10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 14, 2000
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[CHECK MARK] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
or
[ ] 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
Charlotte, North Carolina 28255
Registrant's telephone number, including area code:
(888) 279-3457
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 [CHECK MARK] No
On July 31, 2000, there were 1,642,701,344 shares of Bank of America Corporation
Common Stock outstanding.
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Bank of America Corporation
June 30, 2000 Form 10-Q
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1
Part I. Financial Information
Item 1. Financial Statements
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
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See accompanying notes to consolidated financial statements.
2
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Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet
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See accompanying notes to consolidated financial statements.
3
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
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(1) Changes in Accumulated Other Comprehensive Income (Loss) include after-tax
net unrealized gains (losses) on available-for-sale and marketable equity
securities of $119 and $(1,710) and after-tax net unrealized gains (losses)
on foreign currency translation adjustments of $2 and $(37) for the six
months ended June 30, 2000 and 1999, respectively.
(2) Accumulated Other Comprehensive Income (Loss) consists of the after-tax
valuation allowance for available-for-sale and marketable equity securities
of $(2,351) and $(1,407) and foreign currency translation adjustments of
$(186) and $(188) at June 30, 2000 and 1999, respectively.
See accompanying notes to consolidated financial statements.
4
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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Loans transferred to foreclosed properties amounted to $188 and $198 for the six
months ended June 30, 2000 and 1999, respectively.
Loans securitized and retained in the available-for-sale securities portfolio
amounted to $224 and $367 for the six months ended June 30, 2000 and 1999,
respectively.
There were no acquisitions for the six months ended June 30, 2000. The fair
value of noncash assets acquired and liabilities assumed in acquisitions for
the six months ended June 30, 1999 were $1,557 and $74, net of cash acquired.
See accompanying notes to consolidated financial statements.
5
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
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Bank of America Corporation (the Corporation) is a Delaware corporation, a
bank holding company and a financial holding company. Through its banking and
nonbanking subsidiaries, the Corporation provides a diverse range of financial
services and products throughout the U.S. and in selected international markets.
Note One - Accounting Policies
The consolidated financial statements include the accounts of the
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The information contained in the consolidated financial statements is
unaudited. In the opinion of management, all normal recurring adjustments
necessary for a fair statement of the interim period results have been made.
Certain prior period amounts have been reclassified to conform to current period
classifications.
Accounting policies followed in the presentation of interim financial
results are presented on pages 58 to 63 of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999.
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This standard requires all derivative
instruments to be recognized as either assets or liabilities and measured at
their fair values. In addition, SFAS 133 provides special hedge accounting for
fair value, cash flow and foreign currency hedges, provided certain criteria are
met. Pursuant to Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
Effective Date of Financial Accounting Standards Board Statement No. 133", the
Corporation is required to adopt the standard on or before January 1, 2001. On
June 15, 2000, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - An Amendment of SFAS 133." This
standard addresses certain implementation issues of SFAS 133. Upon adoption, all
hedging relationships must be designated and documented pursuant to the
provisions of SFAS 133, as amended. The Corporation is in the process of
evaluating the impact of this statement and associated amendment on its risk
management strategies and processes, information systems and financial
statements.
In 1999, the Federal Financial Institutions Examination Council issued The
Uniform Classification and Account Management Policy (the Policy) which updated
and expanded the classification of delinquent retail credits. The Policy
provides guidance for banks on the treatment of delinquent open-end and
close-end loans. The Corporation is required to implement the Policy by December
31, 2000 and expects to be in full compliance with the Policy by that date. The
Corporation does not expect the adoption of this Policy to have a material
impact on its results of operations and financial condition.
6
Note Two - Acquisition and Merger-Related Activities
At June 30, 2000, the Corporation operated its banking activities
primarily under two charters: Bank of America, National Association (Bank of
America, N.A.) and Bank of America, N.A. (USA). On March 31, 1999, NationsBank
of Delaware, N.A. merged with and into Bank of America, N.A. (USA), a national
association headquartered in Phoenix, Arizona (formerly known as Bank of America
National Association), which operates the Corporation's credit card business. On
April 1, 1999, the mortgage business of BankAmerica transferred to NationsBanc
Mortgage Corporation. On December 1, 1999, NationsBanc Mortgage Corporation
merged with and into BA Mortgage, LLC, a Delaware limited liability company and
a Bank of America, N.A. subsidiary. On April 8, 1999, the Corporation merged
Bank of America Texas, N.A. into NationsBank, N.A. On July 5, 1999, NationsBank,
N.A. changed its name to Bank of America, N.A. On July 23, 1999, Bank of
America, N.A. merged into Bank of America National Trust and Savings Association
(Bank of America NT&SA), and the surviving entity of that merger changed its
name to Bank of America, N.A. On December 1, 1999, Bank of America, FSB, a
federal savings bank formerly headquartered in Portland, Oregon, was converted
into a national bank and merged into Bank of America, N.A. On September 30,
1998, BankAmerica Corporation (BankAmerica) merged (the Merger) with and into
the Corporation, formerly NationsBank Corporation (NationsBank).
In connection with the Merger, the Corporation recorded pre-tax
merger-related charges of $525 million ($358 million after-tax) in 1999 and
$1,325 million ($960 million after-tax) in 1998. Of the $525 million in 1999,
$200 million ($145 million after-tax) and $325 million ($213 million after-tax)
were recorded in the second and fourth quarters, respectively. Of the $1,325
million in 1998, $725 million ($519 million after-tax) and $600 million ($441
million after-tax) were recorded in the third and fourth quarters, respectively.
The total pre-tax charge for 1999 consisted of approximately $219 million
primarily of severance, change in control and other employee-related costs, $187
million of conversion and related costs including occupancy, equipment and
customer communication expenses, $128 million of exit and related costs and a $9
million reduction of other merger costs. The total pre-tax charge for 1998
consisted of approximately $740 million primarily of severance, change in
control and other employee-related costs, $150 million of conversion and related
costs including occupancy and equipment expenses (primarily lease exit costs and
the elimination of duplicate facilities and other capitalized assets) and
customer communication expenses, $300 million of exit and related costs and $135
million of other merger costs (including legal, investment banking and filing
fees).
Total severance, change in control and other employee-related costs include
amounts related to job eliminations of former associates of BankAmerica and
NationsBank impacted by the Merger. Through June 30, 2000, approximately 13,800
employees had entered the severance process. Employee-related costs of the
Merger were principally in overlapping functions, operations and businesses of
the Corporation. The BankAmerica merger-related reserve balance was $300 million
at January 1, 2000. Cash payments applied to the reserve in 2000 were
approximately $169 million and noncash reductions were $29 million. The
remaining merger-related reserve balance was $102 million at June 30, 2000.
On June 15, 2000, the Corporation entered into an agreement, effective
January 2, 2001, to acquire the remaining 50 percent of Marsico Capital
Management LLP (Marsico) for a total investment of $1.1 billion. The Corporation
acquired the first 50 percent in 1999. Marsico is a Denver-based investment
management firm with more than $15 billion in assets under management,
specializing in large capitalization growth stocks.
For additional information on the Corporation's merger-related activities,
refer to Note Two of the Corporation's 1999 Annual Report on Form 10-K.
7
Note Three - Trading Activities
Trading-Related Revenue
Trading account profits represent the net amount earned from the
Corporation's trading positions, which include trading account assets and
liabilities as well as derivative-dealer positions. These transactions include
positions to meet customer demand as well as for the Corporation's own trading
account. Trading positions are taken in a diverse range of financial instruments
and markets. The profitability of these trading positions is largely dependent
on the volume and type of transactions, the level of risk assumed and the
volatility of price and rate movements. Trading account profits, as reported in
the Corporation's Consolidated Statement of Income, includes neither the net
interest recognized on interest-earning and interest-bearing trading positions
nor the related funding charge or benefit. Trading account profits and
trading-related net interest income ("trading-related revenue") are presented in
the table below as they are both considered in evaluating the overall
profitability of the Corporation's trading positions. Trading-related revenue is
derived from foreign exchange spot, forward and cross-currency contracts, fixed
income and equity securities and derivative contracts in interest rates,
equities, credit and commodities.
Three Months Ended Six Months Ended
June 30 June 30
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(Dollars in millions) 2000 1999 2000 1999
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Trading account profits - as reported $ 471 $ 395 $1,195 $ 895
Net interest income 263 148 483 315
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Total trading-related revenue $ 734 $ 543 $1,678 $1,210
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Trading-related revenue by product
Foreign exchange contracts $ 132 $ 154 $ 290 $ 312
Interest rate contracts 169 126 476 340
Fixed income 71 105 244 296
Equities 335 135 624 222
Commodities and other 27 23 44 40
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Total trading-related revenue $ 734 $ 543 $1,678 $1,210
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8
Trading Account Assets and Liabilities
The fair value of the components of trading account assets and liabilities
at June 30, 2000 and December 31,1999 were:
See Note Six for additional information on derivative-dealer positions,
including credit risk.
Note Four - Loans and Leases
Loans and leases at June 30, 2000 and December 31, 1999 were:
9
The table below summarizes the changes in the allowance for credit losses for
the three months and six months ended June 30, 2000 and 1999:
The following table presents the recorded investment in specific loans that
were considered individually impaired at June 30, 2000 and December 31, 1999:
June 30 December 31
(Dollars in millions) 2000 1999
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Commercial - domestic $1,496 $1,133
Commercial - foreign 585 503
Commercial real estate - domestic 391 449
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Total impaired loans $2,472 $2,085
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A loan is considered impaired when, based on current information and
events, it is probable that the Corporation will be unable to collect all
amounts due, including principal and interest, according to the contractual
terms of the agreement. Due to their homogeneous nature, consumer loans and
certain smaller business loans are generally evaluated as a group based on
individual loan type. Commercial and commercial real estate loans are generally
evaluated individually due to a general lack of uniformity among individual
loans within each loan type and business segment. Once a loan has been
identified as impaired, management measures impairment in accordance with
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS 114). Impaired loans are measured based on the
present value of payments expected to be received, observable market prices or
for loans that are solely dependent on the collateral for repayment, the
estimated fair value of the collateral. If the recorded investment in impaired
loans exceeds the measure of estimated fair value, a valuation allowance is
established as a component of the allowance for credit losses.
At June 30, 2000 and December 31, 1999, nonperforming loans including
certain loans which were considered impaired totaled $3.7 billion and $3.0
billion, respectively. Foreclosed properties amounted to $195 million and $163
million at June 30, 2000 and December 31, 1999, respectively.
10
Note Five - Short-Term Borrowings and Long-Term Debt
During 2000, Bank of America Corporation issued $4.4 billion in senior and
subordinated long-term debt, domestically and internationally, with maturities
ranging from 2002 to 2015. Of the $4.4 billion issued, $2.4 billion bears
interest at floating rates ranging primarily from eight to 41 basis points over
three-month London InterBank Offered Rate (LIBOR). The remaining $2.0 billion
was converted from fixed rates ranging from 7.35 percent to 8.42 percent to
floating rates through interest rate swaps at spreads ranging from nine to 59
basis points over three-month LIBOR.
At June 30, 2000, Bank of America Corporation had the authority to issue
approximately $15.5 billion of corporate debt and other securities under its
existing shelf registration statements.
During 2000, Bank of America, N.A. issued $13.7 billion in senior long-term
bank notes having maturities ranging from 2001 to 2013. Of the $13.7 billion
issued, $5.0 billion bears interest at spreads ranging from zero to 15 basis
points above three-month LIBOR, $4.1 billion bears interest at spreads ranging
from 287 to 272 basis points below the prime rate, $2.8 billion bears interest
at fixed rates ranging from 6.45 percent to 7.40 percent, $1.1 billion bears
interest at spreads ranging from 14 to 28 basis points above the Fed Funds rate
and $695 million bears interest at spreads ranging from five to 12 basis points
above one-month LIBOR.
Bank of America, N.A. maintains a domestic program to offer up to a
maximum of $35.0 billion, at any one time, of bank notes with fixed or floating
rates and maturities ranging from seven days or more from date of issue.
Short-term bank notes outstanding under this program totaled $14.7 billion at
June 30, 2000 compared to $15.2 billion at December 31, 1999. These short-term
bank notes, along with Treasury tax and loan notes and term federal funds
purchased, are reflected in other short-term borrowings in the Consolidated
Balance Sheet. Long-term debt under current and former programs totaled $18.1
billion at June 30, 2000 compared to $10.1 billion at December 31, 1999. On
August 1, 2000, Bank of America, N.A. increased the maximum amount of bank notes
that it can offer from $35.0 billion to $50.0 billion.
Bank of America Corporation and Bank of America, N.A. maintain a joint Euro
medium-term note program to offer up to $15.0 billion of senior, or in the case
of Bank of America Corporation, subordinated notes exclusively to non-United
States residents. The notes bear interest at fixed or floating rates and may be
denominated in U.S. dollars or foreign currencies. Bank of America Corporation
uses foreign currency contracts to convert certain foreign-denominated debt into
U.S. dollars. Bank of America Corporation's notes outstanding under this program
totaled $5.0 billion at June 30, 2000 compared to $4.5 billion at December 31,
1999. Bank of America, N.A.'s notes outstanding under this program totaled $1.2
billion at June 30, 2000. Bank of America, N.A. had no notes outstanding under
this program at December 31, 1999. Of the $15.0 billion authorized at June 30,
2000, Bank of America Corporation and Bank of America, N.A. had remaining
authority to issue in the aggregate of debt securities under the current program
approximately $5.0 billion and $3.8 billion, respectively. At June 30, 2000 and
December 31, 1999, $3.2 billion and $3.3 billion, respectively, were outstanding
under the former BankAmerica Euro medium-term note program. No additional debt
securities will be offered under that program. On August 1, 2000, Bank of
America Corporation and Bank of America, N.A. increased the size of their joint
Euro medium-term note program to $20.0 billion.
11
Note Six - Commitments and Contingencies
Credit Extension Commitments
The Corporation enters into commitments to extend credit, standby letters of
credit and commercial letters of credit to meet the financing needs of its
customers. The commitments shown below have been reduced by amounts
collateralized by cash and amounts participated to other financial institutions.
The following table summarizes outstanding commitments to extend credit:
Derivatives
Credit Risk Associated with Derivative-Dealer Activities
The table on the following page presents the notional or contract amounts
at June 30, 2000 and December 31, 1999 and the credit risk amounts (the net
replacement cost of contracts in a gain position) of the Corporation's
derivative-dealer positions which are primarily executed in the over-the-counter
market for trading purposes. This table should be read in conjunction with the
"Market Risk Management" section on pages 42 through 46 and Note Eleven of the
Corporation's 1999 Annual Report on Form 10-K. The notional or contract amounts
indicate the total volume of transactions and significantly exceed the amount of
the Corporation's credit or market risk associated with these instruments.
Credit risk associated with derivatives is measured as the net replacement cost
should the counterparties with contracts in a gain position to the Corporation
completely fail to perform under the terms of those contracts and any collateral
underlying the contracts proves to be of no value. The credit risk amounts
presented in the following table do not consider the value of any collateral but
generally take into consideration the effects of legally enforceable master
netting agreements.
12
The table above includes both long and short derivative-dealer positions.
The average fair value of derivative-dealer assets for the six months ended June
30, 2000 and for the year ended December 31, 1999 was $19.4 billion and $16.0
billion, respectively. The average fair value of derivative-dealer liabilities
for the six months ended June 30, 2000 and for the year ended December 31, 1999
was $19.3 billion and $16.5 billion, respectively. The fair value of
derivative-dealer assets at both June 30, 2000 and December 31, 1999 was $16.1
billion. The fair value of derivative-dealer liabilities at June 30, 2000 and
December 31, 1999 was $17.6 billion and $16.2 billion, respectively. See Note
Three for a discussion of trading-related revenue.
During the six months ended June 30, 2000 and 1999, there were no
significant credit losses associated with derivative contracts. At June 30, 2000
and December 31, 1999, there were no nonperforming derivative positions that
were material to the Corporation.
In addition to credit risk management activities, the Corporation uses
credit derivatives to generate revenue by taking on exposure to underlying
credits. The Corporation also provides credit derivatives to sophisticated
customers who wish to hedge existing credit exposures or take on additional
credit exposure to generate revenue. The Corporation's credit derivative
positions at June 30, 2000 and December 31, 1999 consisted of credit default
swaps and total return swaps.
13
Asset and Liability Management (ALM) Activities
The table below outlines the status of the Corporation's ALM activity at
June 30, 2000 and December 31, 1999. It presents the notional amount and fair
value of the Corporation's open and closed ALM contracts. This table should be
read in conjunction with the "Market Risk Management" section on pages 42
through 46 and Note Eleven of the Corporation's 1999 Annual Report on Form 10-K.
(1) Fair value represents the net unrealized losses on open contracts.
(2) Represents the unamortized net realized deferred gains associated with
closed contracts.
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When-Issued Securities
At June 30, 2000, the Corporation had commitments to purchase and sell
when-issued securities of $14.5 billion and $20.5 billion, respectively. At
December 31, 1999, the Corporation had commitments to purchase and sell
when-issued securities of $12.0 billion and $16.8 billion, respectively.
Litigation
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to a number of pending and threatened
legal actions and proceedings, including actions brought on behalf of various
classes of claimants. In certain of these actions and proceedings, substantial
money damages are asserted against the Corporation and its subsidiaries and
certain of these actions and proceedings are based on alleged violations of
consumer protection, securities, environmental, banking and other laws.
The Corporation and certain present and former officers and directors have
been named as defendants in a number of actions filed in several federal courts
that have been consolidated for pretrial purposes before a Missouri federal
court. The amended complaint in the consolidated actions alleges, among other
things, that the defendants failed to disclose material facts about
BankAmerica's losses relating to D.E. Shaw Securities Group, L.P. and related
entities until mid-October 1998, in violation of various provisions of federal
and state laws. The amended complaint also alleges that the proxy
statement-prospectus of August 4, 1998, falsely stated that the Merger would be
one of equals and alleges a scheme to have NationsBank gain control over the
newly merged entity. The Missouri federal
14
court has certified classes consisting generally of persons who were
stockholders of NationsBank or BankAmerica on September 30, 1998, or were
entitled to vote on the Merger, or who purchased or acquired securities of the
Corporation or its predecessors between August 4, 1998 and October 13, 1998. The
amended complaint substantially survived a motion to dismiss, and discovery is
underway. Claims against certain director-defendants were dismissed with leave
to replead. Similar uncertified class actions (including one limited to
California residents raising the claim that the proxy statement-prospectus of
August 4, 1998, falsely stated that the Merger would be one of equals) were
filed in California state court, alleging violations of the California
Corporations Code and other state laws. The action on behalf of California
residents was certified, but has since been dismissed and an appeal is pending.
Of the remaining actions, one has been stayed, and a motion for class
certification is pending in the other. The Missouri federal court has enjoined
prosecution of that action as a class action. The plaintiffs who were enjoined
have appealed. The Corporation believes the actions lack merit and will defend
them vigorously. The amount of any ultimate exposure cannot be determined with
certainty at this time.
Management believes that the actions and proceedings and the losses, if
any, resulting from the final outcome thereof, will not be material in the
aggregate to the Corporation's financial position or results of operations.
15
Note Seven - Shareholders' Equity and Earnings Per Common Share
On June 23, 1999, the Corporation's Board of Directors (the Board)
authorized the repurchase of up to 130 million shares of the Corporation's
common stock at an aggregate cost of up to $10.0 billion. Through June 30, 2000,
the Corporation had repurchased 112 million shares of its common stock in open
market repurchases and under accelerated share repurchase programs at an average
per-share price of $57.92 which reduced shareholders' equity by $6.5 billion.
The remaining buyback authority for common stock under the current program
totaled $3.5 billion or 18 million shares at June 30, 2000. On July 26, 2000,
the Board authorized a new stock repurchase program of up to 100 million shares
of the Corporation's common stock at an aggregate cost of up to $7.5 billion.
Earnings per common share is computed by dividing net income available to
common shareholders by the weighted average common shares issued and
outstanding. For diluted earnings per common share, net income available to
common shareholders can be affected by the conversion of the registrant's
convertible preferred stock. Where the effect of this conversion would have been
dilutive, net income available to common shareholders is adjusted by the
associated preferred dividends. This adjusted net income is divided by the
weighted average number of common shares issued and outstanding for each period
plus amounts representing the dilutive effect of stock options outstanding and
the dilution resulting from the conversion of the registrant's convertible
preferred stock, if applicable. The effect of convertible preferred stock is
excluded from the computation of diluted earnings per common share in periods in
which the effect would be antidilutive.
The calculation of earnings per common share and diluted earnings per
common share for the three months and six months ended June 30, 2000 and 1999 is
presented below:
16
Note Eight - Business Segment Information
During the first quarter of 2000, the Corporation realigned its business
segments to report the results of the Corporation's operations through three
business segments: Consumer and Commercial Banking, Asset Management and Global
Corporate and Investment Banking. Consumer and Commercial Banking provides a
diversified range of products and services to individuals and small businesses
through multiple delivery channels and commercial lending and treasury
management services to middle market companies with annual revenue between $10
million and $500 million. Asset Management offers customized asset management
and credit, financial advisory, fiduciary and trust services, and banking
services. It also provides management of equity, fixed income, cash and
alternative investments to individuals, corporations and a wide array of
institutional clients and full service and discount brokerage services. Global
Corporate and Investment Banking provides a diversified range of financial
products such as investment banking, trade finance, treasury management, capital
markets, leasing and financial advisory services to domestic and international
corporations, financial institutions and government entities.
The following table includes total revenue, net income and average total
assets for the three months and six months ended June 30, 2000 and 1999 for each
business segment. Certain prior period amounts have been reclassified between
segments to conform to the current period presentation.
(1) Net interest income is presented on a taxable-equivalent basis.
(2) There were no material intersegment revenues among the three business
segments.
17
A reconciliation of the segments' net income to consolidated net income
follows:
Note Nine -- Subsequent Events
Bank of America Pension Plan
The Corporation and the BankAmerica 401(k) retirement plans were combined
effective June 30, 2000. With the introduction of the revised Bank of America
retirement plans, qualified BankAmerica employees who are currently active had a
one-time opportunity to transfer certain assets in their 401(k) plan account to
their Bank of America Pension Plan (pension plan) account effective August 4,
2000. The total amount of 401(k) plan assets transferred to the pension plan was
$1.3 billion. The pension plan (which is a cash balance type of pension plan)
has a balance guarantee feature, applied at the time a benefit payment is made
from the plan, that protects the transferred portion of participants' accounts
from future market downturns. The Corporation is responsible for funding any
shortfall on the guarantee feature.
Productivity and Investment Initiatives
On July 28, 2000, the Corporation announced process changes and
productivity and other investment initiatives. As part of these initiatives and
in order to reallocate resources, the Corporation will eliminate 9,000 to 10,000
positions, or six to seven percent of its work force, over the next 12 months.
The Corporation plans to take an after-tax charge of $300 million to $350
million in the third quarter, primarily to cover severance costs related to
these changes and initiatives. The Corporation expects such changes and
initiatives to strengthen revenue growth, support earnings momentum and improve
customers' experience with the Corporation.
18
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
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This report on Form 10-Q contains certain forward-looking statements that
are subject to risks and uncertainties and include information about possible or
assumed future results of operations. Many possible events or factors could
affect the future financial results and performance of the Corporation. This
could cause results or performance to differ materially from those expressed in
our forward-looking statements. Words such as "expects", "anticipates",
"believes", "estimates", variations of such words and other similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in, or
implied by, such forward-looking statements. Readers of the Corporation's Form
10-Q should not rely solely on the forward-looking statements and should
consider all uncertainties and risks discussed throughout this report, as well
as those discussed in the Corporation's 1999 Annual Report on Form 10-K. These
statements are representative only on the date hereof, and the Corporation
undertakes no obligation to update any forward-looking statements made.
The possible events or factors include the following: the Corporation's
loan growth is dependent on economic conditions, as well as various
discretionary factors, such as decisions to securitize, sell, or purchase
certain loans or loan portfolios; syndications or participations of loans;
retention of residential mortgage loans; and the management of borrower,
industry, product and geographic concentrations and the mix of the loan
portfolio. The rate of charge-offs and provision expense can be affected by
local, regional and international economic and market conditions, concentrations
of borrowers, industries, products and geographic locations, the mix of the loan
portfolio and management's judgments regarding the collectibility of loans.
Liquidity requirements may change as a result of fluctuations in assets and
liabilities and off-balance sheet exposures, which will impact the capital and
debt financing needs of the Corporation and the mix of funding sources.
Decisions to purchase, hold or sell securities are also dependent on liquidity
requirements and market volatility, as well as on- and off-balance sheet
positions. Factors that may impact interest rate risk include local, regional
and international economic conditions, levels, mix, maturities, yields or rates
of assets and liabilities, utilization and effectiveness of interest rate
contracts and the wholesale and retail funding sources of the Corporation. The
Corporation is also exposed to the potential of losses arising from adverse
changes in market rates and prices which can adversely impact the value of
financial products, including securities, loans, deposits, debt and derivative
financial instruments, such as futures, forwards, swaps, options and other
financial instruments with similar characteristics.
In addition, the banking industry in general is subject to various
monetary and fiscal policies and regulations, which include those determined by
the Federal Reserve Board, the Office of the Comptroller of Currency, the
Federal Deposit Insurance Corporation, state regulators and the Office of Thrift
Supervision, whose policies and regulations could affect the Corporation's
results. Other factors that may cause actual results to differ from the
forward-looking statements include the following: projected business increases
following process changes and productivity and other investment initiatives are
lower than expected or do not pay for severance or other related costs as
quickly as anticipated; competition with other local, regional and international
banks, thrifts, credit unions and other nonbank financial institutions, such as
investment banking firms, investment advisory firms, brokerage firms, investment
companies and insurance companies, as well as other entities which offer
financial services, located both within and outside the United States and
through alternative delivery channels such as the World Wide Web; interest rate,
market and monetary fluctuations; inflation; market volatility; general economic
conditions and economic conditions in the geographic regions and industries in
which the Corporation operates; introduction and acceptance of new
banking-related products, services and enhancements; fee pricing strategies,
mergers and acquisitions and their integration into the Corporation and
management's ability to manage these and other risks.
19
Overview
The Corporation is a bank holding company and a financial holding company
incorporated under the laws of Delaware, and headquartered in Charlotte, North
Carolina. The Corporation provides a diversified range of banking and nonbanking
financial services and products both domestically and internationally through
three major business segments: Consumer and Commercial Banking, Asset Management
and Global Corporate and Investment Banking. At June 30, 2000, the Corporation
had $680 billion in assets and approximately 151,000 full-time equivalent
employees.
The remainder of management's discussion and analysis of the Corporation's
results of operations and financial condition should be read in conjunction
with the consolidated financial statements and related notes presented on pages
2 through 18.
Refer to Table One for selected financial data for the three months and six
months ended June 30, 2000 and 1999.
Key strategic highlights for the six months ended June 30, 2000 were:
o The Corporation continued to focus on expanding its technology leadership
in order to meet two important objectives: provide better service to
customers and connect those customers to the increasing number of
e-commerce capabilities as they become available.
o New online banking enrollments increased to approximately 125,000 per
month, up from 80,000 per month a year earlier, as total online retail
customers rose to approximately 2.4 million. Penetration increased to 14
percent of customers holding Bank of America checking accounts.
o Use of Bank of America Direct, the Corporation's web-based cash management
system, grew more than 250 percent from a year earlier.
o An alliance with Checkfree Holdings Corporation was announced aimed at
enhancing the Corporation's advantage in online banking and at creating a
national platform for accelerating the development of electronic bill
payment and presentment convenience for consumers in the United States.
o An alliance announced with Ariba intends to combine the Bank of America
financial services engine with Ariba's leading business-to-business
commerce platform resulting in a purchase-to-payment system for
business-to-business commerce activities.
o Balances in Money Manager, the Corporation's combination checking and
brokerage product, increased 80 percent from a year ago to $16.5 billion.
Total Money Manager accounts more than doubled to 121,000.
o Mutual fund assets rose by $12 billion, or 14 percent, during the first six
months of the year. In addition, the Corporation agreed to acquire the
remaining 50 percent of Marsico Capital Management LLC, a highly successful
and fast-growing investment management firm which manages more than $15
billion in assets.
20
Key performance highlights for the six months ended June 30, 2000 were:
o Net income totaled $4.3 billion, or $2.56 per common share (diluted) for
the six months ended June 30, 2000, an increase of $474 million, or $0.41
per common share (diluted) from the same period in 1999. Excluding
merger-related charges that occurred in 1999, net income increased $329
million, or $0.33 per common share (diluted) for the six months ended June
30, 2000 from the comparable 1999 period.
o Cash basis ratios on an operating basis measure performance excluding
goodwill and other intangible assets and their related amortization
expense. Cash basis diluted earnings per common share were $2.82 for the
six months ended June 30, 2000, an increase of $0.34 per share compared to
the same period in 1999. Return on average tangible common shareholders'
equity was 29.14 percent for the six months ended June 30, 2000, an
increase of 117 basis points from the comparable 1999 period. The cash
basis efficiency ratio was 51.04 percent for the six months ended June 30,
2000, an improvement of 167 basis points from the comparable 1999 period,
primarily due to a 12 percent increase in noninterest income.
o The return on average common shareholders' equity was 18.60 percent for the
six months ended June 30, 2000, an increase of 201 basis points compared to
the same period in 1999. Excluding merger-related charges, the return on
average common shareholders' equity for the six months ended June 30, 2000
increased 138 basis points from the comparable 1999 period.
o Total revenue includes net interest income on a taxable-equivalent basis
and noninterest income. For the six months ended June 30, 2000, total
revenue was $16.9 billion, an increase of $797 million from the comparable
1999 period.
o Net interest income remained essentially unchanged at $9.3 billion for
the six months ended June 30, 2000 from a year earlier. Loan growth
and higher levels of core deposits and equity were offset by the
impact of asset securitizations and loan sales during 1999, spread
compression and the cost of share repurchases. Average managed loans
and leases were $412.2 billion for the six months ended June 30, 2000,
a $38.7 billion increase from the respective 1999 period, primarily
due to a 19 percent increase in consumer loans and leases. Average
core deposits grew to $298.0 billion for the six months ended June 30,
2000, a $7.9 billion increase from the same period in 1999. The net
interest yield was 3.26 percent for the six months ended June 30,
2000, a 29 basis point decline from the comparable 1999 period. The
decrease was primarily due to spread compression, increased reliance
on long-term debt funding, growth in lower spread securities and
trading-related assets and the cost of share repurchases.
o Noninterest income was $7.5 billion for the six months ended June 30,
2000, an $801 million increase from the comparable 1999 period.
Consumer and Commercial Banking experienced a $149 million increase in
card income to $1.0 billion due to purchase volume growth across all
card products. Income from investment and brokerage services increased
$54 million to $761 million in the Asset Management segment as a
result of new business and market growth. Global Corporate and
Investment Banking had significant increases in equity investment
gains and trading account profits. Equity investment gains were $697
million, reflecting an increase of $408 million. Trading account
profits increased $300 million to $1.2 billion driven by higher
revenues from interest rate contracts, fixed income and equities,
partially offset by decreases in foreign exchange contracts and real
estate activities. The increase in noninterest income for the
Corporation was partially offset by a $366 million decrease in other
income to $371 million due to securitization gains and higher gains on
loan sales in 1999.
o The provision for credit losses for the six months ended June 30, 2000 was
$890 million, a $130 million decrease from the same 1999 period. Net
charge-offs were $890 million, or 0.47 percent of average loans and leases,
for the six months ended June 30, 2000, a decrease of $149 million or 11
basis points from the comparable 1999 period, driven primarily by lower
losses on bankcard loans. Nonperforming assets were $3.9 billion, or 0.97
percent of loans, leases and foreclosed properties at June 30, 2000, a $681
million or 11 basis point increase from December 31, 1999. The increase
reflects a rise in nonperforming loans in the corporate commercial
portfolio which were not concentrated in any single industry or region.
Nonperforming loans also increased in real estate
21
secured consumer finance loans, reflecting the growth and seasoning in that
portfolio. The allowance for credit losses totaled $6.8 billion at June 30,
2000, essentially unchanged from December 31, 1999.
o Noninterest expense was $9.0 billion for the six months ended June 30,
2000, a $126 million increase from the respective 1999 period, reflecting
higher revenue-related incentive compensation and spending on projects to
improve sales and service, partially offset by cost reductions resulting
from recent mergers. The efficiency ratio was 53.63 percent for the six
months ended June 30, 2000, a 186 basis point improvement from the same
period in 1999.
Employee-Related Matters
See Note Nine of the consolidated financial statements for information on
the Corporation's process changes and productivity and other investment
initiatives which will result in the elimination of 9,000 to 10,000 positions
over the next 12 months. The Corporation plans to record a third quarter
after-tax charge of $300 million to $350 million related to these initiatives.
In addition, see Note Nine for information on the Bank of America Pension
Plan.
22
(1) Operating basis excludes merger-related charges.
(2) Cash basis calculations exclude goodwill and other intangible assets
and their related amortization expense.
23
Business Segment Operations
The Corporation provides a diversified range of banking and nonbanking
financial services and products through its various subsidiaries. During the
first quarter of 2000, the Corporation realigned its business segments to report
the results of the Corporation's operations through three business segments:
Consumer and Commercial Banking, Asset Management, and Global Corporate and
Investment Banking.
The business segments summarized in Table Two are primarily managed with a
focus on various performance objectives including total revenue, net income,
return on average equity and efficiency. These performance objectives are also
presented on a cash basis which excludes the impact of goodwill and other
intangible assets and their related amortization expense. Total revenue includes
net interest income on a taxable-equivalent basis and noninterest income. The
net interest yield of the business segments reflects the results of a funds
transfer pricing process which derives net interest income by matching assets
and liabilities with similar interest rate sensitivity and maturity
characteristics. Equity is allocated to each business segment based on an
assessment of its inherent risk.
See Note Eight of the consolidated financial statements for additional
business segment information and reconciliations to consolidated amounts.
Additional information on noninterest income can be found in the "Noninterest
Income" section beginning on page 37. Certain prior period amounts have been
reclassified between segments and their components (presented after Table Two)
to conform to the current period presentation.
24
Consumer and Commercial Banking
Consumer and Commercial Banking provides a wide array of products and
services to individuals, small businesses and middle market companies through
multiple delivery channels.
o Growth in the loan portfolio had a positive effect on net interest income
for the six months ended June 30, 2000. Spread compression and 1999 loan
sales and securitizations more than offset this increase resulting in a two
percent decrease in net interest income.
o Noninterest income increased one percent for the six months ended June 30,
2000 due to higher card income and service charges resulting from an
increased focus by management to grow the card business and new marketing
programs.
o Cash basis earnings increased one percent for the six months ended June 30,
2000 due to decreased provision expense and noninterest expense partially
offset by the decrease in total revenue.
o Improved credit quality in the credit card portfolio resulted in a
decrease in the provision for credit losses.
o Merger-related savings resulted in a decrease across most expense
categories.
The major components of Consumer and Commercial Banking are Banking
Regions, Consumer Products and Commercial Banking.
25
Banking Regions
Banking Regions serves approximately 30 million consumer households in 21
states and the District of Columbia and overseas through its extensive network
of approximately 4,500 banking centers, 14,000 ATMs, telephone and Internet
channels on www.bankofamerica.com. Banking Regions provides a wide array of
products and services, including deposit products such as checking, money market
savings accounts, time deposits and IRAs, and credit products such as home
equity, personal auto loans and auto leasing. Banking Regions also includes
small business banking providing treasury management, credit services, community
investment, debit card, e-commerce and brokerage services to over two million
small business relationships across the franchise.
o Noninterest income increased six percent for the six months ended June 30,
2000 primarily due to increased consumer service charges and debit card
income.
o Net interest income declined one percent primarily due to spread
compression and 1999 loan sales and securitizations.
o Cash basis earnings increased three percent for the six months ended June
30, 2000, primarily attributable to a decrease in noninterest expense
driven by merger-related savings and lower transition expense.
Consumer Products
Consumer Products provides specialized services such as the origination and
servicing of residential mortgage loans, issuance and servicing of credit cards,
direct banking via telephone and Internet, student lending and certain insurance
services. Consumer Products also provides consumer home equity and auto loans,
retail finance programs to dealerships and lease financing of new and used cars.
o Higher card income had a positive effect on noninterest income for the six
months ended June 30, 2000. Gains on loan sales and securitizations in 1999
more than offset this increase resulting in a seven percent decline in
noninterest income.
o Net interest income decreased six percent for the six months ended June 30,
2000 primarily due to a shift to lower spread loan products and loan sales
and securitizations in 1999.
o Cash basis earnings increased one percent for the six months ended June 30,
2000 primarily due to a decrease in provision expense and noninterest
expense partially offset by the decrease in total revenue.
26
o Provision expense decreased due to improved credit quality in the credit
card portfolio.
o The decrease in noninterest expense was primarily driven by expense
reduction initiatives.
Commercial Banking
Commercial Banking provides commercial lending and treasury management
services to middle market companies with annual revenue between $10 million and
$500 million. These services are available through relationship manager teams as
well as through alternative channels such as the telephone via the commercial
service center and the Internet by accessing Bank of America Direct.
o Total revenue for the six months ended June 30, 2000 increased two percent
due to a nine percent increase in noninterest income attributable to higher
service charges.
o Higher noninterest income had a positive effect on cash basis earnings for
the six months ended June 30, 2000. Higher provision expense more than
offset this increase resulting in a three percent decline in cash basis
earnings.
Asset Management
Asset Management includes the Private Bank, Banc of America Capital
Management and Banc of America Investment Services, Inc. The Private Bank offers
financial solutions to high-net-worth clients and foundations in the U.S. and
internationally by providing customized asset management and credit, financial
advisory, fiduciary, trust and banking services. Banc of America Capital
Management offers management of equity, fixed income, cash, and alternative
investments; manages the assets of individuals, corporations, municipalities,
foundations and universities, and public and private institutions; and provides
advisory services to the Corporation's affiliated family of mutual funds. Banc
of America Investment Services, Inc. provides both full-service and discount
brokerage services through investment professionals located throughout the
franchise and a brokerage web site that provides customers a wide array of
market analyses, investment research and self-help tools, account information
and transaction capabilities.
On June 15, 2000, the Corporation entered into an agreement, effective
January 2, 2001, to acquire the remaining 50 percent of Marsico Capital
Management LLP (Marsico) for a total investment of $1.1 billion. The Corporation
acquired the first 50 percent in 1999. Marsico is a Denver-based investment
management firm specializing in large capitalization growth stocks. Marsico
manages more than $15 billion in assets and has experienced compounded annual
revenue growth of approximately 460 percent since its inception in 1997. Marsico
will benefit the Corporation's marketing of investment capabilities to financial
intermediaries and institutional clients.
27
o Total revenue increased four percent for the six months ended June 30,
2000. The increase was attributable to increases in both net interest
income and noninterest income.
o Net interest income increased 13 percent due to strong loan growth in
the commercial loan portfolio.
o Noninterest income increased one percent primarily due to increased
investment and brokerage fees driven by new business and market
growth, partially offset by gains in 1999 on the disposition of
certain businesses.
o Cash basis earnings increased 10 percent for the six months ended June 30,
2000 due to the increase in total revenue, partially offset by increased
noninterest expense, led by one-time business divestiture expenditures in
2000.
Global Corporate and Investment Banking
Global Corporate and Investment Banking provides a broad array of financial
products such as investment banking, trade finance, treasury management, capital
markets, leasing and financial advisory services to domestic and international
corporations, financial institutions and government entities. Clients are
supported through offices in 37 countries in four distinct geographic regions:
U.S. and Canada; Asia; Europe, Middle East and Africa; and Latin America.
Products and services provided include loan origination, merger and acquisition
advisory, debt and equity underwriting and trading, cash management,
derivatives, foreign exchange, leasing, leveraged finance, project finance, real
estate finance, senior bank debt, structured finance and trade services.
o For the six months ended June 30, 2000, total revenue increased 19 percent
due to increases in both net interest income and noninterest income.
o Net interest income increased eight percent, primarily due to trading
activities, interest recoveries and higher demand deposits.
o Noninterest income increased 27 percent due to higher equity
investment gains, trading account profits, investment banking income
and corporate service charges.
o For the six months ended June 30, 2000, cash basis earnings increased 29
percent. The increase was primarily due to the higher revenue discussed
above and was partially offset by an increase in noninterest expense
resulting from higher revenue-related incentive compensation.
28
Global Corporate and Investment Banking offers clients a comprehensive
range of global capabilities through five components: Global Credit Products,
Global Capital Raising, Global Markets, Global Treasury Services and Principal
Investing.
Global Credit Products
Global Credit Products provides credit and lending services and includes
the corporate industry-focused portfolio, real estate, leasing and project
finance.
o Net interest income increased slightly for the six months ended June 30,
2000, but was offset by a six percent decrease in noninterest income due to
a decline in investment banking and other income.
o Noninterest expense decreased five percent for the six months ended June
30, 2000 due to a decrease in personnel expense. Offsetting this decrease
was an increase in the provision for credit losses driven by the charge-off
of a single fraud-related credit, resulting in a three percent decline in
cash basis earnings.
Global Capital Raising
Global Capital Raising includes the Corporation's investment banking
activities. Through a separate subsidiary, Banc of America Securities LLC
(formerly NationsBanc Montgomery Securities LLC), Global Capital Raising
underwrites and makes markets in equity securities, high-grade and high-yield
corporate debt securities, commercial paper, and mortgage-backed and
asset-backed securities. Banc of America Securities LLC also provides
correspondent clearing services for other securities broker/dealers, traditional
brokerage services to high-net-worth individuals, prime-brokerage services and
makes markets in equity derivatives. Debt and equity securities research, loan
syndications, mergers and acquisitions advisory services, private placements and
equity derivatives are also provided through Banc of America Securities LLC.
o Total revenue increased 48 percent for the six months ended June 30, 2000
due to increased net interest income and noninterest income. The increases
were due to higher trading-related revenue, investment banking income and
corporate investment and brokerage fees primarily due to increased activity
and contribution from equity products.
29
o Cash basis earnings increased 149 percent for the six months ended June 30,
2000, led by the increase in revenue partially offset by an increase in
noninterest expense, which was driven by higher revenue-related incentive
compensation.
Global Markets
Global Markets provides business solutions for a global customer base using
interest rate derivatives, foreign exchange products, commodity derivatives and
mortgage-related products. In support of these activities, the businesses will
take positions in these products and capitalize on market-making activities. The
Global Markets business also takes an active role in the trading of fixed income
securities in all of the regions in which Global Corporate and Investment
Banking transacts business and is a primary dealer in the U.S., as well as in
several international locations.
o Noninterest income increased for the six months ended June 30, 2000,
partially offset by a decrease in net interest income, resulting in a one
percent increase in total revenue.
o Noninterest income increased three percent primarily due to strong
client demands in interest rate contracts in the first quarter of
2000.
o The five percent decrease in net interest income was primarily due to
changes in trading-related positions.
o For the six months ended June 30, 2000, cash basis earnings decreased 12
percent primarily due to higher noninterest expense resulting from higher
revenue-related incentive compensation, partially offset by the increase in
total revenue.
30
Global Treasury Services
Global Treasury Services provides the technology, strategies and integrated
solutions to help financial institutions, government agencies and public and
private companies of all sizes manage their operations and cash flows on a
local, regional, national and global level.
o Total revenue increased two percent for the six months ended June 30, 2000,
led by a four percent increase in noninterest income, primarily driven by
an increase in service charges.
o Cash basis earnings increased 54 percent for the six months ended June 30,
2000 primarily due to the increase in total revenue and a decrease in
provision expense driven by credit upgrades and declining balances in the
international portfolio.
Principal Investing
Principal Investing invests in both direct and indirect equity investments
in a wide variety of transactions. Domestic activities include investments from
early-stage seed capital to mezzanine financing, late-stage and buyout
investments. International investing focuses on established businesses in Asia,
Europe and Latin America delivering strategic and financial guidance, broad
business experience and access to the Corporation's global resources.
o For the six months ended June 30, 2000, total revenue increased $319
million primarily due to an increase in noninterest income driven primarily
by higher equity investment gains in both cash and portfolio appreciation.
o For the six months ended June 30, 2000, cash basis earnings increased $189
million primarily due to the increase in revenue led by equity investment
gains.
31
Results of Operations
Net Interest Income
An analysis of the Corporation's net interest income on a
taxable-equivalent basis and average balance sheet for the most recent five
quarters and for the six months ended June 30, 2000 and 1999 is presented in
Tables Three and Four, respectively.
As reported, net interest income on a taxable-equivalent basis was $4.7
billion for the three months ended June 30, 2000, an increase of $46 million
compared to the same period in 1999. For the six months ended June 30, 2000 and
1999, net interest income on a taxable-equivalent basis remained at $9.3
billion. Management also reviews "core net interest income" which adjusts
reported net interest income for the impact of trading-related activities,
securitizations, asset sales and divestitures. For purposes of internal
analysis, management combines trading-related net interest income with trading
account profits, as discussed in the "Noninterest Income" section on page 39, as
trading strategies are typically evaluated on total revenue. The determination
of core net interest income also requires adjustment for the impact of
securitizations (primarily home equity and credit card), asset sales (primarily
residential and commercial real estate loans) and divestitures. Net interest
income associated with assets that have been securitized is predominantly offset
in noninterest income, as the Corporation takes on the role of servicer and
records servicing income and gains on securitizations, where appropriate.
The table below provides a reconciliation between net interest income on a
taxable-equivalent basis presented in Tables Three and Four and core net
interest income for the three months and six months ended June 30, 2000 and
1999, respectively.
(1) Net interest income is presented on a taxable-equivalent basis.
(2) bp denotes basis points; 100 bp equals 1%.
Core net interest income on a taxable-equivalent basis was $4.6 billion and
$9.1 billion for the three months and six months ended June 30, 2000,
respectively, an increase of $69 million and $118 million over the corresponding
periods in 1999. For both periods, managed loan growth, particularly in consumer
products, and higher levels of core deposits and equity were partially offset by
spread compression, increased reliance on long-term debt funding and the cost of
share repurchases.
Core average earning assets were $480.4 billion and $475.6 billion for the
three months and six months ended June 30, 2000, respectively, an increase of
$31.6 billion and $28.7 billion over the same periods in 1999, primarily
reflecting managed loan growth of 12 percent and 10 percent, respectively.
32
Managed consumer loans increased 19 percent for both the three months and six
months ended June 30, 2000, led by growth in residential first mortgages, home
equity lines and consumer finance loans. Loan growth is dependent on economic
conditions, as well as various discretionary factors such as decisions to
securitize certain loan portfolios and the management of borrower, industry,
product and geographic concentrations.
The core net interest yield decreased 20 basis points to 3.85 percent and 18
basis points to 3.88 percent for the three months and six months ended June 30,
2000, respectively, mainly due to spread compression, increased reliance on
long-term debt funding and the cost of share repurchases.
Provision for Credit Losses
The provision for credit losses totaled $470 million and $890 million for
the three months and six months ended June 30, 2000, respectively, compared to
$510 million and $1.0 billion for the comparable 1999 periods. The decrease in
the provision for credit losses was primarily due to a reduction in the inherent
risk and size of the Corporation's emerging markets portfolio and a change in
the composition of the loan portfolio from commercial and consumer foreign to
more consumer loans secured by residential real estate. Total net charge-offs
were $470 million and $890 million for the three months and six months ended
June 30, 2000, respectively, compared to $520 million and $1.0 billion for the
comparable 1999 periods. The decrease in net charge-offs was driven primarily by
lower losses on bankcard loans. For additional information on the allowance for
credit losses, certain credit quality ratios and credit quality information on
specific loan categories, see the "Credit Risk Management and Credit Portfolio
Review" section beginning on page 44.
Gains on Sales of Securities
Gains on sales of securities were $6 million and $12 million for the three
months and six months ended June 30, 2000, respectively, compared to $52 million
and $182 million in the respective periods of 1999. Securities gains were lower
in 2000 as a result of continued unfavorable market conditions for certain debt
securities.
33
34
(1) The average balance and yield on available-for-sale securities are based on
the average of historical amortized cost balances.
(2) Nonperforming loans are included in the average loan balances. Income on
such nonperforming loans is recognized on a cash basis.
(3) Interest income includes taxable-equivalent basis adjustments of $78 and
$71 in the second and first quarters of 2000 and $66, $53 and $51 in the
fourth, third and second quarters of 1999, respectively. Interest income
also includes the impact of risk management interest rate contracts, which
(decreased) increased interest income on the underlying assets $(11) and $7
in the second and first quarters of 2000 and $57, $103 and $83 in the
fourth, third and second quarters of 1999, respectively.
(4) Primarily consists of time deposits in denominations of $100,000 or more.
(5) Long-term debt includes trust preferred securities.
(6) Interest expense includes the impact of risk management interest rate
contracts, which (increased) decreased interest expense on the underlying
liabilities $(5) and $(8) in the second and first quarters of 2000 and
$(2), $6 and $52 in the fourth, third and second quarters of 1999,
respectively.
35
(1) The average balance and yield on available-for-sale securities are
based on the average of historical amortized cost balances.
(2) Nonperforming loans are included in the average loan balances. Income
on such nonperforming loans is recognized on a cash basis.
(3) Interest income includes taxable-equivalent basis adjustments of $149
and $96 for the six months ended June 30, 2000 and 1999, respectively.
Interest income also includes the impact of risk management interest
rate contracts, which (decreased) increased interest income on the
underlying assets $(4) and $146 for the six months ended June 30, 2000
and 1999, respectively.
(4) Primarily consists of time deposits in denominations of $100,000 or
more.
(5) Long-term debt includes trust preferred securities.
(6) Interest expense includes the impact of risk management interest rate
contracts, which (increased) decreased interest expense on the
underlying liabilities $(13) and $112 in the six months ended June 30,
2000 and 1999, respectively.
36
Noninterest Income
As presented in Table Five, noninterest income decreased $22 million and
increased $801 million to $3.5 billion and $7.5 billion for the three months and
six months ended June 30, 2000, respectively, compared to the comparable 1999
periods. The decrease in noninterest income for the three months ended June 30,
2000 primarily reflects declines in other income and investment banking income
partially offset by increases in trading account profits and card income. The
increase in noninterest income for the six months ended June 30, 2000 primarily
reflects increases in equity investment gains, trading account profits, card
income and investment banking income.
The following section discusses the noninterest income results of the
Corporation's three business segments, as well as other income for the total
Corporation. For additional business segment information, see "Business Segment
Operations" beginning on page 24.
Consumer and Commercial Banking
o Noninterest income for Consumer and Commercial Banking decreased $18
million and increased $41 million to $1.8 billion and $3.4 billion for the
three months and six months ended June 30, 2000, respectively. The increase
for the six months ended June 30, 2000 was due to higher card income and
service charges. For the three months ended June 30, 2000, the increases in
card income and service charges were offset by a decrease in other income.
o Card income includes merchant discount, credit card and debit card
fees and interchange income. Card income increased $149 million to
$1.0 billion for the six months ended June 30, 2000. The increase was
primarily due to increased purchase volume in both the credit card and
debit card portfolios resulting in higher interchange income, fee
income from the credit card portfolio and servicing income from
securitized credit card receivables. Growth in income for the core
portfolio is being generated through traditional marketing channels,
expanding relationships with existing customers and leveraging the
franchise network. Card income included revenue from the securitized
portfolio of $48 million and $86 million for the three months and six
months ended June 30, 2000, respectively. Card income included revenue
and gains of $60 million and $97 million from the securitized
portfolio for the three months and six months ended June 30, 1999,
respectively.
o Service charges include deposit account service charges, non-deposit
service charges and fees, bankers' acceptances and letters of credit
fees and fees on factored accounts receivable. Service
37
charges increased $47 million to $1.7 billion for the six months ended
June 30, 2000 due to an increase in both consumer and corporate
service charges. Consumer service charges increased $26 million
primarily due to overdraft charges and general banking service fees.
Corporate service charges increased $21 million primarily attributable
to general banking service fees and bankers' acceptances and letters
of credit fee income.
o Mortgage servicing income increased $7 million to $264 million for the
six months ended June 30, 2000, primarily reflecting higher mortgage
servicing fees and slower prepayment speeds which was partially offset
by lower origination activity. The average managed portfolio of
mortgage loans serviced increased $42.1 billion and $46.5 billion to
$328.1 billion and $324.7 billion for the three months and six months
ended June 30, 2000, respectively. Total production of first mortgage
loans originated through the Corporation decreased $7.3 billion and
$15.4 billion to $14.4 billion and $27.8 billion for the three months
and six months ended June 30, 2000, respectively, reflecting a
slowdown in refinancings as a result of a general increase in levels
of interest rates. First mortgage loan origination volume for the
three months and six months ended June 30, 2000 was composed of
approximately $6.1 billion and $11.1 billion, respectively, of retail
loans and $8.3 billion and $16.7 billion, respectively, of
correspondent and wholesale loans.
In conducting its mortgage production activities, the Corporation is
exposed to interest rate risk for the periods between the loan
commitment date and the loan funding date. To manage this risk, the
Corporation enters into various financial instruments including
forward delivery and option contracts. The notional amount of such
contracts was $5.2 billion at June 30, 2000 with associated net
unrealized losses of $27 million. At December 31, 1999, the notional
amount of such contracts was $2.7 billion with associated net
unrealized gains of $18 million. These contracts have an average
expected maturity of less than 90 days. To manage risk associated with
changes in prepayment rates and the impact on mortgage servicing
rights, the Corporation uses various financial instruments including
options and certain swap contracts. At June 30, 2000, deferred net
gains from mortgage servicing rights hedging activity were $53
million, comprised of unamortized realized deferred gains of $229
million and unrealized losses of $176 million on closed and open
positions, respectively. At December 31, 1999, deferred net losses
from mortgage servicing rights hedging activity were $20 million,
comprised of unamortized realized deferred gains of $313 million and
unrealized losses of $333 million on closed and open positions,
respectively. Notional amounts of hedge instruments used for mortgage
servicing rights hedging activities were $47.7 billion and $43.4
billion at June 30, 2000 and December 31, 1999, respectively.
Asset Management
o Noninterest income for Asset Management increased $6 million to $830
million for the six months ended June 30, 2000. The increase was primarily
attributable to increased investment and brokerage services offset by gains
in 1999 on the disposition of certain businesses.
o Investment and brokerage services include personal and institutional
asset management fees and consumer brokerage fees. Income from
investment and brokerage services increased $54 million to $761
million for the six months ended June 30, 2000. This increase was
primarily attributable to higher revenue from consumer investment and
brokerage services reflecting new business and market growth.
38
Global Corporate and Investment Banking
o Noninterest income for Global Corporate and Investment Banking increased
$675 million to $3.2 billion for the six months ended June 30, 2000. The
increase was due to increases in equity investment gains, trading account
profits, investment banking income and corporate service charges.
o Equity investment gains include investments in both principal
investing and strategic technology areas. Equity investment gains were
$134 million for the three months ended June 30, 2000 and 1999 and
increased $408 million to $697 million for the six months ended June
30, 2000. For the three months ended June 30, 2000, equity investment
gains included realized cash returns on equity investments of $221
million, partially offset by fair value depreciation of $87 million.
For the six months ended June 30, 2000, equity investment gains
included realized returns on equity investments of $595 million and
net appreciation in fair value of $102 million.
o Trading account profits represent the net amount earned from the
Corporation's trading positions, which include trading account assets
and liabilities as well as derivative-dealer positions. These
transactions include positions to meet customer demand as well as for
the Corporation's own trading account. Trading positions are taken in
a diverse range of financial instruments and markets. The
profitability of these trading positions is largely dependent on the
volume and type of transactions, the level of risk assumed, and the
volatility of price and rate movements. Trading account profits, as
reported in the Corporation's Consolidated Statement of Income,
includes neither the net interest recognized on interest-earning and
interest-bearing trading positions, nor the related funding charge or
benefit. Trading account profits, as well as trading-related net
interest income ("trading-related revenue") are presented in the table
below as they are both considered in evaluating the overall
profitability of the Corporation's trading positions. Trading-related
revenue is derived from foreign exchange spot, forward and
cross-currency contracts, fixed income and equity securities and
derivative contracts in interest rates, equities, credit and
commodities.
Trading-related revenue increased $468 million to $1.7 billion for the
six months ended June 30, 2000, primarily due to higher revenues from
interest rate contracts and equities, partially offset by decreases in
foreign exchange contracts and fixed income. Income from interest rate
contracts increased $136 million to $476 million for the six months
ended June 30, 2000. The increase was primarily attributable to market
volatility driven by interest rate uncertainty, coupled with stronger
client activity in domestic and international markets. Revenue from
equities increased $402 million to $624 million for the six months
ended June 30, 2000. The increase reflects continued growth of this
business through enhanced client deal activity and volatility in
equity markets. Fixed income decreased $52 million to $244 million for
the six months ended June 30, 2000, primarily attributable to spread
widening and a decline in customer demand.
39
o Investment banking income decreased $48 million and increased $116
million to $373 million and $770 million for the three months and six
months ended June 30, 2000, respectively. The decrease for the three
months ended June 30, 2000, primarily reflects lower other investment
banking fees and high yield securities underwriting fees, partially
offset by higher equity securities underwriting fees. The increase for
the six months ended June 30, 2000 primarily reflects an increase of
$109 million in securities underwriting fees, attributable to
continued growth in equity underwriting. Syndication fees increased
$64 million to $254 million for the six months ended June 30, 2000.
The increase reflects the Corporation's continued strong position as
lead arranger on syndications. Advisory services fees increased $34
million to $158 million for the six months ended June 30, 2000. The
increase was primarily attributable to strong revenue from a higher
volume of merger and acquisition deals in the first quarter.
Investment banking income by major activity follows:
o Service charges increased $60 million for the six months ended June
30, 2000. The increase was primarily attributable to higher corporate
service charges driven by an increase in general banking fees and
deposit account service charges, partially offset by a decline in
bankers' acceptances and letters of credit.
Other income for the Corporation decreased $366 million to $371 million for
the six months ended June 30, 2000 reflecting the absence of securitization
gains and lower loan sales gains.
40
Other Noninterest Expense
As presented in Table Six, the Corporation's other noninterest expense
decreased $44 million and increased $126 million to $4.4 billion and $9.0
billion for the three months and six months ended June 30, 2000, respectively,
from the comparable 1999 periods. The decrease for the three months ended was
primarily attributable to declines in professional fees and data processing
fees, partially offset by an increase in personnel and other general operating
expense. The increase for the six months ended was primarily attributable to
personnel and other general operating expenses, partially offset by decreases in
equipment, professional fees and data processing expenses.
Table Six
Other Noninterest Expense
o Personnel expense increased $50 million and $251 million to $2.3 billion
and $4.8 billion for the three months and six months ended June 30, 2000,
respectively. The increase was primarily attributable to higher employee
benefits and higher revenue-related incentive compensation for both
periods.
o Equipment expense decreased $43 million and $100 million to $296 million
and $597 million for the three months and six months ended June 30, 2000,
respectively. For both periods, the decreases reflect a decline in repairs
and maintenance expense and a reduction in purchases of non-capitalized
equipment.
o Marketing expense decreased $15 million and $43 million to $132 million and
$251 million for the three months and six months ended June 30, 2000,
respectively, primarily due to timing differences related to the underlying
marketing efforts across the Corporation.
o Professional fees declined $73 million and $94 million to $93 million and
$198 million for the three months and six months ended June 30, 2000,
respectively. For both periods, the declines primarily reflect lower
consulting fees.
o Data processing expense decreased $45 million and $76 million to $169
million and $328 million for the three months and six months ended June 30,
2000, respectively. For both periods, the decreases primarily reflect
declines in software-related expense, item processing and check clearing
expense.
o Other general operating expense increased $59 million and $154 million to
$505 million and $1.0 billion for the three months and six months ended
June 30, 2000, respectively. For the three months ended June 30, 2000, the
increase primarily reflects an increase in other operating expense and
credit card processing expense, partially offset by lower miscellaneous
employee expenses. For the six months ended June 30, 2000, the increase
primarily reflects litigation costs from the first quarter related to
pre-Merger lawsuits.
41
Income Taxes
The Corporation's income tax expense for the three months and six months
ended June 30, 2000 was $1.2 billion and $2.5 billion, respectively, for an
effective tax rate of 36.6 percent. Excluding merger-related charges, income tax
expense for the three months and six months ended June 30, 1999 was $1.2 billion
and $2.2 billion, respectively, for an effective tax rate of 36.0 percent.
Balance Sheet Review and Liquidity Risk Management
The Corporation utilizes an integrated approach in managing its balance
sheet which includes management of interest rate sensitivity, credit risk,
liquidity risk and its capital position. The discussion of average balances
below compares the six months ended June 30, 2000 to the same period in 1999.
With the exception of average managed loans, the average balances discussed
below can be derived from Table Four.
Average levels of customer-based funds increased $7.9 billion to $298.0
billion for the six months ended June 30, 2000 primarily due to an increase in
noninterest-bearing demand and savings deposits. As a percentage of total
sources, average levels of customer-based funds decreased to 45 percent for the
six months ended June 30, 2000 from 47 percent.
Average levels of market-based funds increased $25.0 billion for the six
months ended June 30, 2000 to $206.8 billion. In addition, average levels of
long-term debt increased $11.5 billion to $67.0 billion for the six months ended
June 30, 2000 mainly the result of borrowings to fund earning asset growth,
business development opportunities, build liquidity, repay maturing debt and
fund share repurchases.
The average securities portfolio for the six months ended June 30, 2000
increased $10.0 billion to $86.8 billion, representing 13 percent of total uses
of funds for the six months ended June 30, 2000. See the following "Securities"
section for additional information on the securities portfolio.
Average loans and leases, the Corporation's primary use of funds, increased
$21.2 billion to $384.0 billion for the six months ended June 30, 2000.
Adjusting for securitizations, sales and divestitures, average managed loans and
leases increased $38.7 billion to $412.2 billion for the six months ended June
30, 2000. This increase was primarily due to strong consumer loan growth of
$32.5 billion or 19 percent annualized growth.
The majority of consumer loan growth occurred in residential real estate
secured loan products including residential mortgages, home equity lines and
consumer finance. Average managed residential mortgages increased $21.6 billion
to $92.5 billion, reflecting increased originations of adjustable-rate mortgages
and the retention of these products on the balance sheet. Average managed
consumer finance loans increased $7.6 billion to $32.0 billion. Average managed
home equity lines increased $2.6 billion to $18.3 billion, reflecting the impact
of new marketing programs and lower prepayments.
Average managed commercial loans increased $6.2 billion to $205.0 billion
for the six months ended June 30, 2000. Domestic commercial loans reflected
growth of $7.8 billion to $151.1 billion, due to strong growth in the Consumer
and Commercial Banking and Asset Management business segments. This domestic
growth was partially offset by strategic reductions in foreign commercial loans
of $2.5 billion.
Average other assets and cash and cash equivalents increased $3.4 billion
to $89.0 billion for the six months ended June 30, 2000 due largely to increases
in the average balances of derivative-dealer assets and mortgage servicing
rights.
At June 30, 2000, cash and cash equivalents were $27.5 billion, an increase
of $504 million from December 31, 1999. During the six months ended June 30,
2000, net cash used in operating activities was $4.7 billion, net cash used in
investing activities was $32.2 billion and net cash provided by financing
activities was $37.4 billion. For further information on cash flows, see the
Consolidated Statement of Cash Flows of the consolidated financial statements.
42
Liquidity is a measure of the Corporation's ability to fulfill its cash
requirements and is managed by the Corporation through its asset and liability
management process. The Corporation monitors its assets and liabilities and
modifies these positions as liquidity requirements change. This process, coupled
with the Corporation's ability to raise capital and debt financing, is designed
to cover the liquidity needs of the Corporation. The Corporation also takes into
consideration the ability of its subsidiary banks to pay dividends to the
Corporation. For additional information on the dividend capabilities of
subsidiary banks, see Note Twelve of the Corporation's 1999 Annual Report on
Form 10-K. Management believes that the Corporation's sources of liquidity are
more than adequate to meet its cash requirements.
Securities
The securities portfolio at June 30, 2000 consisted of available-for-sale
securities totaling $79.5 billion compared to $81.7 billion at December 31,
1999. Held-for-investment securities totaled $1.4 billion at June 30, 2000 and
December 31, 1999.
The valuation allowance for available-for-sale and marketable equity
securities is included in shareholders' equity. At June 30, 2000 the valuation
allowance consists of unrealized losses of $2.4 billion, net of related income
taxes of $1.3 billion, primarily reflecting market valuation adjustments of $3.6
billion pre-tax net unrealized losses on available-for-sale securities and $5
million pre-tax net unrealized gains on marketable equity securities. At
December 31, 1999 the valuation allowance reflects unrealized losses of $2.5
billion, net of related income taxes of $1.1 billion, primarily reflecting
market valuation adjustments of $3.8 billion pre-tax net unrealized losses on
available-for-sale securities and $248 million pre-tax net unrealized gains on
marketable equity securities.
At June 30, 2000 and December 31, 1999, the market value of the
Corporation's held-for-investment securities reflected pre-tax net unrealized
losses of $127 million and $152 million, respectively.
The estimated average duration of the available-for-sale securities
portfolio was 3.95 years at June 30, 2000 compared to 4.05 years at December 31,
1999.
Capital Resources and Capital Management
Shareholders' equity at June 30, 2000 was $45.9 billion compared to $44.4
billion at December 31, 1999, an increase of $1.5 billion. The increase was
primarily due to net earnings (net income less dividends) of $2.6 billion,
partially offset by the repurchase of 34 million shares of common stock for
approximately $1.6 billion. The remaining increase of $500 million was due to
the exercise of employee stock options, the issuance of restricted stock and
changes in net unrealized gains on available-for-sale and marketable equity
securities.
Through June 30, 2000, the Corporation had repurchased 112 million common
shares under a 130 million share authorization enacted on June 23, 1999 by the
Corporation's Board of Directors (the Board). On July 26, 2000, the Board
authorized a new stock repurchase program of up to 100 million shares of the
Corporation's common stock at an aggregate cost of up to $7.5 billion.
43
Presented below are the regulatory risk-based capital ratios and capital
amounts for the Corporation and Bank of America, N.A. at June 30, 2000 and
December 31, 1999. The Corporation and Bank of America, N.A. were considered
"well-capitalized" at June 30, 2000.
The regulatory capital guidelines measure capital in relation to the credit
and market risks of both on- and off-balance sheet items using various risk
weights. Under the regulatory capital guidelines, Total Capital consists of
three tiers of capital. Tier 1 Capital includes common shareholders' equity and
qualifying preferred stock less goodwill and other adjustments. Tier 2 Capital
consists of preferred stock not qualifying as Tier 1 Capital, mandatory
convertible debt, limited amounts of subordinated debt, other qualifying term
debt and the allowance for credit losses up to 1.25 percent of risk-weighted
assets. Tier 3 Capital includes subordinated debt that is unsecured, fully paid,
has an original maturity of at least two years, is not redeemable before
maturity without prior approval by the Federal Reserve Board and includes a
lock-in clause precluding payment of either interest or principal if the payment
would cause the issuing bank's risk-based capital ratio to fall or remain below
the required minimum. The sum of Tier 1 and Tier 2 Capital less investments in
unconsolidated banking and finance subsidiaries represents qualifying total
capital, at least 50 percent of which must consist of Tier 1 Capital. Risk-based
capital ratios are calculated by dividing Tier 1 and Total Capital by
risk-weighted assets. In calculating risk-weighed assets, assets and off-balance
sheet exposures are assigned to one of four categories of risk-weights, based
primarily on relative credit risk. At June 30, 2000, the Corporation had no
subordinated debt that qualified as Tier 3 Capital.
At June 30, 2000, the regulatory risk-based capital ratios of the
Corporation and Bank of America, N.A. exceeded the regulatory minimums of four
percent for Tier 1 risk-based capital ratio, eight percent for total risk-based
capital ratio and the leverage guidelines of 100 to 200 basis points above the
minimum ratio of three percent.
Credit Risk Management and Credit Portfolio Review
The following section discusses credit risk in the loan portfolio. The
Corporation's primary credit exposure is concentrated in its loans and leases
portfolio, which totaled $400.8 billion and $370.7 billion at June 30, 2000 and
December 31, 1999, respectively. In an effort to minimize the adverse impact of
any single event or set of occurrences, the Corporation strives to maintain a
diverse credit portfolio. Table Seven presents the distribution of loans and
leases, nonperforming assets and net charge-offs by category. Additional
information on the Corporation's real estate, industry and foreign exposure can
be found in the Concentrations of Credit Risk section beginning on page 50.
44
- --------------------------------------------------------------------------------
Table Seven
Distribution of Loans and Leases, Nonperforming Assets and Net Charge-offs
n/m = not meaningful
(1) Percentage amounts are calculated as net charge-offs divided by average
oustanding loans and leases for each loan category.
(2) Includes both on-balance sheet and securitized loans.
45
Commercial Portfolio
Commercial - domestic loans outstanding totaled $150.6 billion and $143.5
billion at June 30, 2000 and December 31, 1999 or 38 percent and 39 percent of
total loans and leases, respectively. The Corporation had commercial - domestic
loan net charge-offs of $398 million, or 0.55 percent of average commercial -
domestic loans for the six months ended June 30, 2000, compared to $328 million,
or 0.48 percent of average commercial - domestic loans for the six months ended
June 30, 1999. Net charge-offs increased primarily due to a single fraud-related
credit. Nonperforming commercial - domestic loans were $1.5 billion, or 1.02
percent of commercial - domestic loans at June 30, 2000, compared to $1.2
billion, or 0.81 percent of commercial - domestic loans at December 31, 1999.
Commercial - domestic loans past due 90 days or more and still accruing interest
were $168 million at June 30, 2000, compared to $135 million at December 31,
1999, or 0.11 and 0.09 percent of commercial - domestic loans, respectively.
Commercial - foreign loans outstanding totaled $30.6 billion and $28.0
billion at June 30, 2000 and December 31, 1999, respectively, or eight percent
of total loans and leases for both periods. The Corporation had commercial -
foreign loan net charge-offs for the six months ended June 30, 2000 of $29
million, or 0.21 percent of average commercial - foreign loans, compared to $113
million, or 0.74 percent of average commercial - foreign loans for the six
months ended June 30, 1999. Nonperforming commercial - foreign loans were $588
million, or 1.92 percent of commercial - foreign loans at June 30, 2000,
compared to $486 million, or 1.74 percent at December 31, 1999. Commercial -
foreign loans past due 90 days or more and still accruing interest were $65
million at June 30, 2000, compared to $58 million at December 31, 1999, or 0.21
percent of commercial - foreign loans for both periods. For additional
information see the Regional Foreign Exposure discussion beginning on page 51.
Commercial real estate - domestic loans totaled $26.1 billion and $24.0
billion at June 30, 2000 and December 31, 1999, respectively, or seven percent
of total loans and leases for both periods. Net charge-offs remained negligible
at $12 million, or 0.09 percent of average commercial real estate - domestic
loans for the six months ended June 30, 2000. Nonperforming commercial real
estate - domestic loans were $164 million at June 30, 2000, compared to $191
million at December 31, 1999. At June 30, 2000, commercial real estate -
domestic loans past due 90 days or more and still accruing interest were $20
million, or 0.08 percent of total commercial real estate - domestic loans,
compared to $6 million, or 0.02 percent at December 31, 1999. Table Nine
displays commercial real estate loans by geographic region and property type,
including the portion of such loans which are nonperforming, and other real
estate credit exposures.
Table Ten presents aggregate commercial loan and lease exposures by certain
significant industries.
Consumer Portfolio
At June 30, 2000 and December 31, 1999, total consumer loans outstanding
totaled $193.3 billion and $174.9 billion, respectively, or 48 percent and 47
percent of total loans and leases, respectively, of which approximately 70
percent were secured by first and second mortgages on residential real estate.
Additional information on components of, and changes in the Corporation's
consumer loan portfolio can be found in the average earning asset discussion
within the "Net Interest Income" section on page 32 and "Balance Sheet Review
and Liquidity Risk Management" section on page 42.
Residential mortgage loans increased to $94.1 billion at June 30, 2000,
compared to $81.9 billion at December 31, 1999. Net charge-offs on residential
mortgage loans remained negligible at $8 million, or 0.02 percent of average
residential mortgage loans for the six months ended June 30, 2000. Nonperforming
residential mortgage loans decreased $24 million to $505 million at June 30,
2000 compared to $529 million at December 31, 1999.
Consumer bankcard receivables increased to $10.3 billion at June 30, 2000,
compared to $9.0 billion at December 31, 1999. Net charge-offs on bankcard
receivables for the six months ended June 30, 2000 decreased $150 million from
the same period in 1999 to $158 million, or 3.56 percent of average bankcard
receivables. The decrease resulted from portfolio sales in 1999 and continued
declines in delinquency levels and bankruptcy filing rates resulting in lower
charge-offs. Bankcard loans past due 90 days and still accruing interest were
$112 million, or 1.09 percent of bankcard receivables at June 30, 2000, compared
to $138 million, or 1.53 percent at December 31, 1999.
46
Consumer finance loans outstanding totaled $24.7 billion and $22.3 billion
at June 30, 2000 and December 31, 1999, respectively, or six percent of total
loans and leases for both periods. The Corporation had consumer finance net
charge-offs of $116 million or 0.99 percent of average consumer finance loans
for the six months ended June 30, 2000, compared to $90 million, or 1.08 percent
for the six months ended June 30, 1999. Consumer finance nonperforming loans
increased to $826 million at June 30, 2000 from $598 million at December 31,
1999 reflecting continued growth and seasoning in this portfolio.
Other domestic consumer loans, which include direct and indirect consumer
loans and home equity lines of credit increased to $62.0 billion at June 30,
2000, compared to $59.4 billion at December 31, 1999.
Excluding bankcard, total consumer loans past due 90 days or more and still
accruing interest were $117 million or 0.06 percent of total consumer loans at
June 30, 2000, compared to $184 million or 0.11 percent at December 31, 1999.
Nonperforming Assets
As presented in Table Seven, nonperforming assets increased to $3.9 billion
or 0.97 percent of loans, leases and foreclosed properties at June 30, 2000 from
$3.2 billion or 0.86 percent at December 31, 1999. Nonperforming loans increased
to $3.7 billion at June 30, 2000 from $3.0 billion at December 31, 1999,
primarily due to several large commercial - domestic loans not concentrated in
any single industry or region and higher consumer finance non-performers
resulting from growth and seasoning in that portfolio. The allowance coverage of
nonperforming loans was 185 percent at June 30, 2000 compared to 224 percent at
December 31, 1999. Foreclosed properties increased to $195 million at June 30,
2000 compared to $163 million at December 31, 1999.
In order to respond when deterioration of a credit occurs, internal loan
workout units are devoted to providing specialized expertise and full-time
management and/or collection of certain nonperforming assets as well as certain
performing loans. Management believes concerted collection strategies and a
proactive approach to managing overall problem assets have expedited the
disposition, collection and renegotiation of nonperforming and other
lower-quality assets. As part of this process, management routinely evaluates
all reasonable alternatives, including the sale of assets individually or in
groups, and selects the optimal strategy.
Note Four of the consolidated financial statements provides the reported
investment in specific loans considered to be impaired at June 30, 2000 and
December 31, 1999. The Corporation's investment in specific loans that were
considered to be impaired at June 30, 2000 was $2.5 billion, compared to $2.1
billion at December 31, 1999. Commercial - domestic impaired loans increased
$363 million to $1.5 billion at June 30, 2000, compared to December 31, 1999.
Commercial - foreign impaired loans increased $82 million to $585 million at
June 30, 2000 compared to December 31, 1999. Commercial real estate - domestic
impaired loans decreased $58 million to $391 million at June 30, 2000, compared
to December 31, 1999.
Allowance for Credit Losses
The Corporation performs periodic and systematic detailed reviews of its
loan and lease portfolios to identify risks inherent in and to assess the
overall collectibility of those portfolios. Certain homogeneous loan portfolios
are evaluated collectively based on individual loan type while remaining
portfolios are reviewed on an individual loan basis. These detailed reviews,
combined with historical loss experience and other factors, result in the
identification and quantification of specific allowances for credit losses and
47
loss factors which are used in determining the amount of the allowance and
related provision for credit losses. The actual amount of incurred credit losses
that may be confirmed may vary from the estimate of incurred losses due to
changing economic conditions or changes in industry or geographic
concentrations. The Corporation has procedures in place to monitor differences
between estimated and actual incurred credit losses. These procedures include
detailed periodic assessments by senior management of both individual loans and
credit portfolios and the models used to estimate incurred credit losses in
those portfolios.
Portions of the allowance for credit losses are assigned to cover the
estimated probable incurred losses in each loan and lease category based on the
results of the Corporation's detailed review process as described above. Further
assignments are made based on general and specific economic conditions, as well
as performance trends within specific portfolio segments and individual
concentrations of credit, including geographic and industry concentrations. The
assigned portion of the allowance for credit losses continues to be weighted
toward the commercial loan portfolio, which reflects a higher level of
nonperforming loans and the potential for higher individual losses. The
remaining unassigned portion of the allowance for credit losses, determined
separately from the procedures outlined above, addresses certain industry and
geographic concentrations, including global economic conditions. This procedure
helps to minimize the risk related to the margin of imprecision inherent in the
estimation of the assigned allowance for credit losses. Due to the subjectivity
involved in the determination of the unassigned portion of the allowance for
credit losses, the relationship of the unassigned component to the total
allowance for credit losses may fluctuate from period to period. Management
evaluates the adequacy of the allowance for credit losses based on the combined
total of the assigned and unassigned components and believes that the allowance
for credit losses reflects management's best estimate of incurred credit losses
as of the balance sheet date.
The nature of the process by which the Corporation determines the
appropriate allowance for credit losses requires the exercise of considerable
judgment. After review of all relevant matters affecting loan collectibility,
management believes that the allowance for credit losses is appropriate given
its analysis of estimated incurred credit losses at June 30, 2000. Table Eight
provides the changes in the allowance for credit losses for the three months and
six months ended June 30, 2000 and 1999.
48
Table Eight
Allowance For Credit Losses
49
Concentrations of Credit Risk
In an effort to minimize the adverse impact of any single event or set of
occurrences, the Corporation strives to maintain a diverse credit portfolio as
outlined in Tables Seven, Nine, Ten and Eleven.
The Corporation maintains an extremely diverse commercial loan portfolio,
representing 52 percent of total loans and leases, with the largest
concentration in commercial real estate, which represents seven percent of total
loans and leases. The exposure presented in Table Nine represents credit
extensions for real estate-related purposes to borrowers or counterparties who
are primarily in the real estate development or investment business and for
which the ultimate repayment of the credit is dependent on the sale, lease,
rental or refinancing of the real estate. The exposure included in the table
does not include credit extensions which were made on the general
creditworthiness of the borrower for which real estate was obtained as security
and for which the ultimate repayment of the credit is not dependent on the sale,
lease, rental or refinancing of the real estate. Accordingly, the exposure
presented does not include commercial loans secured by owner-occupied real
estate, except where the borrower is a real estate developer.
Table Nine
Commercial Real Estate Loans, Foreclosed Properties
and Other Real Estate Credit Exposure
(1) Foreclosed properties include commercial real estate loans only.
(2) Other credit exposure include letters of credit and loans held for sale.
(3) Distribution based on geographic location of collateral.
50
Table Ten below presents aggregate commercial loan and lease exposures by
certain significant industries at June 30, 2000. Total commercial loans
outstanding, excluding commercial real estate loans, comprised 45 percent of
total loans and leases at June 30, 2000. No commercial industry concentration is
greater than three percent of total loans and leases.
Table Ten
Significant Industry Loans and Leases (1)
- -------------------------------------------------------------------------------
June 30, 2000
Percent of Total
(Dollars in millions) Outstanding Loans and Leases
- -------------------------------------------------------------------------------
Transportation $11,613 2.9 %
Media 10,360 2.6
Equipment and general manufacturing 9,140 2.3
Business services 8,879 2.2
Healthcare 8,204 2.0
Telecommunications 7,743 1.9
Agribusiness 7,592 1.9
Retail 7,513 1.9
Autos 6,815 1.7
Oil and gas 6,087 1.5
- -------------------------------------------------------------------------------
(1) Includes only non-real estate commercial loans and leases.
Regional Foreign Exposure
Through its credit and market risk management activities, the Corporation
has been devoting particular attention to those countries negatively impacted by
global economic pressure. These include certain Asian countries as well as
countries within Latin America and Eastern Europe that have experienced currency
and other economic problems.
In connection with its efforts to maintain a diversified portfolio, the
Corporation limits its exposure to any one geographic region or country and
monitors this exposure on a continuous basis. Table Eleven sets forth selected
regional foreign exposure at June 30, 2000. At June 30, 2000, the Corporation's
total exposure to these select countries was $31.8 billion, an increase of $4.0
billion from December 31, 1999, primarily due to increased levels of Japanese
government securities. Table Eleven is based on the Federal Financial
Institutions Examination Council's instructions for periodic reporting of
foreign exposures. The table has been expanded to include "Gross Local Country
Claims" as defined in the table below and may not be consistent with disclosures
by other financial institutions.
51
Table Eleven
Regional Foreign Exposure
(1) Includes the following claims by the Corporation's foreign offices on local
country residents regardless of the currency: loans, accrued interest
receivable, acceptances, time deposits placed, trading account assets,
other interest-earning investments, other short-term monetary assets,
unused commitments, standby letters of credit, commercial letters of
credit, formal guarantees, and available-for-sale (at fair value) and
held-for-investment (at cost) securities.
(2) All instruments in (1) that are cross-border claims excluding loans but
including derivative-dealer assets (at fair value) and available-for-sale
(at fair value) and held-for-investment (at cost) securities that are
collateralized by U.S. Treasury securities as follows: Mexico - $1,142,
Venezuela - $171, Philippines - $21 and Latin America Other - $78.
Held-for-investment securities (at cost) amounted to $772 with a fair value
of $634.
International Developments
In recent years, a number of countries in Asia, Latin America and Central
and Eastern Europe experienced economic difficulties due to a combination of
structural problems and negative market reaction that resulted from increased
awareness of these problems. While each country's situation is unique, many
share common factors such as: (1) government actions which restrain normal
functioning of free markets in physical goods, capital and/or currencies; (2)
perceived weaknesses of the banking systems; and (3) perceived overvaluation of
local currencies and/or pegged exchange rate systems. These factors resulted in
capital movement out of these countries or in reduced capital inflows;
accordingly, many of these countries experienced liquidity problems in addition
to the structural problems.
52
Since 1999, many of the Asian economies have been showing signs of recovery
from prior troubles. In the first and second quarters of 2000, they continued to
strengthen their recovery despite the higher interest rates in international
markets. They have also slowly implemented structural reforms to prevent
problems from recurring. However, there can be no assurance that this will
continue and setbacks could occur. Since early 1999, several Latin American
economies have replaced their pegged exchange rate systems with free-floating
currencies. While sustained recovery is not assured, much of Latin America is
showing signs of recovery.
Where appropriate, the Corporation has adjusted its activities (including
its borrower selection) in light of the risks and opportunities discussed above.
Throughout 1999, the Corporation continued to reduce its exposure in Asia, Latin
America and Central and Eastern Europe, adjusting to the changing economic
conditions. During the second quarter of 2000, exposure in Central and Eastern
Europe decreased slightly while exposure in Asia and Latin America increased,
corresponding with the upturn in economic activity in those regions. The
Corporation will continue to monitor and adjust its foreign activities on a
country-by-country basis depending on management's judgment of the likely
developments in each country and will take action as deemed appropriate.
Market Risk Management
In the normal course of conducting its business activities, the Corporation
is exposed to market risks including price and liquidity risk. Market risk is
the potential of loss arising from adverse changes in market rates and prices,
such as interest rates (interest rate risk), foreign currency exchange rates
(foreign exchange risk), commodity prices (commodity risk) and prices of equity
securities (equity risk). Financial products that expose the Corporation to
market risk include securities, loans, deposits, debt and derivative financial
instruments such as futures, forwards, swaps, options and other financial
instruments with similar characteristics. Liquidity risk arises from the
possibility that the Corporation may not be able to satisfy current or future
financial commitments or that the Corporation may be more reliant on alternative
funding sources such as long-term debt.
Market risk is managed by the Corporation's Finance Committee, which
formulates policy based on desirable levels of market risk. In setting desirable
levels of market risk, the Finance Committee considers the impact on both
earnings and capital of the current outlook in market rates, potential changes
in market rates, world and regional economies, liquidity, business strategies
and other factors.
53
Trading Portfolio
The table below sets forth the calculated value-at-risk (VAR) amounts for
the twelve months ended June 30, 2000 and 1999. The amounts are calculated on a
pre-tax basis. The Corporation performs the VAR calculation for each major
trading portfolio segment on a daily basis. It then calculates the combined VAR
across these portfolio segments using two different sets of assumptions. The
first calculation assumes that each portfolio segment experiences adverse price
movements at the same time (i.e., the price movements are perfectly correlated).
The second calculation assumes that these adverse price movements within the
major portfolio segments do not occur at the same time (i.e., they are
uncorrelated). Interest rate and foreign exchange risks were generally lower for
the twelve months ended June 30, 2000 than for the twelve months ended June 30,
1999 due to the decreased emphasis on proprietary risk-taking and the increased
volume of customer flow. Equity risk was generally higher for the twelve months
ended June 30, 2000 than for the twelve months ended June 30, 1999 due to growth
in the customer equity and equity derivatives businesses. For additional
discussion of market risk associated with the trading portfolio, the VAR model
and how the Corporation manages its exposure to market risk, see pages 42 and 43
of the Corporation's 1999 Annual Report on Form 10-K. The composition of the
trading portfolio and the related fair value are included in Note Three of the
consolidated financial statements.
Trading Activities Market Risk
(1) The high and low for the entire trading account may not equal the sum of the
individual components as the highs or lows of the components occurred on
different trading days.
Asset and Liability Management Activities
Non-Trading Portfolio
The Corporation's Asset and Liability Management (ALM) process is used to
manage interest rate risk through the structuring of balance sheet and
off-balance sheet portfolios and identifying and linking such off-balance sheet
positions to specific assets and liabilities. Interest rate risk represents the
only material market risk exposure to the Corporation's non-trading on-balance
sheet financial instruments.
Available-for-sale securities had an unrealized loss of $3.6 billion at
June 30, 2000, compared to an unrealized loss of $3.8 billion at December 31,
1999. The expected maturities, unrealized gains and losses and weighted average
effective yield and rate associated with the Corporation's other significant
non-trading on-balance sheet financial instruments at June 30, 2000 were not
significantly different from those at December 31, 1999. For a discussion of
non-trading on-balance sheet financial instruments, see page 43 and Table
Eighteen on page 44 of the "Market Risk Management" section of the Corporation's
1999 Annual Report on Form 10-K.
Interest Rate and Foreign Exchange Contracts
Risk management interest rate contracts and foreign exchange contracts are
utilized in the ALM process. Interest rate contracts, which are generally
non-leveraged generic interest rate and basis swaps, options, futures and
forwards, allow the Corporation to effectively manage its interest rate risk
position. In addition, the Corporation uses foreign currency contracts to manage
the foreign exchange risk associated
54
with foreign-denominated assets and liabilities, as well as the Corporation's
equity investments in foreign subsidiaries. As reflected in Table Twelve, the
notional amount of the Corporation's receive fixed and pay fixed interest rate
swaps at June 30, 2000 was $55.2 billion and $18.6 billion, respectively. The
receive fixed interest rate swaps are primarily converting variable-rate
commercial loans to fixed-rate. The net receive fixed position at June 30, 2000
was $36.6 billion notional compared to $37.3 billion notional at December 31,
1999. The Corporation had $7.8 billion notional and $8.0 billion notional of
basis swaps at June 30, 2000 and December 31, 1999, respectively, linked
primarily to loans and long-term debt. The Corporation had $42.9 billion
notional and $35.1 billion notional of option products at June 30, 2000 and
December 31, 1999, respectively. In addition, open foreign exchange contracts at
June 30, 2000 had a notional amount of $6.0 billion compared to $6.2 billion at
December 31, 1999.
Table Twelve also summarizes the expected maturity and the average estimated
duration, weighted average receive and pay rates and the net unrealized gains
and losses at June 30, 2000 and December 31, 1999 of the Corporation's open ALM
interest rate swaps, as well as the expected maturity and net unrealized gains
and losses at June 30, 2000 and December 31, 1999 of the Corporation's open ALM
basis swaps, options, futures and forward rate and foreign exchange contracts.
Unrealized gains and losses are based on the last repricing and will change in
the future primarily based on movements in one-, three- and six-month LIBOR
rates. The ALM swap portfolio had a net unrealized loss of $1.5 billion and $1.6
billion at June 30, 2000 and December 31, 1999, respectively. The ALM option
products had a net unrealized (loss) gain of $(146) million and $5 million at
June 30, 2000 and December 31, 1999, respectively. At June 30, 2000 and December
31, 1999, open foreign exchange contracts had a net unrealized loss of $200
million and $30 million, respectively.
The amount of unamortized net realized deferred gains associated with
closed ALM swaps was $99 million and $174 million at June 30, 2000 and December
31, 1999, respectively. The amount of unamortized net realized deferred gains
associated with closed ALM options was $112 million and $82 million at June 30,
2000 and December 31, 1999, respectively. The amount of unamortized net realized
deferred losses associated with closed ALM futures and forward contracts was $19
million and $21 million at June 30, 2000 and December 31, 1999, respectively.
There were no unamortized net realized deferred gains or losses associated with
closed foreign exchange contracts at June 30, 2000 and December 31, 1999.
Management believes the fair value of the ALM interest rate and foreign
exchange portfolios should be viewed in the context of the overall balance
sheet, and the value of any single component of the balance sheet or off-balance
sheet positions should not be viewed in isolation.
For a discussion of the Corporation's management of risk associated with
mortgage production and servicing activities, see the "Noninterest Income"
section on page 37. See Note Six of the consolidated financial statements for
information on the Corporation's ALM contracts.
55
Table Twelve
Asset and Liability Management Interest Rate and Foreign Exchange Contracts
(1) Represents the unamortized net realized deferred gains associated with
closed contracts. As a result, no notional amount is reflected for expected
maturity.
56
Table Thirteen
Selected Quarterly Financial Data
(1) Cash basis calculations exclude goodwill and other intangible assets and
their related amortization expense.
57
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
See "Management's Discussion and Analysis of Results of Operations
and Financial Condition - Market Risk Management" on page 53 and the sections
referenced therein for Quantitative and Qualitative Disclosures about Market
Risk.
- --------------------------------------------------------------------------------
Part II. Other Information
- --------------------------------------------------------------------------------
Item 1. Legal Litigation
Proceedings
In the ordinary course of business, the Corporation
and its subsidiaries are routinely defendants in or
parties to a number of pending and threatened legal
actions and proceedings, including actions brought on
behalf of various classes of claimants. In certain of
these actions and proceedings, substantial money
damages are asserted against the Corporation and its
subsidiaries and certain of these actions and
proceedings are based on alleged violations of
consumer protection, securities, environmental,
banking and other laws.
The Corporation and certain present and former
officers and directors have been named as defendants
in a number of actions filed in several federal
courts that have been consolidated for pretrial
purposes before a Missouri federal court. The amended
complaint in the consolidated actions alleges, among
other things, that the defendants failed to disclose
material facts about BankAmerica's losses relating to
D.E. Shaw Securities Group, L.P. and related entities
until mid-October 1998, in violation of various
provisions of federal and state laws. The amended
complaint also alleges that the proxy
statement-prospectus of August 4, 1998, falsely
stated that the Merger would be one of equals and
alleges a scheme to have NationsBank gain control
over the newly merged entity. The Missouri federal
court has certified classes consisting generally of
persons who were stockholders of NationsBank or
BankAmerica on September 30, 1998, or were entitled
to vote on the Merger, or who purchased or acquired
securities of the Corporation or its predecessors
between August 4, 1998 and October 13, 1998. The
amended complaint substantially survived a motion to
dismiss, and discovery is underway. Claims against
certain director-defendants were dismissed with leave
to replead. Similar uncertified class actions
(including one limited to California residents
raising the claim that the proxy statement-prospectus
of August 4, 1998, falsely stated that the Merger
would be one of equals) were filed in California
state court, alleging violations of the California
Corporations Code and other state laws. The action on
behalf of California residents was certified, but has
since been dismissed and an appeal is pending. Of the
remaining actions, one has been stayed, and a motion
for class certification is pending in the other. The
Missouri federal court has enjoined prosecution of
that action as a class action. The plaintiffs who
were enjoined have appealed. The Corporation believes
the actions lack merit and will defend them
vigorously. The amount of any ultimate exposure
cannot be determined with certainty at this time.
Management believes that the actions and proceedings
and the losses, if any, resulting from the final
outcome thereof, will not be material in the
aggregate to the Corporation's financial position or
results of operations.
58
Item 2. Changes in As part of its share repurchase program, during the
Securities and Use second quarter of 2000, the Corporation sold put
Of Proceeds options to purchase an aggregate of one million
shares of Common Stock. These put options were sold
to an independent third party for an aggregate
purchase price of $6.6 million. The put option
exercise price is $48.14 per share and expires in
April 2001. The put option contracts allow the
Corporation to determine the method of settlement
(cash or stock). Each of these transactions was
exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended.
As of June 30, 2000, the Corporation had 10,000,000
put options outstanding, with exercise prices ranging
from $45.22 per share to $65.30 per share, and
expiration dates ranging from July 2000 to April
2001.
Item 4. a. The Annual Meeting of Stockholders was held on
Submission of April 25, 2000.
Matters to a Vote b. The following are the voting results on each
of Security Holders matter submitted to the stockholders:
1. To elect 18 directors
Against or
For Withheld
------------- ----------
Charles W. Coker 1,306,836,134 42,474,094
Alan T. Dickson 1,307,563,388 41,746,840
Frank Dowd, IV 1,300,993,232 48,316,996
Kathleen F. Feldstein 1,307,763,130 41,547,098
Paul Fulton 1,311,569,844 37,740,384
Donald E. Guinn 1,307,729,725 41,580,503
James H. Hance, Jr. 1,307,302,745 42,007,483
C. Ray Holman 1,307,533,084 41,777,144
W. W. Johnson 1,306,818,576 42,491,652
Kenneth D. Lewis 1,307,341,106 41,969,122
Walter E. Massey 1,307,140,279 42,169,949
Hugh L. McColl, Jr. 1,206,328,121 142,982,107
O. Temple Sloan, Jr. 1,291,098,617 58,211,611
Meredith R. Spangler 1,311,797,001 37,513,227
Ronald Townsend 1,307,082,798 42,227,430
Solomon D. Trujillo 1,312,560,600 36,749,628
Jackie M. Ward 1,306,473,551 42,836,677
Virgil R. Williams 1,298,918,344 50,391,884
59
2. To consider and act upon a proposal to ratify the action of the Board
of Directors in selecting PricewaterhouseCoopers LLP as independent
public accountants to audit the books of the Corporation and its
subsidiaries for the current year
Against or
For Withheld Abstentions
------------- ---------- -----------
1,333,242,115 9,587,840 6,480,273
3. To consider and act upon a stockholder proposal requesting that the
Corporation develop a policy for the cancellation of debt of heavily
indebted poor countries
Against or Broker
For Withheld Abstentions Nonvotes
---------- ----------- ----------- -----------
28,248,560 996,444,963 80,391,711 244,224,994
4. To consider and act upon a stockholder proposal requesting that the
Corporation adopt a compensation committee charter
Against or Broker
For Withheld Abstentions Nonvotes
---------- ----------- ----------- -----------
194,871,421 848,379,733 61,809,418 244,249,656
5. To consider and act upon a stockholder proposal requesting that the
Corporation adopt a policy relating to contributions to political
movements and entities
Against or Broker
For Withheld Abstentions Nonvotes
---------- ----------- ----------- -----------
34,840,164 982,743,495 87,471,497 244,255,072
Item 6. Exhibits a) Exhibits
and Reports on
Form 8-K Exhibit 11 - Earnings Per Share Computation -
included in Note 7 of the
consolidated financial statements
Exhibit 12(a) - Ratio of Earnings to Fixed Charges
Exhibit 12(b) - Ratio of Earnings to Fixed Charges
and Preferred Dividends
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K
The following reports on Form 8-K were filed by the
Corporation during the quarter ended June 30, 2000:
Current Report on Form 8-K dated April 17, 2000 and
filed April 19, 2000, Items 5 and 7.
Current Report on Form 8-K dated May 23, 2000 and
filed May 31, 2000, Items 5 and 7.
60
Current Report on Form 8-K dated June 02, 2000 and
filed June 08, 2000, Items 5 and 7.
61
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Bank of America Corporation
---------------------------
Registrant
Date: August 14, 2000 /s/ Marc D. Oken
--------------- -----------------
MARC D. OKEN
Executive Vice President and
Principal Financial Executive
(Duly Authorized Officer and
Chief Accounting Officer)
62
Bank of America Corporation
Form 10-Q
Index to Exhibits
- -------------------------------------------------------------------------------
Exhibit Description
- ------- -----------
11 Earnings Per Share Computation - included in Note 7 of the
consolidated financial statements
12(a) Ratio of Earnings to Fixed Charges
12(b) Ratio of Earnings to Fixed Charges and Preferred Dividends
27 Financial Data Schedule
63