173
Provision for credit losses		(57	)		91			(97	)		(99	)

Gains (losses) on sales of debt securities		1			—			30			(7	)

Amortization of intangibles		34			7			12			6
Other noninterest expense		963			561			1,635			1,556

Income before income taxes		1,795			910			1,112			703
Income tax expense		675			328			391			250

Net income	$	1,120		$	582		$	721		$	453

Average total assets	$	211,601		$	121,598		$	372,826		$	301,375


	Global Wealth and Investment Management ⁽¹⁾						All Other
*(Dollars in millions)*	2005			2004			2005			2004
Net interest income (fully taxable-equivalent basis)	$	941		$	600		$	26		$	108
Noninterest income		853			501			74			25

Total revenue		1,794			1,101			100			133
Provision for credit losses		2			(9	)		18			212

Gains on sales of debt securities		—			—			629			501

Amortization of intangibles		19			5			1			1
Other noninterest expense		883			716			201			(23	)

Income before income taxes		890			389			509			444
Income tax expense		314			143			130			114

Net income	$	576		$	246		$	379		$	330

Average total assets	$	123,867		$	69,889		$	159,816		$	105,791

⁽¹⁾

There were no material intersegment revenues among the segments.

The following table presents reconciliations of the four business segments’ Total Revenue on a FTE basis and Net Income to consolidated totals. The adjustments presented in the table below include consolidated income and expense amounts not specifically allocated to individual business segments.


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Segments’ revenue	$	14,121		$	9,567
Adjustments:
Revenue associated with unassigned capital		83			121
ALM activities		11			3
Equity investments		184			(20	)
Liquidating businesses		57			84
Fully taxable-equivalent basis adjustment		(199	)		(169	)
Other		(235	)		(55	)

Consolidated revenue	$	14,022		$	9,531

Segments’ net income	$	4,316		$	2,351
Adjustments, net of taxes:
Earnings associated with unassigned capital		55			82
ALM activities ⁽¹⁾		383			289
Equity investments		98			(29	)
Liquidating businesses		19			(31	)
Merger and restructuring charges		(75	)		—
Other		(101	)		19

Consolidated net income	$	4,695		$	2,681

⁽¹⁾

Includes pre-tax Gains on Sales of Debt Securities of $627 million and $498 million for the three months ended March 31, 2005 and 2004.

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 Form 10-Q of Bank of America Corporation and its subsidiaries (the Corporation) 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 2004 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 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, the District of Columbia and 43 foreign countries. The Corporation provides a diversified range of banking and nonbanking financial services and products both domestically and internationally through four business segments: Global Consumer and Small Business Banking, Global Business and Financial Services, Global Capital Markets and Investment Banking, and Global Wealth and Investment Management.

At March 31, 2005, the Corporation had $1.2 trillion in assets and approximately 175,000 full-time equivalent employees. Notes to 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. Certain prior period amounts have been reclassified to conform to current period presentation.

On April 1, 2004, we completed our merger with FleetBoston Financial Corporation (FleetBoston) (the Merger) after obtaining final shareholder and regulatory approvals. The Merger was accounted for under the purchase method of accounting. Accordingly, results for the three months ended March 31, 2004 exclude FleetBoston.

On October 15, 2004, we acquired 100 percent of National Processing, Inc. (NPC), for $1.4 billion in cash, creating the second largest merchant processor in the United States.

Performance Overview

Net Income totaled $4.7 billion, or $1.14 per diluted common share, for the three months ended March 31, 2005, 75 percent and 25 percent increases from $2.7 billion, or $0.91 per diluted common share, for the three months ended March 31, 2004.

Business Segment Total Revenue and Net Income


	Total Revenue						Net Income
	Three Months Ended March 31
*(Dollars in millions)*	2005			2004			2005		2004
Global Consumer and Small Business Banking	$	6,961		$	4,724		$	1,899	$	1,070
Global Business and Financial Services		2,734			1,569			1,120		582
Global Capital Markets and Investment Banking		2,632			2,173			721		453
Global Wealth and Investment Management		1,794			1,101			576		246
All Other		100			133			379		330

Total FTE basis ⁽¹⁾		14,221			9,700			4,695		2,681
FTE adjustment ⁽¹⁾		(199	)		(169	)		—		—

Total	$	14,022		$	9,531		$	4,695	$	2,681

⁽¹⁾

Total revenue for the segments and All Other is on a fully taxable-equivalent (FTE) basis. For more information on a FTE basis, see Supplemental Financial Data beginning on page 32.

Global Consumer and Small Business Banking

Net Income increased $829 million, or 77 percent, to $1.9 billion for the three months ended March 31, 2005 compared to the same period in 2004. Driving this increase was the $1.2 billion increase in Net Interest Income, a $477 million increase in Card Income and a $233 million increase in Service Charges. Partially offsetting this was a $708 million increase in Noninterest Expense and a $285 million increase in Provision for Credit Losses. The increase in Provision for Credit Losses to $714 million from $429 million was primarily driven by higher credit card net charge-offs of $297 million, of which $139 million was attributed to the addition of the FleetBoston credit card portfolio. For more information on Global Consumer and Small Business Banking, see page 37.

Global Business and Financial Services

Net Income increased $538 million, or 92 percent, to $1.1 billion for the three months ended March 31, 2005 compared to the same period in 2004. Average Loans and Leases increased $62.3 billion, or 57 percent, and average Deposits increased $43.4 billion, or 70 percent. The increase in Loans and Leases was primarily due to the addition of FleetBoston and organic loan growth in Business Banking, Middle Market Banking and Commercial Real Estate. Deposit balance growth resulted from the addition of FleetBoston. Also driving the improved results was a $148 million decrease in Provision for Credit Losses, resulting primarily from actions taken (including loan sales) to reduce certain portfolio exposures. For more information on Global Business and Financial Services, see page 44.

Global Capital Markets and Investment Banking

Net Income increased $268 million, or 59 percent, to $721 million for the three months ended March 31, 2005 compared to the same period in 2004. The increase in Net Income was driven by higher Trading Account Profits of $437 million and increased Equity Investment Gains of $108 million. These increases were offset by a decrease in Investment Banking Income of $31 million primarily due to a decline in securities underwriting. Also impacting Net Income was a decline in Net Interest Income of $91 million as a result of a flattening yield curve, and higher Noninterest expense of $85 million. For more information on Global Capital Markets and Investment Banking, see page 46.

Global Wealth and Investment Management

Net Income increased $330 million, or 134 percent, to $576 million for the three months ended March 31, 2005 compared to the same period in 2004. Contributing to the increase in Net Income was an increase of $341 million in Net Interest Income and higher Investment and Brokerage Services income of $328 million. Partially offsetting these increases were higher Personnel costs of $167 million related to the addition of client managers and increased incentives. Total assets under management decreased $18.1 billion, or 4 percent, to $433.4 billion at March 31, 2005 compared to December 31, 2004, driven by a $9.8 billion decrease due to market valuations, $4.0 billion in net outflows consisting primarily of outflows in short-term money market funds and fixed income offset by inflows in equity products, and a $4.3 billion adjustment to reclassify assets to assets in custody. For more information on Global Wealth and Investment Management, see page 49.

All Other

Net Income increased $49 million, or 15 percent, to $379 million for the three months ended March 31, 2005 compared to the same period in 2004. This increase was driven by a decrease in Provision for Credit Losses of $194 million and a $128 million increase in Gains on Sales of Debt Securities. Partially offsetting these increases was a $224 million increase in Noninterest Expense, driven by $112 million of Merger and Restructuring Charges. For more information on All Other, see page 51.

Financial Highlights

Net Interest Income

Net Interest Income on a FTE basis increased $2.1 billion to $8.1 billion for the three months ended March 31, 2005 compared to the same period in 2004. This increase was driven by the impact of the Merger, growth in consumer loan levels (primarily credit card and home equity), higher core deposit funding levels, higher asset and liability management (ALM) portfolio levels (primarily consisting of securities) net of the impact of spread compression, and growth in middle-market business loan levels. Partially offsetting these increases were lower trading-related contributions and reductions in foreign loan balances. The net interest yield on a FTE basis declined 15 basis points (bps) to 3.11 percent primarily due to the negative impact of increased trading-related balances (which have a lower yield than other earning assets), ALM portfolio repositioning, including the impact of spread compression, partially offset by the addition of FleetBoston and growth in core deposit and consumer loan levels. For more information on Net Interest Income on a FTE basis, see Table 4 on page 35.

Noninterest Income

Noninterest Income


	Three Months Ended March 31
*(Dollars in millions)*	2005		2004
Service charges	$	1,777	$	1,416
Investment and brokerage services		1,013		635
Mortgage banking income		221		209
Investment banking income		366		404
Equity investment gains		399		133
Card income		1,289		795
Trading account profits		760		3
Other income		324		135

Total noninterest income	$	6,149	$	3,730

Noninterest Income increased $2.4 billion to $6.1 billion for the three months ended March 31, 2005 compared to the same period in 2004, due primarily to the addition of FleetBoston and organic growth.

•

Service Charges grew $361 million driven by approximately $316 million from the addition of FleetBoston customers and organic account growth.

•

Investment and Brokerage Services increased $378 million due to approximately $349 million related to the addition of FleetBoston and asset allocation changes with weighting increases in equities and fixed income and a weighting decrease in money market products.

•

Mortgage Banking Income increased $12 million as a result of increased servicing income and a $5 million impact from the Merger.

•

Investment Banking Income declined $38 million and included a $63 million decline in securities underwriting partially offset by a $30 million increase in syndications.

•

Equity Investment Gains increased $266 million due to a $228 million increase in Principal Investing, which was the result of increased liquidity in the private equity markets.

•

Card Income increased $494 million due to increased fees and interchange income, including the $242 million impact from the addition of the FleetBoston card portfolio.

•

Trading Account Profits increased $757 million due to increased customer activity, more active portfolio management in our market-making books and wider spreads on credit default swaps. The first quarter of 2004 included mortgage-related trading losses and losses on our equity business from a retained stock position.

•

Other Income increased $189 million as a result of the Merger and early leasing terminations.

For more information on Noninterest Income, see Business Segment Operations beginning on page 37.

Gains on Sales of Debt Securities

Gains on Sales of Debt Securities for the three months ended March 31, 2005 were $659 million compared to $495 million for the same period in 2004, as we continued to reposition the ALM portfolio in response to interest rate fluctuations and to manage mortgage prepayment risk. For more information on Gains on Sales of Debt Securities, see Market Risk Management beginning on page 74.

Provision for Credit Losses

The Provision for Credit Losses decreased $44 million to $580 million for the three months ended March 31, 2005 compared to the same period in 2004. This decline was driven by lower commercial net charge-offs of $135 million and continued improvements in credit quality in the commercial loan portfolio. Partially offsetting this decrease was an increase in the Provision for Credit Losses in our consumer credit card portfolio primarily driven by higher credit card net charge-offs of $297 million, of which $139 million was attributed to the addition of the

FleetBoston credit card portfolio. Organic credit card portfolio growth, continued seasoning of credit card accounts, the return of previously securitized loans to the balance sheet in 2004, as well as increases effective in 2004 in credit card minimum payment requirements drove higher net charge-offs. The increased net charge-offs associated with the increase in required credit card minimum payments did not impact the Provision for Credit Losses in the first quarter of 2005 as those net charge-offs were provided for in late 2004. For more information on credit quality, see Credit Risk Management beginning on page 58.

Noninterest Expense

Noninterest Expense


	Three Months Ended March 31
*(Dollars in millions)*	2005		2004
Personnel	$	3,701	$	2,752
Occupancy		636		488
Equipment		297		261
Marketing		337		281
Professional fees		177		160
Amortization of intangibles		208		54
Data processing		364		284
Telecommunications		206		151
Other general operating		1,019		999
Merger and restructuring charges		112		—

Total noninterest expense	$	7,057	$	5,430

Noninterest Expense increased $1.6 billion to $7.1 billion for the three months ended March 31, 2005 compared to the same period in 2004, primarily due to the addition of FleetBoston.

•

Personnel Expense increased $949 million primarily due to the $698 million impact of FleetBoston associates.

•

Occupancy Expense increased $148 million due to the $142 million impact of the Merger.

•

Amortization of Intangibles increased $154 million driven by the amortization of intangible assets acquired in the Merger.

•

Merger and Restructuring Charges were $112 million 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.

For more information on Noninterest Expense, see Business Segment Operations beginning on page 37.

Income Tax Expense

Income Tax Expense was $2.3 billion, reflecting an effective tax rate of 33.4 percent, for the three months ended March 31, 2005 compared to $1.3 billion and 32.5 percent for the three months ended March 31, 2004. The difference in the effective tax rate between years resulted primarily from the application of purchase accounting to certain leveraged leases acquired in the Merger, an increase in state tax expense generally related to higher tax rates in the Northeast, as well as a higher level of pre-tax income.

Assets

Average Loans and Leases increased $9.5 billion, or two percent, for the three months ended March 31, 2005 compared to the three months ended December 31, 2004. Average Securities increased $33.4 billion, or 20 percent, as a result of repositioning our ALM portfolio and investing excess cash from deposit growth. Additionally, for the three months ended March 31, 2005 compared to the three months ended December 31, 2004, average trading-related assets increased $11.5 billion, or five percent, as we expanded our trading book to accommodate the needs of our clients. For more information, see Table 4 on page 35.

Liabilities and Shareholders’ Equity

Average core deposits increased $9.3 billion, or two percent for the three months ended March 31, 2005 compared to the three months ended December 31, 2004. The increase was attributable to organic growth which resulted from our continued improvements in customer satisfaction, new product offerings and our account growth efforts. At March 31, 2005, our Tier 1 Capital ratio was 8.20 percent, compared to 8.10 percent at December 31, 2004. For more information, see Table 4 on page 35 and Capital Management beginning on page 56.

Table 1

Selected Quarterly Financial Data


	2005 Quarter			2004 Quarters
*(Dollars in millions, except per share information)*	First			Fourth			Third			Second			First
Income statement
Net interest income	$	7,873		$	7,747		$	7,665		$	7,581		$	5,801
Noninterest income		6,149			5,966			4,922			5,467			3,730
Total revenue		14,022			13,713			12,587			13,048			9,531
Provision for credit losses		580			706			650			789			624
Gains on sales of debt securities		659			101			732			795			495
Noninterest expense		7,057			7,333			7,021			7,228			5,430
Income before income taxes		7,044			5,775			5,648			5,826			3,972
Income tax expense		2,349			1,926			1,884			1,977			1,291
Net income		4,695			3,849			3,764			3,849			2,681
Average common shares issued and outstanding (in thousands)		4,032,550			4,032,979			4,052,304			4,062,384			2,880,306
Average diluted common shares issued and outstanding (in thousands)		4,099,062			4,106,040			4,121,375			4,131,290			2,933,402

Performance ratios
Return on average assets		1.59	%		1.33	%		1.37	%		1.41	%		1.29	%
Return on average common shareholders’ equity		19.30			15.63			15.56			16.63			22.16
Total equity to total assets (period end)		8.13			8.97			9.14			9.35			6.10
Total average equity to total average assets		8.23			8.51			8.79			8.52			5.84
Dividend payout		39.02			47.45			48.75			42.60			43.21

Per common share data
Earnings	$	1.16		$	0.95		$	0.93		$	0.95		$	0.93
Diluted earnings		1.14			0.94			0.91			0.93			0.91
Dividends paid		0.45			0.45			0.45			0.40			0.40
Book value		24.35			24.56			24.14			23.51			16.85

Average balance sheet
Total loans and leases	$	524,944		$	515,463		$	503,078		$	497,158		$	374,077
Total assets		1,200,883			1,152,551			1,096,683			1,094,459			833,192
Total deposits		627,419			609,936			587,878			582,305			425,075
Long-term debt		97,126			99,588			98,361			96,395			78,852
Common shareholders’ equity		98,542			97,828			96,120			92,943			48,632
Total shareholders’ equity		98,814			98,100			96,392			93,266			48,686

Capital ratios
Risk-based capital:
Tier 1		8.20	%		8.10	%		8.08	%		8.20	%		7.73	%
Total		11.46			11.63			11.71			11.97			11.46
Leverage		5.82			5.82			5.92			5.83			5.43

Market price per share of common stock
Closing	$	44.10		$	46.99		$	43.33		$	42.31		$	40.49
High closing		47.08			47.44			44.98			42.72			41.38
Low closing		43.66			43.62			41.81			38.96			39.15

Supplemental Financial Data

Table 2 provides a reconciliation of the supplemental financial data mentioned below with GAAP financial measures. Other companies may define or calculate supplemental financial data differently.

Operating Basis Presentation

In managing our business, we may at times look at performance excluding certain non-recurring items. For example, as an alternative to Net Income, we view results on an operating basis, which represents Net Income excluding Merger and Restructuring Charges. The operating basis of presentation is not defined by accounting principles generally accepted in the United States (GAAP). We believe that the exclusion of Merger and Restructuring Charges, which represent events outside our normal operations, provides a meaningful period-to-period comparison and is more reflective of normalized operations.

Net Interest Income - FTE Basis

In addition, we view Net Interest Income and related ratios and analysis (i.e. efficiency ratio, net interest yield and operating leverage) on a FTE basis. Although this is a non-GAAP measure, we believe managing the business with Net Interest Income on a FTE basis provides a more accurate picture of the interest margin for comparative purposes. To derive the FTE basis, Net Interest Income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis with a corresponding increase in Income Tax Expense. 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.

Performance Measures

As mentioned above, certain performance measures including the efficiency ratio, net interest yield, and operating leverage utilize Net Interest Income (and thus Total Revenue) on a FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield evaluates how many basis points we are earning over the cost of funds. Operating leverage measures the total percentage revenue growth minus the total percentage expense growth for the corresponding period. During our annual integrated plan process, we set operating leverage and efficiency targets for the Corporation and each line of business. Targets vary by year and by business and are based on a variety of factors, including: maturity of the business, investment appetite, competitive environment, market factors, and other items (i.e. risk appetite). The aforementioned performance measures and ratios, earnings per common share (EPS), return on average assets, return on average common shareholders’ equity and dividend payout ratio, as well as those measures discussed more fully below are presented in Table 2, Supplemental Financial Data and Reconciliations to GAAP Financial Measures.

Return on Average Equity and Shareholder Value Added

We also evaluate our business based upon return on average equity (ROE) and shareholder value added (SVA) measures. ROE and SVA, both utilize non-GAAP allocation methodologies. ROE measures the earnings contribution of a unit as a percentage of the Shareholders’ Equity allocated to that unit. SVA is defined as cash basis earnings on an operating basis less a charge for the use of capital. For more information, see Basis of Presentation beginning on page 37. Both measures are used to evaluate the Corporation’s use of equity (i.e. capital) at the individual unit level and are integral components in the analytics for resource allocation. Using SVA as a performance measure places specific focus on whether incremental investments generate returns in excess of the costs of capital associated with those investments. Investments and initiatives are analyzed using SVA during the annual planning process for maximizing allocation of corporate resources. In addition, profitability, relationship and investment models all use ROE and SVA as key measures to support our overall growth goal.

Table 2

Supplemental Financial Data and Reconciliations to GAAP Financial Measures


	Three Months Ended March 31
*(Dollars in millions, except per share information)*	2005			2004
Operating basis ⁽¹⁾
Operating earnings	$	4,770		$	2,681
Operating earnings per common share		1.18			0.93
Diluted operating earnings per common share		1.16			0.91
Shareholder value added		2,305			1,405
Return on average assets		1.61	%		1.29	%
Return on average common shareholders’ equity		19.61			22.16
Efficiency ratio (fully taxable-equivalent basis)		48.83			55.98
Dividend payout ratio		38.41			43.21

Fully taxable-equivalent basis data
Net interest income	$	8,072		$	5,970
Total revenue		14,221			9,700
Net interest yield		3.11	%		3.26	%
Efficiency ratio		49.62			55.98

Reconciliation of net income to operating earnings
Net income	$	4,695		$	2,681
Merger and restructuring charges		112			—
Related income tax benefit		(37	)		—

Operating earnings	$	4,770		$	2,681

Reconciliation of EPS to operating EPS
Earnings per common share	$	1.16		$	0.93
Effect of merger and restructuring charges, net of tax benefit		0.02			—

Operating earnings per common share	$	1.18		$	0.93

Reconciliation of diluted EPS to diluted operating EPS
Diluted earnings per common share	$	1.14		$	0.91
Effect of merger and restructuring charges, net of tax benefit		0.02			—

Diluted operating earnings per common share	$	1.16		$	0.91

Reconciliation of net income to shareholder value added
Net income	$	4,695		$	2,681
Amortization of intangibles		208			54
Merger and restructuring charges, net of tax benefit		75			—

Cash basis earnings on an operating basis		4,978			2,735
Capital charge		(2,673	)		(1,330	)

Shareholder value added	$	2,305		$	1,405

Reconciliation of return on average assets to operating return on average assets
Return on average assets		1.59	%		1.29	%
Effect of merger and restructuring charges, net of tax benefit		0.02			—

Operating return on average assets		1.61	%		1.29	%

Reconciliation of return on average common shareholders’ equity to operating return on average common shareholders’ equity
Return on average common shareholders’ equity		19.30	%		22.16	%
Effect of merger and restructuring charges, net of tax benefit		0.31			—

Operating return on average common shareholders’ equity		19.61	%		22.16	%

Reconciliation of efficiency ratio to operating efficiency ratio (fully taxable-equivalent basis)
Efficiency ratio		49.62	%		55.98	%
Effect of merger and restructuring charges, net of tax benefit		(0.79	)		—

Operating efficiency ratio		48.83	%		55.98	%

Reconciliation of dividend payout ratio to operating dividend payout ratio
Dividend payout ratio		39.02	%		43.21	%
Effect of merger and restructuring charges, net of tax benefit		(0.61	)		—

Operating dividend payout ratio		38.41	%		43.21	%

⁽¹⁾

Operating basis excludes Merger and Restructuring Charges. Merger and Restructuring Charges were $112 million for the three months ended March 31, 2005.

Core Net Interest Income

In managing our business, we review core net interest income, which adjusts reported Net Interest Income on a FTE basis for the impact of trading-related activities and revolving securitizations. As discussed in the Global Capital Markets and Investment Banking business segment section beginning on page 46, we evaluate our trading results and strategies based on total trading-related revenue, calculated by combining trading-related Net Interest Income with Trading Account Profits. We also adjust for loans that we originated and sold into revolving credit card, home equity line and commercial loan securitizations. Noninterest Income, rather than Net Interest Income and Provision for Credit Losses, is recorded for assets that have been securitized as we are compensated for servicing the securitized assets and record servicing income and gains or losses on securitizations, where appropriate. An analysis of core net interest income, earning assets and yields, which adjusts for the impact of these two non-core items from reported Net Interest Income on a FTE basis, is shown below.

Table 3

Core Net Interest Income


	Three Months Ended March 31
*(Dollars in millions)*	2005			2004
Net interest income
As reported (fully taxable-equivalent basis)	$	8,072		$	5,970
Trading-related net interest income		(422	)		(577	)
Impact of revolving securitizations		255			38

Core net interest income	$	7,905		$	5,431

Average earning assets
As reported	$	1,044,914		$	734,808
Trading-related earning assets		(264,472	)		(209,958	)
Impact of revolving securitizations		10,791			1,553

Core average earning assets	$	791,233		$	526,403

Net interest yield on earning assets
As reported (fully taxable-equivalent basis)		3.11	%		3.26	%
Impact of trading-related activities		0.84			0.86
Impact of revolving securitizations		0.07			0.01

Core net interest yield on earning assets		4.02	%		4.13	%

Core net interest income increased $2.5 billion for the three months ended March 31, 2005. Approximately half of the increase was due to the Merger. Other activities within the portfolio affecting core net interest income include consumer and middle market loan growth, higher domestic deposit funding levels, ALM activity net of the impact of spread compression, partially offset by a lower trading-related contribution and net decreases in large corporate, foreign, and exited businesses.

Core average earning assets increased $264.8 billion primarily due to higher ALM levels, (primarily securities and mortgages) and higher levels of consumer loans (primarily credit card loans and home equity lines). The increases in these assets were due to both the Merger and organic growth. The increase in revolving securitizations primarily reflects the impact of the Merger, as balances related to FleetBoston represented an increase of $10.3 billion and balances related to Bank of America declined $1.1 billion.

The core net interest yield decreased 11 bps due to the impact of ALM portfolio repositioning, including the impact of spread compression, partially offset by higher levels of core deposits and consumer loans.

Table 4

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


	First Quarter 2005						Fourth Quarter 2004
*(Dollars in millions)*	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Time deposits placed and other short-term investments	$	14,327	$	101	2.87	%	$	15,620	$	128	3.24	%
Federal funds sold and securities purchased under agreements to resell		147,855		893	2.43			149,226		712	1.90
Trading account assets		117,748		1,203	4.10			110,585		1,067	3.85
Securities		204,574		2,561	5.01			171,173		2,083	4.87
Loans and leases ⁽¹⁾:
Residential mortgage		178,098		2,412	5.43			178,879		2,459	5.49
Credit card		51,310		1,373	10.85			49,366		1,351	10.88
Home equity lines		51,477		692	5.45			48,336		609	5.01
Direct/Indirect consumer		41,620		573	5.58			39,526		551	5.55
Other consumer ⁽²⁾		7,305		158	8.75			7,557		153	8.07

Total consumer		329,810		5,208	6.37			323,664		5,123	6.31

Commercial - domestic		123,803		1,983	6.49			121,412		1,914	6.27
Commercial real estate		33,016		430	5.29			31,355		392	4.98
Commercial lease financing		20,745		260	5.01			20,204		254	5.01
Commercial - foreign		17,570		258	5.96			18,828		272	5.76

Total commercial		195,134		2,931	6.08			191,799		2,832	5.88

Total loans and leases		524,944		8,139	6.27			515,463		7,955	6.15

Other earning assets		35,466		455	5.19			35,937		457	5.08

Total earning assets ⁽³⁾		1,044,914		13,352	5.15			998,004		12,402	4.96

Cash and cash equivalents		31,382						31,028
Other assets, less allowance for loan and lease losses		124,587						123,519

Total assets	$	1,200,883					$	1,152,551

Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings	$	37,000	$	35	0.39	%	$	36,927	$	36	0.39	%
NOW and money market deposit accounts		233,392		651	1.13			234,596		589	1.00
Consumer CDs and IRAs		118,989		769	2.62			109,243		711	2.59
Negotiable CDs, public funds and other time deposits		10,291		96	3.73			7,563		81	4.27

Total domestic interest-bearing deposits		399,672		1,551	1.57			388,329		1,417	1.45

Foreign interest-bearing deposits ⁽⁴⁾:
Banks located in foreign countries		22,084		316	5.81			17,953		275	6.11
Governments and official institutions		6,831		43	2.58			5,843		33	2.21
Time, savings and other		30,770		133	1.75			30,459		104	1.36

Total foreign interest-bearing deposits		59,685		492	3.35			54,255		412	3.02

Total interest-bearing deposits		459,357		2,043	1.80			442,584		1,829	1.64

Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings		276,483		1,969	2.89			252,384		1,543	2.43
Trading account liabilities		44,507		427	3.89			37,387		352	3.74
Long-term debt		97,126		841	3.46			99,588		724	2.91

Total interest-bearing liabilities ⁽³⁾		877,473		5,280	2.43			831,943		4,448	2.13

Noninterest-bearing sources:
Noninterest-bearing deposits		168,062						167,352
Other liabilities		56,534						55,156
Shareholders’ equity		98,814						98,100

Total liabilities and shareholders’ equity	$	1,200,883					$	1,152,551

Net interest spread					2.72						2.83
Impact of noninterest-bearing sources					0.39						0.35

Net interest income/yield on earning assets			$	8,072	3.11	%			$	7,954	3.18	%

⁽¹⁾

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

⁽²⁾

Includes consumer finance of $3,362 million in the first quarter of 2005 and $3,473 million, $3,644 million, $3,828 million and $3,999 million in the fourth, third, second and first quarters of 2004, respectively; foreign consumer of $3,532 million in the first quarter of 2005 and $3,523 million, $3,304 million, $3,256 million and $1,989 million in the fourth, third, second and first quarters of 2004, respectively; and consumer lease financing of $411 million in the first quarter of 2005 and $561 million, $745 million, $1,058 million and $1,491 million in the fourth, third, second and first quarters of 2004, respectively.

⁽³⁾

Interest income includes the impact of interest rate risk management contracts, which increased interest income on the underlying assets $437 million in first quarter of 2005 and $496 million, $531 million, $658 million and $715 million in the fourth, third, second and first quarters of 2004, respectively. These amounts were substantially offset by corresponding decreases in the income earned on the underlying assets. Interest expense includes the impact of interest rate risk management contracts, which increased interest expense on the underlying liabilities $175 million in the first quarter of 2005 and $155 million, $217 million, $333 million and $183 million in the fourth, third, second and first quarters of 2004, respectively. These amounts were substantially offset by corresponding decreases in the interest paid on the underlying liabilities. For further information on interest rate contracts, see “Interest Rate Risk Management” beginning on page 77.

⁽⁴⁾

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


	Third Quarter 2004						Second Quarter 2004						First Quarter 2004
*(Dollars in millions)*	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Time deposits placed and other short-term investments	$	14,726	$	127	3.45	%	$	14,384	$	59	1.65	%	$	12,268	$	48	1.57	%
Federal funds sold and securities purchased under agreements to resell		128,339		484	1.50			124,383		413	1.33			113,761		434	1.53
Trading account assets		98,459		975	3.96			104,391		1,025	3.94			105,033		1,025	3.91
Securities		169,515		2,095	4.94			159,797		1,925	4.82			99,755		1,223	4.91
Loans and leases ⁽¹⁾:
Residential mortgage		175,046		2,371	5.41			173,158		2,284	5.29			141,898		1,960	5.53
Credit card		45,818		1,265	10.98			43,160		1,167	10.88			35,303		870	9.92
Home equity lines		44,309		514	4.62			40,424		450	4.48			24,379		262	4.31
Direct/Indirect consumer		38,951		538	5.49			39,763		540	5.44			34,045		464	5.49
Other consumer ⁽²⁾		7,693		152	7.91			8,142		169	8.32			7,479		120	6.42

Total consumer		311,817		4,840	6.19			304,647		4,610	6.07			243,104		3,676	6.07

Commercial - domestic		122,093		1,855	6.04			123,970		1,843	5.98			90,946		1,511	6.68
Commercial real estate		30,792		344	4.44			30,311		317	4.20			19,815		210	4.26
Commercial lease financing		20,125		233	4.64			20,086		237	4.72			9,459		95	4.00
Commercial - foreign		18,251		245	5.34			18,144		237	5.24			10,753		95	3.57

Total commercial		191,261		2,677	5.57			192,511		2,634	5.50			130,973		1,911	5.87

Total loans and leases		503,078		7,517	5.95			497,158		7,244	5.85			374,077		5,587	6.00

Other earning assets		34,266		460	5.33			38,407		494	5.17			29,914		404	5.42

Total earning assets ⁽³⁾		948,383		11,658	4.90			938,520		11,160	4.77			734,808		8,721	4.76

Cash and cash equivalents		29,469						30,320						23,187
Other assets, less allowance for loan and lease losses		118,831						125,619						75,197

Total assets	$	1,096,683					$	1,094,459					$	833,192

Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings	$	36,823	$	35	0.38	%	$	35,864	$	31	0.34	%	$	26,159	$	17	0.27	%
NOW and money market deposit accounts		233,602		523	0.89			233,702		488	0.84			155,835		321	0.83
Consumer CDs and IRAs		101,250		668	2.63			93,017		587	2.54			75,341		567	3.03
Negotiable CDs, public funds and other time deposits		5,654		69	4.85			4,737		66	5.60			5,939		74	5.01

Total domestic interest-bearing deposits		377,329		1,295	1.37			367,320		1,172	1.28			263,274		979	1.50

Foreign interest-bearing deposits ⁽⁴⁾:
Banks located in foreign countries		17,864		307	6.83			18,945		287	6.10			18,954		171	3.62
Governments and official institutions		5,021		22	1.80			5,739		23	1.58			4,701		19	1.63
Time, savings and other		29,513		87	1.17			29,882		47	0.64			21,054		37	0.71

Total foreign interest-bearing deposits		52,398		416	3.16			54,566		357	2.63			44,709		227	2.04

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