-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NqhwYRIBnlJgIU8JO5RIP6m0higsgg+Yjsr8CKFyY9cuoiem9ccemli3tcJuLiuO 9Ha9koCwU5/WeAgmup0pHg== 0000898430-96-000858.txt : 19960318 0000898430-96-000858.hdr.sgml : 19960318 ACCESSION NUMBER: 0000898430-96-000858 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960315 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKAMERICA CORP CENTRAL INDEX KEY: 0000009672 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 941681731 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07377 FILM NUMBER: 96535478 BUSINESS ADDRESS: STREET 1: BANK OF AMERICA CTR STREET 2: 555 CALIFORNIA ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 4156223530 MAIL ADDRESS: STREET 1: 555 CALIFORNIA STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] Commission file number: 1-7377. Exact name of registrant as specified in its charter: BANKAMERICA CORPORATION Address and telephone State of incorporation: of principal executive offices: I.R.S. Employer I.D. No: Delaware. 94-1681731. Bank of America Center San Francisco, California 94104 415-622-3530. Securities registered pursuant to Section 12(b) of the Act: New York, Chicago, and Pacific Stock Exchanges: Common Stock, Par Value $1.5625 and Preferred Share Purchase Rights New York Stock Exchange: Cumulative Adjustable Preferred 9% Cumulative Preferred Stock, Depositary Shares Each Representing a Stock, Series A Series H One-Twentieth Interest in a Share of: Cumulative Adjustable Preferred 8 3/8% Cumulative Preferred Stock, 11% Preferred Stock, Series J Stock, Series B Series K 8.16% Cumulative Preferred Stock, 9 5/8% Cumulative Preferred Stock, Floating Rate Subordinated Capital Series L Series F Notes Due August 15, 1996 7 7/8% Cumulative Preferred Stock, Series M 8 1/2% Cumulative Preferred Stock, Series N
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price on the consolidated transaction reporting system on January 31, 1996, was in excess of $24.6 billion. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of January 31, 1996. Common Stock, $1.5625 par value------365,918,099 shares outstanding on January 31, 1996.* *In addition, 19,338,165 shares were held in treasury. Documents incorporated by reference and parts of Form 10-K into which incorporated: Portions of the Annual Report to Shareholders for the Year Ended December 31, 1995 Parts I, II, & IV Portions of the Proxy Statement for the May 23, 1996 Annual Meeting of Shareholders Part III FORM 10-K ================================================================================ PART I Items 1 and 2. Business and Properties General..................................................................... 2 Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential.................................. 4 Available-for-Sale and Held-to-Maturity Securities.......................... 8 Loan Portfolio.............................................................. 9 Summary of Credit Loss Experience........................................... 12 Deposits.................................................................... 12 Return on Equity and Assets................................................. 13 Short-Term Borrowings....................................................... 13 Competition................................................................. 13 Supervision and Regulation.................................................. 14 Employees................................................................... 17 Item 3. Legal Proceedings........................................................... 17 Item 4. Submission of Matters to a Vote of Security Holders......................... 17 - --------------------------------------------------------------------------------------------------------- PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................................... 18 Item 6. Selected Financial Data..................................................... 18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 18 Item 8. Financial Statements and Supplementary Data................................. 18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................. 18 - --------------------------------------------------------------------------------------------------------- PART III Item 10. Directors and Executive Officers of the Registrant.......................... 19 Item 11. Executive Compensation...................................................... 21 Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 21 Item 13. Certain Relationships and Related Transactions.............................. 21 - --------------------------------------------------------------------------------------------------------- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............ 22 - --------------------------------------------------------------------------------------------------------- SIGNATURES ............................................................................... 25
1 PART I ================================================================================ ITEMS 1 AND 2. BUSINESS AND PROPERTIES ________________________________________________________________________________ GENERAL BankAmerica Corporation (the Parent) is a bank holding company that was incorporated on October 7, 1968, under the laws of the state of Delaware, and is registered under the Bank Holding Company Act of 1956, as amended. At December 31, 1995, BankAmerica Corporation and consolidated subsidiaries (BAC) was one of the three largest bank holding companies in the United States, based on total assets of $232.4 billion. During 1994, Continental Bank Corporation (Continental) was merged with and into the Parent, and Continental's principal subsidiary, Continental Bank, was renamed Bank of America Illinois (BAI). In addition, during 1994, BAC acquired United Mortgage Holding Company in Minnesota and the Virginia processing operations of Margaretten Mortgage. During 1995, BAC completed its acquisition of Arbor National Holdings, Inc., based in New York. Additional information related to the Continental merger is incorporated by reference from Note 3 on pages 56 through 58 of the 1995 Annual Report to Shareholders. During 1995, BAC began to divest its Institutional Trust and Securities Services business. Additional information related to this divestiture is incorporated by reference from page 21 of the 1995 Annual Report to Shareholders. The Parent's largest subsidiaries, based on total assets at year-end 1995, are Bank of America NT&SA (the Bank), Seattle- First National Bank (SFNB), and BAI. The Bank was founded by A. P. Giannini in San Francisco, California, and began business as Bank of Italy on October 17, 1904, offering banking services to individuals and small businesses in the community. It adopted its present name on November 1, 1930, and became a subsidiary of the Parent on April 1, 1969. SFNB, the largest bank in Washington State based on total assets at December 31, 1995, was acquired by the Parent in 1983. SFNB has a major presence in the consumer and commercial banking sectors of the Pacific Northwest. BAI, headquartered in Chicago, provides corporate, middle market, and private banking services. The Parent's subsidiaries also include Bank of America Arizona, Bank of America Nevada, Bank of America Oregon, and Bank of America Community Development Bank, all of which have state charters; Bank of America Alaska, N.A., Bank of America New Mexico, N.A., and Bank of America Texas, N.A., which are national banks; and Bank of America, FSB (FSB), a federal savings bank. In addition, Bank of America National Association, which holds a national charter, offers credit card services, primarily to individuals, throughout the United States. 2 ================================================================================ OPERATIONS ============================================================= The Parent, through its network of subsidiaries, provides banking and other financial services throughout the United States and in selected international markets to consumers and business customers, including corporations, governments, and other institutions. In providing financial products to consumers, BAC offers retail deposit services, residential first mortgages, credit card products, manufactured housing financing, investment services, and other consumer finance products. BAC's consumer banking operations serve the largest customer base of any bank in the western United States - approximately 11 million households in 1995. In the ten western states in which BAC operates, it offers the largest full-service branch network - nearly 2,000 branches, approximately 200 of them in supermarkets and other stores. In addition, BAC's proprietary network of more than 6,600 ATMs is the nation's largest. In California, BAC's largest market, the Bank operated approximately 1,020 branches at December 31, 1995. SFNB had approximately 270 branches at December 31, 1995. As a global financial intermediary, BAC provides capital- raising services, trade finance, cash management, investment banking, capital markets products, and financial advisory services to large public- and private-sector institutions that are part of the global economy. In addition, BAC provides credit and other financial services to a variety of real estate market segments, including developers, investors, pension fund advisors, real estate investment trusts, and property managers. The wide range of products and services available to consumers and large institutions is also provided to middle market customers (companies with annual revenues between $5 million and $250 million) primarily throughout the West and in the Midwest. Furthermore, BAC provides a broad range of private banking and investment services to customers worldwide, including personal trust and investment management products, such as mutual funds, fixed-income securities, annuities, and equity securities. Additional information about BAC and its operations is incorporated by reference from the inside front cover, pages 5 through 15, pages 17 through 21, Note 2 on page 56, and Note 25 on page 82 of the 1995 Annual Report to Shareholders. PROPERTIES ============================================================= BAC's principal offices are located at 555 California Street in San Francisco, California. SFNB's principal offices are located at 701 Fifth Avenue in Seattle, Washington. BAI's principal offices are located at 231 South LaSalle Street in Chicago, Illinois. At December 31, 1995, BAC owned approximately one-half of its properties. The remaining facilities were leased. 3 ================================================================================ DISTRIBUTION OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL ================================================================================ AVERAGE BALANCES, INTEREST, AND AVERAGE RATES ================================================================================
Year Ended December 31, 1995 Year Ended December 31, 1994 ---------------------------------- ----------------------------------- (dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Interest-bearing deposits in banks $ 5,853 $ 466 7.95% $ 4,912 $ 325 6.62% Federal funds sold 548 32 5.89 1,318 55 4.13 Securities purchased under resale agreements 8,823 618 7.00 6,378 351 5.51 Trading account assets 9,106 745 8.18 6,713 476 7.09 Available-for-sale securities/d/ 9,768/c/ 764 7.83 9,675/c/ 593 6.13 Held-to-maturity securities/d/ 7,192 524 7.29 10,805/c/ 794 7.35 Domestic loans: Consumer--residential first mortgages 35,407 2,500 7.06 32,012 1,913 5.97 Consumer--residential junior mortgages 13,832 1,252 9.05 13,196 1,009 7.65 Consumer--credit card 8,230 1,230 14.95 7,280 1,139 15.65 Other consumer 14,149 1,399 9.89 11,847 1,217 10.27 Commercial and industrial 30,927 2,619 8.47 23,643 1,665 7.04 Commercial loans secured by real estate 10,586 957 9.04 9,407 757 8.04 Construction and development loans secured by real estate 3,367 373 11.07/e/ 3,948 307 7.78 Financial institutions 2,511 143 5.69 2,142 108 5.06 Lease financing 1,835 111 6.06 1,675 129 7.70 Agricultural 1,619 157 9.67 1,641 129 7.87 Loans for purchasing or carrying securities 1,303 91 7.02 1,814 92 5.06 Other 1,394 91 6.56 1,244 76 6.10 -------- -------- -------- -------- Total domestic loans 125,160 10,923 8.73 109,849 8,541 7.77 Foreign loans 21,754 1,792 8.24 18,572 1,273 6.86 -------- -------- -------- -------- Total loan/c/ 146,914 12,715 8.65 128,421 9,814 7.64 -------- -------- -------- -------- Total earning assets 188,204 $ 15,864 8.43 168,222 $ 12,408 7.38 ======== ======== Nonearning assets 42,641 37,366 Less: Allowance for credit losses 3,672 3,520 -------- -------- TOTAL ASSETS/f/ $227,173 $202,068 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Domestic interest-bearing deposits: Transaction $ 13,241 $ 159 1.20% $ 13,761 $ 160 1.16% Savings 13,550 282 2.08 14,427 294 2.04 Money market 29,070 870 2.99 32,625 818 2.51 Time 30,002 1,471 4.90 28,259 864 3.06 -------- -------- -------- -------- Total domestic interest-bearing deposits 85,863 2,782 3.24 89,072 2,136 2.40 Foreign interest-bearing deposits/g/: Banks located in foreign countries 10,245 679 6.63 6,771 421 6.23 Governments and official institutions 6,845 397 5.80 4,646 217 4.67 Time, savings, and other 16,131 1,065 6.60 11,371 563 4.95 -------- -------- -------- -------- Total foreign interest-bearing deposits 33,221 2,141 6.44 22,788 1,201 5.27 -------- -------- -------- -------- Total interest-bearing deposits 119,084 4,923 4.13 111,860 3,337 2.98 Federal funds purchased 2,222 131 5.89 611 27 4.48 Securities sold under repurchase agreements 9,110 581 6.38 6,455 351 5.44 Other short-term borrowings 9,301 630 6.77 4,231 275 6.50 Long-term debt 15,156 1,067 7.04 13,920 810 5.82 Subordinated capital notes 605 46 7.58 606 42 6.84 -------- -------- -------- -------- Total interest-bearing liabilities 155,478 $ 7,378 4.75 137,683 $ 4,842 3.52 ======== ======== Domestic noninterest-bearing deposits 33,272 31,938 Foreign noninterest-bearing deposits 1,630 1,498 Other noninterest-bearing liabilities 17,238 13,258 -------- -------- Total liabilities/f/ 207,618 184,377 Stockholders' equity 19,555 17,691 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $227,173 $202,068 ======== ======== Interest income as a percentage of average earning assets 8.43% 7.38% Interest expense as a percentage of average earning assets (3.92) (2.88) ------ ------ NET INTEREST MARGIN 4.51% 4.50% ====== ======
================================================================================ /a/ Average balances are obtained from the best available daily, weekly, or monthly data. /b/ Interest income and average rates are presented on a taxable-equivalent basis. The taxable-equivalent basis adjustments are based on a marginal tax rate of 35 percent for 1995, 1994, and 1993. /c/ Average balances include nonaccrual assets. /d/ Refer to the table on page 7 for more detail on available-for-sale and held- to-maturity securities. /e/ Rate reflects a higher level of interest recoveries on nonaccrual loans during the year ended December 31, 1995 as compared to the years ended December 31, 1994 and 1993. /f/ The percentage of average total assets attributable to foreign operations for the years ended December 31, 1995, 1994, and 1993 was 18 percent, 18 percent, and 16 percent, respectively. The percentage of average total liabilities attributable to foreign operations for the same periods was 19 percent, 18 percent, and 16 percent, respectively. /g/ Primarily consists of time deposits in denominations of $100,000 or more. 4 ================================================================================ ================================================================================
Year Ended December 31, 1993 Fourth Quarter 1995 - ---------------------------------- --------------------------------- Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ - ---------------------------------- --------------------------------- $ 2,642/c/ $ 194 7.36% $ 5,962 $ 119 7.91% 1,131 35 3.12 392 5 5.51 3,903 174 4.46 8,204 147 7.09 6,341 375 5.91 9,568 200 8.28 4,118 280 6.79 9,951 196 7.86 15,759 1,123 7.13 6,614 120 7.22 29,548 1,858 6.29 36,361 674 7.42 13,388 1,056 7.89 13,691 306 8.85 7,499 1,220 16.26 8,750 318 14.55 11,271 1,174 10.41 15,633 389 9.87 20,580 1,301 6.32 31,940 666 8.27 9,707 729 7.51 10,768 241 8.95 5,718 295 5.17 3,237 84 10.23 1,948 68 3.48 2,786 34 4.89 1,773 219 12.36 1,876 26 5.53 1,605 122 7.62 1,572 37 9.44 1,447 59 4.05 1,284 22 6.83 1,099 55 5.03 1,410 23 6.59 -------- ------- -------- ------- 105,583 8,156 7.73 129,308 2,820 8.68 19,531 1,312 6.72 22,588 468 8.22 -------- ------- -------- ------- 125,114 9,468 7.57 151,896 3,288 8.62 -------- ------- -------- ------- 159,008 $11,649 7.32 192,587 $ 4,075 8.42 30,144 ======= 43,286 ======= 3,826 3,604 -------- -------- $185,326 $232,269 ======== $ 13,469 $ 181 1.34% $ 13,165 $ 40 1.21% 13,977 312 2.23 13,216 70 2.08 34,182 851 2.49 28,271 221 3.11 30,939 772 2.50 29,776 385 5.12 -------- ------- -------- ------- 92,567 2,116 2.29 84,428 716 3.36 3,346 230 6.88 11,856 196 6.54 1,927 78 4.08 7,446 106 5.67 10,276 547 5.32 17,680 289 6.49 -------- ------- -------- ------- 15,549 855 5.50 36,982 591 6.34 -------- ------- -------- ------- 108,116 2,971 2.75 121,410 1,307 4.27 570 16 2.78 2,492 35 5.60 2,837 158 5.58 9,051 147 6.44 3,088 201 6.52 9,653 168 6.88 14,090 727 5.16 15,100 265 6.98 1,499 113 7.52 605 12 7.50 -------- ------- -------- ------- 130,200 $ 4,186 3.22 158,311 $ 1,934 4.84 30,688 ======= 34,350 ======= 1,425 1,539 6,728 18,207 -------- -------- 169,041 212,407 16,285 19,862 -------- -------- $185,326 $232,269 ======== 7.32% ======== 8.42% (2.63) (3.98) ----- ----- 4.69% 4.44% ===== ===== Fourth Quarter 1994 - ------------------------------------ Balance/a/ Interest/b/ Rate/b/ - ------------------------------------ $ 5,860 $ 108 7.33% 837 11 5.21 6,956 106 6.05 6,770 125 7.31 10,393/c/ 182 6.96 8,427/c/ 156 7.40 33,400 523 6.27 13,397 246 7.30 7,602 289 15.22 12,692 350 10.93 28,523 576 8.02 10,018 212 8.46 3,857 85 8.69 2,761 37 5.32 1,724 26 6.03 1,668 36 8.61 1,590 26 6.47 1,355 21 6.15 -------- ------- 118,587 2,427 8.15 19,989 371 7.35 -------- ------- 138,576 2,798 8.03 -------- ------- 177,819 $ 3,486 7.80 40,478 ======= 3,648 -------- $214,649 ======== $ 13,674 $ 40 1.17% 14,190 74 2.06 32,050 215 2.67 31,411 310 3.92 -------- ------- 91,325 639 2.78 8,737 138 6.26 5,183 69 5.28 12,313 173 5.58 -------- ------- 26,233 380 5.75 -------- ------- 117,558 1,019 3.44 1,168 15 5.22 6,623 93 5.55 5,094 84 6.53 14,769 245 6.56 605 11 7.08 -------- ------- 145,817 $ 1,467 3.99 33,930 ======= 1,634 14,286 -------- 195,667 18,982 -------- $214,649 ======== 7.80% (3.27) ----- 4.53% =====
- -------------------------------------------------------------------------------- 5 ================================================================================ NET INTEREST INCOME ANALYSIS ================================================================================
Year Ended December 31, 1995 over 1994 Year Ended December 31, 1994 over 1993 --------------------------------------- --------------------------------------- INCREASE (DECREASE)/a/ INCREASE (DECREASE)/a/ --------------------------------------- --------------------------------------- (in millions) Volume Rate Net Volume Rate Net - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST INCOME/b/ Interest-bearing deposits in banks $ 69 $ 72 $ 141 $ 152 $ (21) $ 131 Federal funds sold (40) 17 (23) 7 13 20 Securities purchased under resale agreements 157 110 267 129 48 177 Trading account assets 188 81 269 23 78 101 Available-for-sale securities: U.S. Treasury and other government agency securities (84) 28 (56) 74 4 78 Mortgage-backed securities 35 46 81 171 (26) 145 Other domestic securities 11 2 13 19 (1) 18 Foreign securities 65 68 133 79 (7) 72 ------- ------ Total available-for-sale securities 171 313 Held-to-maturity securities: U.S. Treasury and other government agency securities (20) - (20) (183) 41 (142) Mortgage-backed securities (179) (3) (182) (273) (9) (282) State, county, and municipal securities (3) (1) (4) (6) 1 (5) Other domestic securities (4) 1 (3) (48) (32) (80) Foreign securities (56) (5) (61) 180 - 180 ------- ------ Total held-to-maturity securities (270) (329) Domestic loans: Consumer-residential first mortgages 216 371 587 151 (96) 55 Consumer-residential junior mortgages 51 192 243 (15) (32) (47) Consumer-credit card 144 (53) 91 (35) (46) (81) Other consumer 229 (47) 182 59 (16) 43 Commercial and industrial 575 379 954 206 158 364 Commercial loans secured by real estate 100 100 200 (23) 51 28 Construction and development loans secured by real estate (50) 116 66 (109) 121 12 Financial institutions 20 15 35 7 33 40 Lease financing 11 (29) (18) (12) (78) (90) Agricultural (2) 30 28 3 4 7 Loans for purchasing or carrying securities (30) 29 (1) 17 16 33 Other 9 6 15 8 13 21 ------- ------ Total domestic loans 2,382 385 Foreign loans 239 280 519 (66) 27 (39) ------- ------ Total loans 2,901 346 ------- ------ NET INCREASE $ 3,456 $ 759 ======= ======= INTEREST EXPENSE Domestic interest-bearing deposits: Transaction $ (6) $ 5 $ (1) $ 4 $ (25) $ (21) Savings (18) 6 (12) 10 (28) (18) Money market (95) 147 52 (40) 7 (33) Time 56 551 607 (71) 163 92 ------- ------ Total domestic interest-bearing deposits 646 20 Foreign interest-bearing deposits: Banks located in foreign countries 229 29 258 215 (24) 191 Governments and official institutions 119 61 180 126 13 139 Time, savings, and other 279 223 502 56 (40) 16 ------- ------ Total foreign interest-bearing deposits 940 346 ------- ------ Total interest-bearing deposits 1,586 366 Federal funds purchased 93 11 104 1 10 11 Securities sold under repurchase agreements 162 68 230 197 (4) 193 Other short-term borrowings 343 12 355 75 (1) 74 Long-term debt 76 181 257 (9) 92 83 Subordinated capital notes - 4 4 (62) (9) (71) ------- ------ NET INCREASE $ 2,536 $ 656 ======= ======= ===================================================================================================================================
/a/ Changes that are the result of a joint volume and rate fluctuation are allocated in proportion to the volume and rate changes. /b/ Interest income is presented on a taxable-equivalent basis. The taxable- equivalent basis adjustments are based on a marginal tax rate of 35 percent for 1995, 1994, and 1993. 6 ================================================================================ AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES--AVERAGE BALANCES, INTEREST, - -------------------------------------------------------------------------------- AND AVERAGE RATES - -----------------
Year Ended December 31, 1995 Year Ended December 31, 1994 ----------------------------------------------------------------------------------------------------- Rate Rate Rate based on Rate based on based on amortized based on amortized (dollar amounts in millions) Balance/a/ Interest/b/ fair value/b/ cost/b/ Balance/a/ Interest/b/ fair value/b/ cost/b/ - ------------------------------------------------------------------------------------------------------------------------------------ AVAILABLE-FOR-SALE SECURITIES U.S. Treasury and other government agency securities $1,659 $108 6.49% 6.45% $3,029 $164 5.42% 5.41% Mortgage-backed securities 4,962 344 6.94 6.89 4,410 263 5.96 5.88 Other domestic securities 660 34 5.22 5.84 427 21 4.78 5.00 Foreign securities 2,487/c/ 278 11.17/d/ 10.10/d/ 1,809/c/ 145 8.05 7.09 - ------------------------------------------------------------------------------------------------------------------------------------ $9,768 $764 7.83% 7.64% $9,675 $593 6.13% 5.95% - --------------------------------==================================================================================================== Year Ended December 31, 1993 ----------------------------------------- Rate based on amortized (dollar amounts in millions) Balance/a/ Interest/b/ cost/b/ - ----------------------------------------------------------------------------------- AVAILABLE-FOR-SALE SECURITIES U.S. Treasury and other government agency securities $1,646 $86 5.20% Mortgage-backed securities 1,606 118 7.35 Other domestic securities 39 3 7.19 Foreign securities 827 73 8.83 - ----------------------------------------------------------------------------------- $4,118 $280 6.79% - --------------------------------------------======================================= Year Ended December 31, 1995 Year Ended December 31, 1994 Year Ended December 31, 1993 (dollar amounts in -------------------------------- -------------------------------- -------------------------------- millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ - ------------------------------------------------------------------------------------------------------------------------------------ HELD-TO-MATURITY SECURITIES U.S. Treasury and other government agency securities $ 388 $ 26 6.72% $ 689 $ 46 6.72% $ 3,554 $ 188 5.28% Mortgage-backed securities 4,490 321 7.15 6,985 503 7.20 10,784 785 7.28 State, county, and municipal securities 445 35 7.89 479 39 8.12 553 44 7.93 Other domestic securities 178 13 7.62 224 16 7.11 740 96 13.01/e/ Foreign securities 1,691 129 7.62 2,428/c/ 190 7.83 128 10 7.61 - ------------------------------------------------------------------------------------------------------------------------------------ $7,192 $524 7.29% $10,805 $794 7.35% $15,759 $1,123 7.13% - ----------------------------======================================================================================================== Fourth Quarter 1995 Fourth Quarter 1994 ----------------------------------------------------------------------------------------------------- Rate Rate Rate based on Rate based on based on amortized based on amortized (dollar amounts in millions) Balance/a/ Interest/b/ fair value/b/ cost/b/ Balance/a/ Interest/b/ fair value/b/ cost/b/ - ------------------------------------------------------------------------------------------------------------------------------------ AVAILABLE-FOR-SALE SECURITIES U.S. Treasury and other government agency securities $1,665 $ 27 6.32% 6.36% $ 2,317 $ 31 5.27% 5.17% Mortgage-backed securities 4,927 85 6.91 6.97 5,678 98 6.88 6.62 Other domestic securities 720 9 5.31 6.06 491 6 5.09 5.34 Foreign securities 2,639/c/ 75 11.31 10.46 1,907/c/ 47 9.73 8.76 - ------------------------------------------------------------------------------------------------------------------------------------ $9,951 $196 7.86% 7.81% $10,393 $182 6.96% 6.67% - ---------------------------------=================================================================================================== Fourth Quarter 1995 Fourth Quarter 1994 ---------------------------------------- ---------------------------------------- (dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/ - ------------------------------------------------------------------------------------------------------------------------------------ HELD-TO-MATURITY SECURITIES U.S. Treasury and other government agency securities $ 289 $ 5 6.42% $ 482 $ 9 7.02% Mortgage-backed securities 4,169 75 7.18 4,782 85 7.11 State, county, and municipal securities 452 9 7.99 461 9 8.14 Other domestic securities 165 3 7.39 196 3 6.96 Foreign securities 1,539 28 7.24 2,506/c/ 50 7.84 - ------------------------------------------------------------------------------------------------------------------------------------ $6,614 $120 7.22% $8,427 $156 7.40% - ---------------------------------------============================================================================================= ====================================================================================================================================
/a/ Average balances are obtained from the best available daily, weekly, or monthly data. /b/ Interest income and average rates are presented on a taxable-equivalent basis. The taxable-equivalent basis adjustments are based on a marginal tax rate of 35 percent for 1995, 1994 and 1993. /c/ Average balances include nonaccrual assets. /d/ Rates reflect interest received on nonaccrual debt-restructuring par bonds. /e/ Rates reflect income recognized on call premiums received and unamortized discounts related to debentures called prior to maturity. 7 ================================================================================ AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES ================================================================================ Carrying Value and Yield by Contractual Maturity Date ================================================================================
Available-for-Sale Securities Held-to-Maturity Securities ----------------------------- --------------------------- December 31, 1995/a/ December 31, 1995/b/ ----------------------------- --------------------------- (dollar amounts in millions) Amount Yield/b/ Amount Yield/b/ - --------------------------------------------------------------------------------------------------------------------------------- DUE IN ONE YEAR OR LESS U.S. Treasury and other government agency securities $ 893 5.61% $ 62 5.01% Mortgage-backed securities 1 6.84 - - State, county, and municipal securities - - 87 4.76 Other securities 843 6.16 170 8.49 ------- ------- 1,737 5.88 319 6.86 DUE AFTER ONE YEAR THROUGH FIVE YEARS U.S. Treasury and other government agency securities 489 7.96 2 7.62 Mortgage-backed securities 9 7.67 1 10.37 State, county, and municipal securities 1 6.53 132 5.51 Other securities 1,532 9.86 259 7.89 ------- ------- 2,031 9.39 394 7.10 DUE AFTER FIVE YEARS THROUGH TEN YEARS U.S. Treasury and other government agency securities 267 5.81 - - Mortgage-backed securities 110 6.30 195 7.84 State, county, and municipal securities 3 6.56 95 5.37 Other securities 152 6.94 46 5.32 ------- ------- 532 6.24 336 6.80 DUE AFTER TEN YEARS U.S. Treasury and other government agency securities 161 9.03 2 7.27 Mortgage-backed securities 6,629 7.05 2,285 7.10 State, county, and municipal securities 3 7.14 153 5.49 Other securities 653 6.58 1,167 6.45 ------- ------- 7,446 7.05 3,607 6.82 ------- ------- $11,746 $ 4,656 ======= =======
- -------------------------------------------------------------------------------- /a/These amounts exclude equity securities, which have no contractual maturities. /b/Yields on tax-exempt securities have not been computed on a taxable- equivalent basis. Information on the securities portfolios is incorporated by reference from page 52 of Note 1 and Note 6 on pages 58 and 59 of the 1995 Annual Report to Shareholders. 8 ================================================================================ LOAN PORTFOLIO Loan Outstandings by Type ====================================================== Information on loan outstandings by type is incorporated by reference from page 29 of the 1995 Annual Report to Shareholders. Maturity Distribution and Interest Rate Characteristics of Certain Types of Loans ======================================================
Remaining Maturities as of December 31, 1995 ------------------------------------------------------------- Due after One Due in One Year through Due after (in millions) Year or Less Five Years Five Years Total -------------------------------------------------------------------------------------------------- MATURITY DISTRIBUTION OF LOANS Domestic commercial loans: Secured by real estate $ 4,025 $ 2,813 $ 4,137 $10,975 Construction and development secured by real estate 1,867 1,092 194 3,153 Commercial and industrial, financial institutions, and agricultural 23,926 10,610 2,780 37,316 Foreign loans 17,892 2,497 3,093 23,482 -------------------------------------------------------------------------------------------------- $47,710 $17,012 $10,204 $74,926 ----------------------------------------========================================================== LOANS DUE AFTER ONE YEAR Predetermined interest rates $ 4,408 $ 3,510 $ 7,918 Floating or adjustable interest rates 12,604 6,694 19,298 -------------------------------------------------------------------------------------------------- $17,012 $10,204 $27,216 ---------------------------------------------------------=========================================
Principal repayments of loans are reported above in the maturity category in which remaining payments are due under the contractual terms of the loan. Certain loan agreements provide rollover options that may extend the contractual maturity of these loans. However, these extensions are not reflected in the table above until such time as the option is exercised. 9 ================================================================================ CROSS-BORDER OUTSTANDINGS EXCEEDING ONE PERCENT OF TOTAL ASSETS ======================================================================
Cross-Border Total Outstandings Public Private Cross-Border as a Percentage (dollar amounts in millions)/a/b/c/d/ December 31 Sector/e/ Banks/e/ Sector/e/ Outstandings of Total Assets - ----------------------------------------------------------------------------------------------------------------------------------- Japan 1995 $ 7 $2,253 $2,546 $4,806 2.07% 1994 17 1,248 2,292 3,557 1.65 1993 10 1,490 2,054 3,554 1.90 Italy 1995 172 101 2,500 2,773 1.19 1994 57 119 1,371 1,547 0.72 1993 44 229 597 870 0.47 South Korea 1995 106 1,189 1,143 2,438 1.05 1994 - 864 935 1,799 0.83 1993 - 512 666 1,178 0.63 Spain 1995 109 24 1,553 1,686 0.73 1994 57 108 1,817 1,982 0.92 1993 56 105 1,941 2,102 1.12 Hong Kong 1995 2 129 837 968 0.42 1994 - 185 1,202 1,387 0.64 1993 - 110 2,181 2,291 1.23 - -----------------------------------------------------------------------------------------------------------------------------------
/a/ Cross-border outstandings include the following assets, primarily in U.S. dollars, with borrowers or customers in a foreign country: loans, accrued interest, acceptances, interest-bearing deposits with other banks, trading account assets, available-for-sale securities, held-to-maturity securities, other interest-earning investments, and other monetary assets. Local currency outstandings that are neither hedged nor funded by local currency borrowings are included in cross-border outstandings. Guarantees of outstandings of borrowers of other countries are considered outstandings of the guarantor. Loans made to, or deposits placed with, a branch of a foreign bank located outside the foreign bank's home country are considered loans or deposits with the country in which the foreign bank is headquartered. Outstandings of a country do not include amounts of principal or interest that are supported by written, legally enforceable guarantees by guarantors from other countries or the amount of outstandings to the extent that they are secured by tangible, liquid collateral held and realizable by BAC outside the country. /b/ At December 31, 1995, total unfunded commitments of the countries listed above, whose unfunded commitments exceeded 10 percent of their respective cross-border outstandings, were as follows: Japan, $558 million; South Korea, $356 million; and Hong Kong, $334 million. /c/ Included in the cross-border outstandings of the countries listed are loans and other interest-bearing assets on nonaccrual status at December 31, 1995, 1994, and 1993, respectively; as follows: $17 million, $18 million, and $16 million for Japan, $3 million, $3 million, and $6 million for Spain, $3 million, $2 million and $7 million for Hong Kong. Also included in cross-border outstandings are loans which are past due 90 days or more and still accruing interest of $2 million and $1 million for Hong Kong at December 31, 1995 and 1993, respectively. /d/ No country excluded from this table had cross-border outstandings between 0.75 percent and 1.00 percent of total assets for any of the periods presented. However, not included in cross-border outstandings with Mexico were par bonds issued by the government of Mexico with a face value of $1,341 million at December 31, 1995, 1994, and 1993. The par bonds had a carrying value of $1,162 million, $1,109 million, and $1,297 million at December 31, 1995, 1994, and 1993, respectively. At December 31, 1995, the par bonds had a total fair value of approximately $902 million. Due to the first-quarter 1994 adoption of SFAS No. 115, certain of these par bonds were recorded in available-for-sale securities and carried at their fair value of $306 million at December 31, 1995, while the remainder of these par bonds were recorded in held-to-maturity securities at their amortized cost. Principal repayment of these par bonds is collateralized by zero-coupon U.S. Treasury securities that, at maturity in 2008 and 2019, will have a redemption value equal to the face value of the par bonds. At December 31, 1995, this collateral had a fair value of approximately $335 million. Future interest payments for a rolling eighteen- month period are also collateralized by additional U.S. dollar-denominated securities permitted by the agreement. The details of the transaction in which the majority of these par bonds were acquired were reported in the Parent's Annual Report on Form 10-K for the year ended December 31, 1990. Mexico's cross-border outstandings also excluded additional securities of $30 million, $30 million, and $45 million at December 31, 1995, 1994, and 1993, which were fully collateralized at maturity by separate zero-coupon U.S. Treasury securities. Had these par bonds and other instruments been included, total cross-border outstandings with Mexico would have exceeded 1.00 percent of total assets for all periods presented. /e/ Sector definitions are based on Federal Financial Institutions Examination Council Instructions for preparing the Country Exposure Report. Additional information on cross-border outstandings, information on countries currently experiencing liquidity problems, and a discussion of the risks, including credit risk, inherent in BAC's foreign operations are incorporated by reference from pages 27 through 29, page 32, and Note 7 on pages 59 and 60 of the 1995 Annual Report to Shareholders. 10 ================================================================================ Off-Balance-Sheet Credit-Related Financial Instruments ============================================================= Information on off-balance-sheet credit-related financial instruments is incorporated by reference from page 27 and pages 70 and 71 of Note 20 of the 1995 Annual Report to Shareholders. Nonperforming Assets ============================================================= Information on nonperforming assets is incorporated by reference from pages 35 through 38 of the 1995 Annual Report to Shareholders. Interest Income Foregone on Nonaccrual Assets =============================================================
Year Ended (in millions) December 31, 1995 --------------------------------------------------------------------------------------------------------------- DOMESTIC Interest income that would have been recognized had the assets performed in accordance with their original terms $310 Less: Interest income included in the results of operations 85 --------------------------------------------------------------------------------------------------------------- Domestic interest income foregone 225 Foreign Interest income that would have been recognized had the assets performed in accordance with their original terms 28 Less: Interest income included in the results of operations 17 --------------------------------------------------------------------------------------------------------------- Foreign interest income foregone 11 --------------------------------------------------------------------------------------------------------------- $236 ----------------------------------------------------------------------------------------------------------=====
Information on nonaccrual loan accounting policies and interest income foregone on restructured loans is incorporated by reference from page 32, page 53 of Note 1, and Notes 7 and 8 on pages 59 through 61 of the 1995 Annual Report to Shareholders. Other Interest-Bearing Assets on Nonaccrual Status ============================================================= Information on other interest-bearing assets on nonaccrual status is incorporated by reference from pages 36 and 38 of the 1995 Annual Report to Shareholders. 11 ================================================================================ SUMMARY OF ANNUAL CREDIT LOSS EXPERIENCE CREDIT LOSS ================================================================ EXPERIENCE Information on annual credit loss experience is incorporated by reference from pages 33 through 35 of the 1995 Annual Report to Shareholders. ALLOWANCE FOR FOREIGN CREDIT LOSSES/a/ ================================================================
YEAR ENDED DECEMBER 31 ------------------------------------------------------ (in millions) 1995 1994 1993 1992 1991 ------------------------------------------------------------------------------------------- BALANCE, BEGINNING OF YEAR $391 $322 $559 $808 $1,665 Credit losses 15 42 36 126 375 Credit loss recoveries 99 124 66 174 54 ------------------------------------------------------------------------------------------- Net credit (losses) recoveries 84 82 30 48 (321) Provision for credit losses (54) - - 3 - Losses on the sale or swap of loans to restructuring countries - - (3) (72) (207) Other net additions (deductions) 7 (13) (264)/ab/ (228)/a/ (329)/a/ ------------------------------------------------------------------------------------------- BALANCE, END OF YEAR $428 $391 $322 $559 $808 ===========================================================================================
/a/ The allocations of the allowance for credit losses and the provision for credit losses are used to measure divisional profitability and are based on management's judgment of potential losses in the respective portfolios. This allocation process resulted in reductions in the allowance for foreign credit losses of $166 million, $212 million, and $327 million in 1993, 1992, and 1991, respectively. These reductions primarily related to Latin America. While management has allocated reserves to various portfolio segments for purposes of this table, the allowance is general in nature and is available for the portfolio in its entirety. /b/ Includes a $36 million addition related to the consolidation of subsidiaries and operations that were held for disposition at December 31, 1992 and a deduction of $128 million related to the transfer of certain assets net of their related allowance to other assets, of which $88 million was regulatory-related allocated transfer risk reserve. ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES ================================================ Information on the allocation of the allowance for credit losses by loan type is incorporated by reference from page 34 of the 1995 Annual Report to Shareholders. ________________________________________________________________________________ DEPOSITS AVERAGE DEPOSIT BALANCES AND AVERAGE RATES ================================================ Average deposit balances, average rates, and average foreign deposit liabilities are shown on pages 4 and 5 of this report. MATURITY DISTRIBUTION OF DOMESTIC TIME DEPOSITS ================================================ OF $100,000 OR MORE ===================
DECEMBER 31, 1995 ----------------------------------------------- TIME CERTIFICATES OTHER TIME OF DEPOSIT DEPOSITS (in millions) OF $100,000 OR MORE OF $100,000 OR MORE -------------------------------------------------------------------------------- TIME REMAINING UNTIL MATURITY Three months or less $4,500 $185 After three months through six months 1,958 5 After six months through twelve months 1,404 3 After twelve months 2,462 78 -------------------------------------------------------------------------------- $10,324 $271 ================================================================================
12 ================================================================================ RETURN ON EQUITY The ratio of average total equity to average total assets, AND ASSETS the rates of return on average total assets and average common and total equity, and the common dividend payout ratios for the years ended December 31, 1995, 1994, and 1993 are incorporated by reference from page 16 of the 1995 Annual Report to Shareholders. ________________________________________________________________________________
============================================================================================================= SHORT-TERM DECEMBER 31 AVERAGE DURING YEAR BORROWINGS ---------------------------- ---------------------------- MAXIMUM WEIGHTED WEIGHTED OUTSTANDINGS AVERAGE AVERAGE (DOLLAR AMOUNTS IN MILLIONS) DURING YEAR OUTSTANDINGS INTEREST RATE OUTSTANDINGS INTEREST RATE --------------------------------------------------------------------------------------------------------------- 1995 Federal funds purchased/a/ $ 5,160 $5,160 5.62% $2,222 5.89% Securities sold under repurchase agreements/a/ 10,730 6,383 6.69 9,110 6.38 Other short-term borrowings 10,800 7,627 6.88 9,301 6.77 --------------------------------------------------------------------------------------------------------------- 1994 Federal funds purchased/a/ $ 3,283 $3,283 5.45% $ 611 4.48% Securities sold under repurchase agreements/a/ 8,026 5,505 5.90 6,455 5.44 Other short-term borrowings 5,796 5,053 6.58 4,231 6.50 --------------------------------------------------------------------------------------------------------------- 1993 Federal funds purchased/a/ $ 1,763 $ 220 2.84% $ 570 2.78% Securities sold under repurchase agreements/a/ 4,361 4,229 4.95 2,837 5.58 Other short-term borrowings 3,581 3,523 6.66 3,088 6.52 ==============================================================================================================
/a/ Federal funds purchased and securities sold under repurchase agreements mature either overnight or weekly. ________________________________________________________________________________ COMPETITION BAC, both domestically and internationally, operates in intensely competitive environments. Domestically, BAC's competitors include other banks, financial institutions, and nonbanking institutions, such as finance companies, leasing companies, insurance companies, brokerage firms, and investment banking firms. Internationally, BAC primarily competes with major foreign banks, domestic banks with international operations, other financial institutions, and nonfinancial companies. In recent years, increased competition has also developed from predominantly specialized finance and nonfinance companies that offer wholesale finance, credit card, and other consumer finance services, including on-line banking services and personal finance software. Competition for deposit and loan products remains strong, from both banking and nonbanking firms, and affects the rates of those products as well as the terms on which they are offered to customers. Mergers between financial institutions have placed additional pressure on banks within the industry to streamline their operations, reduce expenses, and increase revenues to remain competitive. In addition, competition is expected to intensify due to recently enacted federal and state interstate banking laws, which permit banking organizations to expand geographically. Such laws will allow banks to merge with other banks across state lines, thereby enabling BAC's competitors to establish or expand banking operations in BAC's most significant markets. Technological innovation continues to contribute to greater competition in domestic and international financial services markets. Technological innovation has, for example, made it possible for nondepository institutions to offer customers automated transfer payment 13 ================================================================================ services that previously have been traditional banking products. In addition, customers now expect a choice of several delivery systems and channels, including telephone, mail, home computer, ATMs, self-service branches, and supermarket branches. In addition to other banks, the sources of competition for such products include savings associations, credit unions, brokerage firms, money market and other mutual funds, asset management groups, finance and insurance companies, and mortgage banking firms. The competitive environment within the United States is largely defined by federal and state legislation. Banking laws have had a substantial impact on the structure and competitive dynamics of financial services markets in the United States since, among other things, they limit the types of financial services that both domestic and foreign banks can offer and the geographic boundaries within which they can operate. (See "Supervision and Regulation" below.) Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. As a major and active participant in financial markets, BAC strives to anticipate and adapt to these changing competitive conditions, but there can be no assurance as to their impact on BAC's future business or results of operations. ________________________________________________________________________________ SUPERVISION The banking and financial services businesses in which BAC AND REGULATION engages are highly regulated. Such regulation is intended, among other things, to protect depositors covered by the Federal Deposit Insurance Corporation ("FDIC") and the banking system as a whole. The laws, regulations and policies affecting such businesses are regularly under review by Congress and state legislatures, and federal and state regulatory agencies. Changes in the laws, regulations or policies that impact BAC cannot necessarily be predicted, but they may have a material effect on the business and earnings of BAC. Following is a summary of significant statutes, regulations, and policies that apply to the operation of banking institutions. This summary is qualified in its entirety by reference to the full text of such statutes, regulations or policies. A. GENERAL As a bank holding company, the Parent is subject to regulation under the Bank Holding Company Act ("BHCA") of 1956, as amended, and is registered as such with, and subject to examination by, the Board of Governors of the Federal Reserve System ("FRB"). Pursuant to the BHCA, the Parent is prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5 percent of any class of voting shares of any nonbanking corporation, and may not acquire more than 5 percent of the voting shares of any domestic bank without the prior approval of the FRB. In addition, the Parent may not engage in any business directly or through a nonbanking subsidiary other than managing and controlling banks or furnishing services that the FRB deems to be so closely related to banking as "to be a proper incident thereto." The Parent's subsidiaries are also subject to extensive regulation, supervision, and examination by applicable federal and state regulatory agencies. The Bank and other national bank subsidiaries are primarily regulated by the Office of the Comptroller of the Currency ("OCC"). The state-chartered bank subsidiaries of the Parent are primarily regulated by the FDIC and state banking regulators, except for Bank of America Nevada and Bank of America Illinois, which, as state bank members of the Federal Reserve System, are primarily regulated by the FRB and state banking regulators. FSB is subject to the regulatory 14 ================================================================================ authority of the Office of Thrift Supervision ("OTS") and the FRB. Further, all domestic depository institution subsidiaries of BAC that are insured institutions are subject to the authority of the FDIC. The activities of the Parent's broker-dealers, which include BA Securities, Inc. and BA Futures, Inc., are subject to rules and regulations promulgated by the Securities and Exchange Commission ("SEC"), the Commodity Futures Trading Commission, securities industry self regulatory organizations (the New York Stock Exchange, the National Association of Securities Dealers, Inc., and the Municipal Securities Rulemaking Board), the FRB, and various state securities commissions. Other nonbank subsidiaries of the Parent are regulated under applicable federal and/or state mortgage lending, insurance, consumer, and other laws. B. DIVIDEND RESTRICTIONS The availability of dividends from the Parent's subsidiaries is limited by various statutes and regulations. The National Bank Act and other federal laws prohibit the payment of dividends by a national bank under certain circumstances, and limit the amount a national bank can pay without the prior approval of the OCC. In addition, state-chartered banking subsidiaries are subject to dividend limitations imposed by applicable state and federal laws. FSB is subject to OTS regulatory restrictions on its payment of dividends. Specific information related to restrictions on funds available to the Parent and its subsidiaries is incorporated by Reference from Note 24 on pages 79 through 81 of the 1995 Annual Report to Shareholders. C. REGULATORY CAPITAL STANDARDS AND RELATED MATTERS As a result of the enactment of the Financial Institution Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), any insured depository institution owned by the Parent (i.e., any bank subsidiary) can be assessed for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other depository institution owned by the Parent. FIRREA also established, in part, new regulations that raised capital requirements and standards. The primary emphasis of the capital standards required by FIRREA is to ensure that financial institutions have sufficient capital to support the risk levels of their assets and off-balance-sheet commitments. The risk-based capital ratios and the leverage ratio, as required by FIRREA, provide a means to measure financial institutions' compliance with capital standards. During 1991, Congress passed the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), which focused primarily on tightening the supervision of banks and thrifts and recapitalizing the Bank Insurance Fund ("BIF"). Among other things, FDICIA requires federal bank regulatory authorities to take "prompt corrective action" with respect to inadequately capitalized banks. FDICIA established five tiers of capital measurement ranging from "well capitalized" to "critically undercapitalized." If a bank does not meet any of the minimum capital requirements set by its regulators, FDICIA requires certain responses, such as that the bank submit a plan, guaranteed by its holding company, to restore its capital to adequate levels. It is BAC's policy to maintain risk-based capital ratios for both the Parent and its domestic banking subsidiaries above the "well capitalized" levels, and as of December 31, 1995, BAC and all of its banking subsidiaries met the requirements of a "well capitalized" institution. BAC is also subject to the risk-based capital and leverage guidelines of the FRB, which require that BAC's capital-to- asset ratios meet certain minimum standards. For a detailed discussion of the FRB guidelines and BAC's risk-based capital and leverage ratios, refer to pages 44 and 45 of the 1995 Annual Report to Shareholders. 15 ================================================================================ As deposits of BAC's subsidiary banks are insured by the FDIC, such subsidiary banks are subject to FDIC insurance assessments. The amount of FDIC assessments paid by individual insured depository institutions is based on their relative risk as measured by regulatory capital ratios and certain other factors. Under this system, in establishing the insurance premium assessment for each bank, the FDIC takes into consideration the probability that it will incur a loss with respect to that bank, and charges a higher insurance premium to banks with perceived higher inherent risks. The FDIC also considers the different categories and concentrations of assets and liabilities of the institution, the likely amount of such loss, the revenue needs of the BIF, and any other factors the FDIC deems relevant. Prior to September 15, 1995, assessment rates ranged from a minimum of 23 cents per $100 of eligible deposits for the highest-rated banks to 31 cents per $100 of eligible deposits for the weakest-rated banks. In May 1995, the FDIC achieved the ratio of BIF reserves to insured deposits of BIF members of 1.25 percent as mandated by FDICIA. In June 1995, minimum assessment rates for the highest-rated banks were reduced to 4 cents per $100 of eligible deposits, while maximum assessment rates remained unchanged. In November 1995, the FDIC again reduced insurance premiums for most banks. Under the new rate structure for the BIF, assessment rates will be reduced by 4 cents per $100 of eligible deposits as well, leaving a premium range of 0 to 27 cents per $100 of eligible deposits (and subject to a minimum assessment) instead of the previous 4 to 31 cents per $100 of eligible deposits. D. KEY LEGISLATIVE AND REGULATORY DEVELOPMENTS 1. Interstate Banking and Securities Litigation Reform The Riegle-Neal Interstate Banking and Branching Efficiency Act (the "Act"), which was enacted in 1994, codifies the authority of banks to provide specified interstate banking services on an agency basis to customers of affiliate banks as of September 1995. Also, under the Act, as of September 1995, bank holding companies may acquire banks in other states, subject to certain deposit concentration limitations. Beginning June 1, 1997 and subject to certain deposit concentration and other limitations, banks may merge with other banks in states that do not "opt out" of the interstate legislation prior to June 1, 1997. Interstate mergers may be conducted prior to June 1, 1997 in states that specifically permit such mergers. In addition, prior to June 1, 1997, certain consolidations are possible using the "30-mile rule," which allows national banks to relocate their headquarters up to 30 miles away, including across state lines. The ability to merge with other banks across state lines will enable BAC to continue to consolidate its affiliate banking operations, if it so chooses, thereby potentially reducing operating expenses, expanding customer service, and enhancing overall operations of the business. Currently, several states have already "opted in" to the interstate legislation. However, Texas has "opted out." In the securities area, Congress enacted the Private Securities Litigation Reform Act of 1995, which may reduce the exposure of banks and other companies to certain types of legal claims by holders of securities, thus saving litigation costs. 2. Pending Legislation and Regulation During 1995, Congress considered reform of the Glass- Steagall Act and the Bank Holding Company Act, which restrict banks' and bank holding companies' ability to engage in certain activities, including the underwriting of and dealing in various securities. If such statutory reform is enacted in the future, it could cause a significant change in the makeup of the financial services industry and expand the ability of BAC to offer a broader range of financial products. 16 ================================================================================ Congress also is considering a comprehensive bank regulatory relief package, which if enacted, could reduce the regulatory burden and accompanying costs imposed on banks in a variety of discrete regulatory areas. Legislation was also proposed to restructure the BIF and the Savings Association Insurance Fund ("SAIF"), which, if enacted as proposed, could realign the deposit insurance assessment costs for banks, particularly for Oakar banks (banks who bought failed savings associations in prior years pursuant to certain legal provisions), and could eliminate a special charter for savings associations. As noted above, it is impossible to predict whether or when any such legislation and regulation might be enacted, and there can be no assurance as to the impact of any such legislation on BAC's future business or results of operations. 3. Environmental Regulation Since BAC is not involved with the manufacture or transport of chemicals or toxins that might have an adverse effect on the environment, its primary exposure to environmental law and regulation is through its lending and trust activities. BAC's lending and trust procedures include controls designed to identify and monitor this exposure to avoid any significant loss or liability related to environmental regulations. E. MONETARY AND ECONOMIC POLICIES The operations of bank holding companies and their subsidiaries are affected by the credit and monetary policies of the FRB. An important function of the FRB is to regulate the national supply of bank credit. Among the instruments of monetary policy used by the FRB to implement its objectives are open market operations in U.S. Government securities, changes in the discount rate on bank borrowings, and changes in reserve requirements on bank deposits. These instruments of monetary policy are used in varying combinations to influence the overall level of bank loans, investments and deposits, the interest rates charged on loans and paid for deposits, the price of the dollar in foreign exchange markets, and the level of inflation. The credit and monetary policies of the FRB have had a significant effect on the operating results of BAC in the past and are expected to continue to do so in the future. ________________________________________________________________________________ EMPLOYEES At December 31, 1995, the actual number of persons employed by BAC was 95,288. On a full-time-equivalent basis, BAC's staff level was 79,916 at December 31, 1995. ITEM 3. LEGAL PROCEEDINGS ________________________________________________________________________________ Due to the nature of its business, BAC is subject to various threatened or filed legal actions. Although the amount of the ultimate exposure, if any, cannot be determined at this time, BAC, based upon the advice of counsel, does not expect the final outcome of threatened or filed suits to have a material adverse effect on its financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ________________________________________________________________________________ None. 17 PART II ================================================================================ ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ________________________________________________________________________________ Information on dividend restrictions, dividend payments, the principal market for and trading price of the Parent's common stock, and the number of holders of such stock is incorporated by reference from pages 16, 17, and 43, Note 24 on pages 79 through 81, and Note 26 on page 83 of the 1995 Annual Report to Shareholders. ITEM 6. SELECTED FINANCIAL DATA ________________________________________________________________________________ Selected financial data is incorporated by reference from pages 16 and 17 of the 1995 Annual Report to Shareholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ________________________________________________________________________________ Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated by reference from pages 16 through 45 of the 1995 Annual Report to Shareholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ________________________________________________________________________________ The Report of Independent Auditors, the consolidated financial statements, and the notes to consolidated financial statements are incorporated by reference from pages 47 through 83 of the 1995 Annual Report to Shareholders. See Item 14 of this report for information concerning financial statements and schedules filed with this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ________________________________________________________________________________ None. 18 PART III ================================================================================ ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ________________________________________________________________________________ Reference is made to the text under the captions, "Executive Compensation, Benefits and Related Matters" (excluding the material under the headings "Report of Executive Personnel and Compensation Committee" and "Shareholder Return Performance Graph" therein) and "Item No. 1--Election of Directors" in the Proxy Statement for the May 23, 1996 Annual Meeting of Shareholders of the Parent for incorporation of information concerning directors and persons nominated to become directors. Information concerning executive officers of the Parent as of March 1, 1996 is set forth below.
NAME AGE POSITION WITH REGISTRANT Richard M. Rosenberg 65 Chairman of the Board David A. Coulter 48 President and Chief Executive Officer Michael E. O'Neill 49 Vice Chairman and Chief Financial Officer Kathleen J. Burke 44 Vice Chairman and Personnel Relations Officer Luke S. Helms 52 Vice Chairman Jack L. Meyers 53 Vice Chairman Michael J. Murray 51 Vice Chairman Thomas E. Peterson 60 Vice Chairman Michael E. Rossi 51 Vice Chairman Martin A. Stein 55 Vice Chairman
RICHARD M. ROSENBERG relinquished his title as Chief Executive Officer on December 31, 1995 and his title as President on August 7, 1995. He was previously appointed Chairman and Chief Executive Officer of the Parent and the Bank on May 24, 1990, in addition to his title as President. He was appointed President of the Parent and the Bank on February 5, 1990. On April 22, 1992, Mr. Rosenberg relinquished his title as President, but was reappointed President on October 5, 1992. DAVID A. COULTER was appointed Chief Executive Officer of the Parent and the Bank on January 1, 1996, in addition to his title as President. He was appointed to the Board of Directors of the Parent and the Bank on October 2, 1995. He was appointed President of the Parent and the Bank on August 7, 1995. Previously he was Vice Chairman of the Parent and the Bank from February 1993 to August 1995. He was appointed Group Executive Vice President of the Bank on April 27, 1992. He was Executive Vice President of the Bank and head of the Bank's U.S. Corporate Group from 1990 to 1992. 19 ================================================================================ KATHLEEN J. BURKE was appointed Vice Chairman of the Parent and the Bank on March 14, 1994, in addition to her title as Personnel Relations Officer of the Parent. She was appointed Executive Vice President and Personnel Relations Officer of the Parent and Executive Vice President of the Bank on April 22, 1992 and Group Executive Vice President of the Bank on April 27, 1992. Previously, she was Executive Vice President and Director of Human Resources of Security Pacific Corporation and its principal subsidiary, Security Pacific National Bank from 1989 to 1992. LUKE S. HELMS was appointed Vice Chairman of the Parent and the Bank on August 2, 1993. Previously, he was Chairman and Chief Executive Officer of Seafirst Corporation and SFNB from 1990 to 1993. JACK L. MEYERS was appointed Vice Chairman of the Parent and the Bank on October 4, 1993. He was appointed Chief Credit Officer of the Bank on September 3, 1993. He was Group Executive Vice President responsible for the Bank's Commercial Business Group from 1991 to 1993. MICHAEL J. MURRAY was appointed Vice Chairman of the Parent and the Bank on October 2, 1995. Previously, he was Group Executive Vice President responsible for the Bank's U.S. Corporate Group from September 1994 to September 1995. From 1993 to 1994, Mr. Murrary served as Vice Chairman of Continental. Previously, he was Executive Vice President and head of Corporate Banking for Continental from 1991 to 1993. MICHAEL E. O'NEILL was appointed Vice Chairman and Chief Financial Officer of the Parent and the Bank on December 4, 1995. Previously, he was Group Executive Vice President of the Bank and head of the Global Equity Investments Group from September 1994 to November 1995. From 1993 to 1994, Mr. O'Neill served as Chief Financial Officer of Continental. Previously, he was Chief of Staff of Capital Markets Investments and Trading for Continental from 1990 to 1993. THOMAS E. PETERSON was appointed Vice Chairman of the Parent and the Bank on February 5, 1990. Previously, he was Executive Vice President of the Bank and head of Retail Banking from 1987 to 1990. MICHAEL E. ROSSI was appointed Vice Chairman of the Parent and the Bank on October 7, 1991. He was appointed Executive Vice President of the Parent on December 3, 1990, when he was also designated as the head of Credit Policy for the Bank. MARTIN A. STEIN was appointed Vice Chairman of the Parent and the Bank on April 27, 1992. He was appointed Executive Vice President of the Parent and the Bank on June 25, 1990. At the same time, he was appointed head of the BankAmerica Systems Engineering Group of the Bank. The present term of office for the officers named above will expire on May 23, 1996 or on their earlier retirement, resignation, or removal. There is no family relationship among any such officers. 20 ================================================================================ ITEM 11. EXECUTIVE COMPENSATION ________________________________________________________________________________ Information concerning executive compensation is incorporated by reference from the text under the captions, "Corporate Governance-Director Remuneration, Stock Ownership Guidelines, Retirement and Attendance" and "Executive Compensation, Benefits and Related Matters" (excluding the material under the headings "Report of the Executive Personnel and Compensation Committee" and "Shareholder Return Performance Graph" therein) in the Proxy Statement for the May 23, 1996 Annual Meeting of Shareholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ________________________________________________________________________________ Information concerning ownership of equity stock of the Parent by certain beneficial owners and management is incorporated by reference from the text under the caption, "Security Ownership of Certain Beneficial Owners" in the Proxy Statement for the May 23, 1996 Annual Meeting of Shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ________________________________________________________________________________ Information concerning certain relationships and related transactions with officers and directors is incorporated by reference from the text under the caption, "Executive Compensation, Benefits and Related Matters" (excluding the material under the headings "Report of the Executive Personnel and Compensation Committee" and "Shareholder Return Performance Graph" therein) in the Proxy Statement for the May 23, 1996 Annual Meeting of Shareholders. 21 PART IV ================================================================================ ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ________________________________________________________________________________ (A)(1) FINANCIAL The report of independent auditors and the following STATEMENTS consolidated financial statements of BAC are incorporated herein by reference from the 1995 Annual Report to Shareholders. Page number references are to the 1995 Annual Report to Shareholders.
PAGE BankAmerica Corporation: Report of Independent Auditors.................................................................. 47 Consolidated Statement of Operations-- Years Ended December 31, 1995, 1994, and 1993................................................ 48 Consolidated Balance Sheet--December 31, 1995 and 1994.......................................... 49 Consolidated Statement of Cash Flows--Years Ended December 31, 1995, 1994, and 1993............................................................................... 50 Consolidated Statement of Changes in Stockholders' Equity-- Years Ended December 31, 1995, 1994, and 1993................................................ 51 Notes to Consolidated Financial Statements...................................................... 52
________________________________________________________________________________ (A)(2) FINANCIAL Schedules to the consolidated financial statements (Nos. I STATEMENT and II of Rule 9-07) for which provision is made in the SCHEDULES applicable accounting regulation of the Securities and Exchange Commission (Regulation S-X) are inapplicable and therefore, are not included. Financial statements and summarized financial information of unconsolidated subsidiaries or 50% or less owned persons accounted for by the equity method are not included as such subsidiaries do not, either individually or in the aggregate, constitute a significant subsidiary. ________________________________________________________________________________ (A)(3) EXHIBITS
Incorporated by Reference From File No. 1-7377: ----------------------------------- Report on Form -------------------------- 10-Q or 10-K Filed 8-K for the Period Exhibit No. Description Herewith Dated Ending No. ----------------------------------------------------------------------------------------------------------------- 3.a. BankAmerica Corporation Certificate of Incorporation, as amended. Exhibit 3(a) for the Parent's Form 8-A Amendment No. 1, filed August 25, 1994 (File No. 33-55225) incorporated herein by reference. 3.b. BankAmerica Corporation By-laws, as amended. 6/30/95 3(b)
22 ================================================================================
Incorporated by Reference From File No. 1-7377: ----------------------------------- Report on Form ------------------------ 10-Q or 10-K Filed 8-K for the Period Exhibit No. Description Herewith Dated Ending No. ---------------------------------------------------------------------------------------------------------- 4.a. The Parent and certain of its consolidated subsidiaries have outstanding certain long-term debt. See Notes 11 and 12 on pages 62 and 63 of the 1995 Annual Report to Shareholders. None of such debt exceeds 10% of the total assets of the Corporation; therefore, copies of constituent instruments defining the rights of holders of such debt are not included as exhibits. The Parent agrees to furnish copies of such instruments to the Securities and Exchange Commission upon request. 4.b. Rights Agreement dated as of April 11, 1988, 12/31/94 4(b) between the Parent and Manufacturers Hanover Trust Company of California, as Rights Agent, as amended. 10.a. BankAmerica Corporation Retirement Plan for X 9/30/94 10 Nonofficer Directors, as amended. Filed herewith is an amendment to the plan./a/ 10.b. BankAmerica Corporation Deferred 12/31/92 10(b) Compensation Plan for Directors, 3/31/93 10 as amended./a/ 9/30/95 10(f) 10.c. BankAmerica Corporation Deferred Compensation 12/31/93 10(c) Plan./a/ 10.d. BankAmerica Corporation Senior Management X 12/31/93 10(d) Incentive Plan (formerly the "Annual Management Incentive Plan")./a/ Filed herewith is an amendment to the plan. 10.e. Supplemental CareerAccounts Plan./a/ 3/31/92 10(a) 10.f. BankAmerica Corporation Executive Compensation 12/31/94 10(f) Program - Benefits/Perquisites Summary./a/ 10.g. BankAmerica Corporation 1987 Management Stock 9/30/95 10(b) Plan, as amended./a/ 10.h. Management Incentive Stock Plan, as amended./a/ 9/30/95 10(c) 10.i. 1992 Management Stock Plan, as amended./a/ X 9/30/95 10(a) Filed herewith is an amendment to the plan. 10.j. BankAmerica Corporation 1991 Stock Appreciation 6/30/92 10(a) Rights Plan./a/ 10.k. Employment Agreement dated April 30, 1987 12/31/92 10(k) between R.M. Rosenberg and the Parent and the Bank, and Supplemental Benefits Agreement dated as of November 21, 1985 between R.M. Rosenberg and Seafirst Corporation and SFNB./a/ 10.l. Supplemental Benefits Agreement dated X July 9, 1990 and December 6, 1990 between M.A. Stein and the Parent./a/
---------------------- /a/Management contract or compensatory plan, contract, or arrangement. 23
Incorporated by Reference From File No. 1-7377: ----------------------------------- Report on Form ------------------------ 10-Q or 10-K Filed 8-K for the Period Exhibit No. Description Herewith Dated Ending No. ---------------------------------------------------------------------------------------------------------- 10.m. Security Pacific Corporation Stock-Based Incentive 9/30/95 10(d) Award Plan, as amended./a/ 10.n. Security Pacific Corporation Stock Option 9/30/95 10(e) Plan, as amended./a/ 10.o. Change in Control Severance Pay Program./a/ X 10.p. General Release and Settlement Agreement X dated December 1 and 4, 1995 between L. W. Coleman and the Parent. 11. Computation of Earnings Per Common Share. X 12.a. Ratios of Earnings to Fixed Charges and Ratios of X Earnings to Combined Fixed Charges and Preferred Stock Dividends. 12.b. Historical and Pro Forma Combined Ratios of X Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 13. 1995 Annual Report to Shareholders. Portions not X incorporated by reference are furnished for informational purposes and are not filed herewith. 21. BankAmerica Corporation Subsidiaries. X 23. Consent of Ernst & Young LLP. X 24. Powers of Attorney. X 27. Financial Data Schedule. X
---------------------- /a/Management contract or compensatory plan, contract, or arrangement. ________________________________________________________________________________ (B)REPORTS ON During the fourth quarter of 1995, the Parent filed reports FORM 8-K on Form 8-K dated October 2, 1995, October 18, 1995 and November 14, 1995. The October 2, 1995 report filed, pursuant to Items 5 and 7 of the report, a copy of the Parent's press release titled "BankAmerica Board Increases Preferred Stock Repurchase Authorization to $750 Million from $500 Million." The October 18, 1995 report filed, pursuant to Items 5 and 7 of the report, a copy of the Parent's press release titled "BankAmerica Third Quarter Earnings." The November 14, 1995 report disclosed, pursuant to Item 5 of the report, the resignation of an individual as a member of the Parent's board of directors and as one of its executive officers. After the fourth quarter of 1995, the Parent filed reports on Form 8-K dated January 17, 1996, February 5, 1996, and March 4, 1996. The January 17, 1996 report filed, pursuant to Items 5 and 7 of the report, a copy of the Parent's press release titled "BankAmerica Fourth Quarter Earnings." The February 5, 1996 report disclosed, pursuant to Item 5 of the report, the Parent board of directors' decision to increase the quarterly dividend on its common stock. The March 4, 1996 report filed, pursuant to Items 5 and 7 of the report, a copy of the Parent's press release titled "BankAmerica Increases Stock Repurchase Program." 24 SIGNATURES ================================================================================ Pursuant to the requirements of Section 13 or 15(d) 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. March 15, 1996 BANKAMERICA CORPORATION By /s/ JAMES H. WILLIAMS ------------------------ (James H. Williams, Executive Vice President and Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Principal Executive Officer and Director: /s/ RICHARD M. ROSENBERG Chairman of the Board -------------------------------- (Richard M. Rosenberg) Principal Executive Officer and Director: /s/ DAVID A. COULTER President and Chief Executive -------------------------------- Officer (David A. Coulter) Principal Financial Officer: /s/ MICHAEL E. O'NEILL Vice Chairman and Chief -------------------------------- Financial Officer (Michael E. O'Neill) Principal Accounting Officer: /s/ JAMES H. WILLIAMS Executive Vice President -------------------------------- and Chief Accounting Officer (James H. Williams)
Directors: JOSEPH F. ALIBRANDI* Director DONALD E. GUINN* Director JILL E. BARAD* Director PHILIP M. HAWLEY* Director PETER B. BEDFORD* Director FRANK L. HOPE, JR.* Director ANDREW F. BRIMMER* Director IGNACIO E. LOZANO, JR.* Director RICHARD A. CLARKE* Director WALTER E. MASSEY* Director TIMM F. CRULL* Director JOHN M. RICHMAN* Director KATHLEEN FELDSTEIN* Director A. MICHAEL SPENCE* Director
A majority of the members of the Board of Directors. *By /s/ CHERYL SOROKIN ----------------------------------- (Cheryl Sorokin, Attorney-in-Fact) Dated: March 15, 1996 25 Other information about BankAmerica Corporation may be found in its quarterly Analytical Review and Form 10-Q and its Annual Report to Shareholders. These reports, as well as additional copies of this Form 10-K, may be obtained from: Bank of America Corporate Public Relations #13124 P.O. Box 37000 San Francisco, CA 94137 Information Online -- To keep current online via the Internet, visit BankAmerica Corporation's home page on the World Wide Web (http://www.bankamerica.com) to view the latest information about the corporation and its products and services, or apply for a loan or credit card. Corporate disclosure documents filed with the Securities and Exchange Commission by BankAmerica Corporation and other companies can be obtained from the Securities and Exchange Commission's home page on the World Wide Web (http://www.sec.gov.) [LOGO OF BANKAMERICA APPEARS HERE] ________________________________________________________________________________ [LOGO OF RECYCLED NL-9 2-96 PAPER APPEARS HERE] ================================================================================ EXHIBIT INDEX
Incorporated by Reference From File No. 1-7377: ----------------------------------- Report on Form ------------------------ 10-Q or 10-K Filed 8-K for the Period Exhibit No. Description Herewith Dated Ending No. ---------------------------------------------------------------------------------------------------------- 3.a. BankAmerica Corporation Certificate of Incorporation, as amended, Exhibit 3(a) for the Parent's Form 8-A Amendment No. 1, filed August 25, 1994 (File No. 33-55225) incorporated herein by reference. 3.b. BankAmerica Corporation By-laws, as amended. 6/30/95 3(b) 4.a. The Parent and certain of its consolidated subsidiaries have outstanding certain long-term debt. See Notes 11 and 12 on pages 62 and 63 of the 1995 Annual Report to Shareholders. None of such debt exceeds 10% of the total assets of the Corporation; therefore, copies of constituent instruments defining the rights of holders of such debt are not included as exhibits. The Parent agrees to furnish copies of such instruments to the Securities and Exchange Commission upon request. 4.b. Rights Agreement dated as of April 11, 1988, 12/31/94 4(b) between the Parent and Manufacturers Hanover Trust Company of California, as Rights Agent, as amended. 10.a. BankAmerica Corporation Retirement Plan for X 9/30/94 10 Nonofficer Directors, as amended. Filed herewith is an amendment to the plan./a/ 10.b. BankAmerica Corporation Deferred 12/31/92 10(b) Compensation Plan for Directors, 3/31/93 10 as amended./a/ 9/30/95 10(f) 10.c. BankAmerica Corporation Deferred Compensation 12/31/93 10(c) Plan./a/ 10.d. BankAmerica Corporation Senior Management X 12/31/93 10(d) Incentive Plan (formerly the "Annual Management Incentive Plan")./a/ Filed herewith is an amendment to the plan. 10.e. Supplemental CareerAccounts Plan./a/ 3/31/92 10(a) 10.f. BankAmerica Corporation Executive Compensation 12/31/94 10(f) Program - Benefits/Perquisites Summary./a/ 10.g. BankAmerica Corporation 1987 Management Stock 9/30/95 10(b) Plan, as amended./a/ 10.h. Management Incentive Stock Plan, as amended./a/ 9/30/95 10(c) 10.i. 1992 Management Stock Plan, as amended./a/ X 9/30/95 10(a) Filed herewith is an amendment to the plan. 10.j. BankAmerica Corporation 1991 Stock Appreciation 6/30/92 10(a) Rights Plan./a/ 10.k. Employment Agreement dated April 30, 1987 12/31/92 10(k) between R.M. Rosenberg and the Parent and the Bank, and Supplemental Benefits Agreement dated as of November 21, 1985 between R.M. Rosenberg and Seafirst Corporation and SFNB./a/ 10.l. Supplemental Benefits Agreement dated July 9, 1990 X and December 6, 1990 between M.A. Stein and the Parent./a/
---------------------- /a/Management contract or compensatory plan, contract, or arrangement.
Incorporated by Reference From File No. 1-7377: ----------------------------------- Report on Form ------------------------ 10-Q or 10-K Filed 8-K for the Period Exhibit No. Description Herewith Dated Ending No. ---------------------------------------------------------------------------------------------------------- 10.m. Security Pacific Corporation Stock-Based Incentive 9/30/95 10(d) Award Plan, as amended./a/ 10.n. Security Pacific Corporation Stock Option 9/30/95 10(e) Plan, as amended./a/ 10.o. Change in Control Severance Pay Program./a/ X 10.p. General Release and Settlement Agreement X dated December 1 and 4, 1995 between L. W. Coleman and the Parent. 11. Computation of Earnings Per Common Share. X 12.a. Ratios of Earnings to Fixed Charges and Ratios of X Earnings to Combined Fixed Charges and Preferred Stock Dividends. 12.b. Historical and Pro Forma Combined Ratios of X Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 13. 1995 Annual Report to Shareholders. Portions not X incorporated by reference are furnished for informational purposes and are not filed herewith. 21. BankAmerica Corporation Subsidiaries. X 23. Consent of Ernst & Young LLP. X 24. Powers of Attorney. X 27. Financial Data Schedule. X
---------------------- /a/Management contract or compensatory plan, contract, or arrangement. EX-10.A 2 RETIREMENT PLAN FOR NONOFFICER DIRECTORS, AMENDMENT EXHIBIT 10.a. ------------- AMENDMENT TERMINATING THE AMENDED AND RESTATED BANKAMERICA CORPORATION RETIREMENT PLAN FOR NONOFFICER DIRECTORS ---------------------------------------- At the March 4, 1996 Board of Directors meeting of BankAmerica Corporation ("BAC") the board resolved certain matters relating to the Amended and Restated BankAmerica Corporation Retirement Plan for Nonofficer Directors, as originally adopted effective August 7, 1989 (the "Plan"). The board resolved that the Plan, is hereby terminated prospectively as of March 31, 1996 and amended as of such date as follows: 1. The second paragraph of Section 1 is amended by the addition of the following sentence: "The Plan shall be terminated prospectively as of March 31, 1996." 2. Section 2(a) is amended to read as follows: "'Annual Retainer' means (i) for Eligible Directors whose Retirement occurred prior to August 1, 1994, the current annual retainer paid to Board members for service on the Board as adjusted from time to time; (ii) for Eligible Directors whose Retirement occurs between August 1, 1994 and March 31, 1996, the annual retainer paid to Board members for service on the Board as in effect at the time of the eligible Director's Retirement and (iii) for Eligible Directors whose Retirement occurs on or after April 1, 1996, the annual retainer payable to Board members as of March 31, 1996. In no case shall the definition include any additional amount paid for service on a Board committee or as Board committee chairman or any amount specifically paid for attendance at Board or at Board committee Meetings." 3. Section 2(c) is amended by the addition of the following sentence: 1 Document #4127673.06 "However, a member of the Board of Directors on March 31, 1996 shall not be an Eligible Director unless such director (i) had completed 10 or more years of service on the Board on March 31, 1996 and (ii) elected to retain benefits under the Plan and not have the present value of the director's retirement benefits credited to the BankAmerica Corporation Amended and Restated Deferred Compensation Plan for Directors." 2 Document #4127673.06 EX-10.D 3 SENIOR MANAGEMENT INCENTIVE PLAN, AMENDMENT EXHIBIT 10.d. AMENDMENT TO BANKAMERICA CORPORATION SENIOR MANAGEMENT INCENTIVE PLAN The BankAmerica Corporation Senior Management Incentive Plan ("SMIP"), as adopted effective January 1, 1994, is amended as follows, effective January 1, 1996: 1. Section 5.1 of the SMIP is amended in its entirety to read as follows: "5.1 The Committee shall allocate a percentage of the Incentive Award Pool to each Executive Officer who is a Participant for the Plan Year. The allocation shall be made not later than 90 days after the commencement of the Plan Year. No Participant may be allocated more than 10 percent of the Incentive Award Pool. An Executive Officer who becomes a Participant after the date the Committee has allocated percentages of the Incentive Award Pool for the Plan Year shall have an allocation of 2 percent of the Incentive Award Pool. No incentive award shall exceed the Participant's allocated percentage of the Incentive Award Pool." 2. Section 6.1 of the SMIP is deleted. Sections 6.2, 6.3 and 6.4 are renumbered 6.1, 6.2 and 6.3, respectively. 3. The first sentence of Section 6.1, as renumbered, shall be amended to read as follows: "6.1 After the end of the Plan Year, the performance of each Senior Officer who is a Participant shall be assessed by the CEO who shall make an award recommendation to the Committee for the Participant." 4123405 EX-10.I 4 1992 MANAGEMENT STOCK PLAN, AMENDMENT EXHIBIT 10.i. AMENDMENT TO BANKAMERICA CORPORATION 1992 MANAGEMENT STOCK PLAN -------------------------------------------------- The BankAmerica Corporation 1992 Management Stock Plan is amended as follows, effective February 5, 1996: The definition of Change in Control at Section 1.3(e) of the 1992 BankAmerica Corporation Management Stock Plan is hereby amended by replacing "more than 80% of" in subsection (iii)(A) of Section 1.3(e) with "more than 70% (80% in the case of any Award made prior to February 5, 1996) of." 4123800.08 EX-10.L 5 SUPPLEMENTAL BENEFITS AGREEMENT EXHIBIT 10.l. Supplemental Benefits Agreement dated July 9, 1990 and December 6, 1990 between M.A. Stein and the Parent EXHIBIT 10.l. Supplemental Benefits Agreement dated July 9, 1990 [Bank of America NT&SA Letterhead] July 9, 1990 Mr. Martin A. Stein Executive Vice President BankAmerica Systems Engineering #3001 San Francisco Re: Special Annuity --------------- Dear Marty: Per the terms of your employment offer, we agree to pay you an annual benefit of $20,000, payable monthly, commencing at age 65 and ceasing upon your death. I just wanted to inform you that the Benefit Department is accruing for this benefit. As detailed in your offer letter, these payments are separate from any benefits you may receive from the BankAmeraccount and BankAmerishare plans. A copy of this letter is being included in your Personnel file and the Retirements department for future reference and planning. Sincerely, /s/ ROBERT N. BECK Robert N. Beck 4129352 EXHIBIT 10.l. Supplemental Benefits Agreement dated December 6, 1990 [Bank of America NT&SA Letterhead] December 6, 1990 Marty Stein Executive Vice President BASE Executive Office #3789 Dear Marty: Per the terms of your offer letter, effective September 1990 you became vested in an equivalent benefit of $20,000 per year (payable monthly) commencing the month you reach age 65 and with all payments ceasing upon death. These benefits are separate from the BankAmeraccount and BankAmerishare plans. These payments were to provide you a benefit equivalent to the retirement benefits that would have been vested at Paine Webber. If you have any questions regarding this issue, please let me know. Sincerely, /s/ ROBERT N. BECK Robert N. Beck 4129352 EX-10.O 6 SEVERANCE PAY PROGRAM EXHIBIT 10.o. CHANGE IN CONTROL SEVERANCE PAY PROGRAM In February 1996, the BAC Board of Directors adopted a change in control executive severance pay program covering executive officers ("Executive Officers"). These Executive Officers are covered by individual change in control agreements with BAC ("Agreements"). The form of agreement which is in effect between BAC and each of the Executive Officers covered by the Agreements is substantially in the form attached hereto. 4128766 AGREEMENT (form of) ------------------- AGREEMENT by and between BankAmerica Corporation, a Delaware corporation ("BANKAMERICA") and __________ _________ (the "EXECUTIVE"). The Executive is currently employed by BankAmerica and/or a direct or indirect subsidiary of BankAmerica (the "COMPANY"). The Board of Directors of BankAmerica (the "BOARD"), has determined that it is in the best interests of BankAmerica and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined below) of BankAmerica. The Board believes it is important to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations and claims of the Executive will be satisfied and released and which are competitive with those of other financial institutions. Therefore, in order to accomplish these objectives, the Board has directed BankAmerica to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. ------------------- (a) The "EFFECTIVE DATE" shall mean the first date during the Change in Control Period (as defined in Section 1(b)) on which a Change in Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive's employment with the Company is terminated (including termination for Good Reason, as defined in Section 5(c)) prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to affect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "CHANGE IN CONTROL PERIOD" shall mean the period commencing on February 1, 1996 and ending on the second anniversary of such date, provided, however, that commencing on the date one year after February 1, 1996, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "RENEWAL DATE"), unless previously terminated, the Change in Control Period shall be automatically extended so as to terminate two years from such 4114808.14 -1- Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change in Control Period shall not be so extended. 2. Change in Control. For the purpose of this Agreement, a "CHANGE ----------------- IN CONTROL" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of BankAmerica (the "OUTSTANDING BANKAMERICA COMMON STOCK") or (ii) the combined voting power of the then outstanding voting securities of BankAmerica entitled to vote generally in the election of directors (the "Outstanding BankAmerica Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from BankAmerica (ii) any acquisition by BankAmerica, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by BankAmerica's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of BankAmerica or any of its subsidiaries (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding BankAmerica Common Stock and Outstanding BankAmerica Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns BankAmerica or all or substantially all of BankAmerica's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Out- 4114808.14 -2- standing BankAmerica Common Stock and Outstanding BankAmerica Voting Securities, as the case may be, (provided, however, that, for the purpose of this clause (i), any shares of common stock or voting securities of such resulting corporation received by such beneficial owners in such Business Combination other than as the result of such beneficial owners' ownership of Outstanding BankAmerica Common Stock or Outstanding BankAmerica Voting Securities immediately prior to such Business Combination shall not be considered to be owned by such beneficial owners for the purposes of calculating their percentage of ownership of the outstanding common stock and voting power of the resulting corporation), (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation unless such Person owned 20% or more of the Outstanding BankAmerica Common Stock or Outstanding BankAmerica Voting Securities immediately prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of BankAmerica of a complete liquidation or dissolution of BankAmerica. 3. Employment Period. BankAmerica agrees that the Company is ----------------- expected, but not obligated, to continue the Executive in its employ, and, in return for the consideration provided by this Agreement, the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the first anniversary of such date (the "EMPLOYMENT PERIOD"). 4. Terms of Employment. ------------------- (a) Position and Duties. (i) During the Employment Period, ------------------- (A) the Company shall not assign the Executive any duties or responsibilities substantially inconsistent with the Executive's duties or responsibilities with the Company immediately preceding the Effective Date nor shall the Company substantially reduce the Executive's duties or responsibilities as they existed immediately preceding the Effective Date and (B) the Executive's services shall be performed primarily at the location where the Executive was primarily employed immediately preceding the Effective Date or primarily at any office or location no more than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time to the business and affairs of the Company and to use the Executive's reasonable best efforts to perform faithfully and efficiently the responsibilities 4114808.14 -3- and duties assigned to the Executive. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities comply with policies and guidelines of the Company in effect generally with respect to peer executives of the Company and do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company so long as such activities comply with policies and guidelines of the Company in effect generally with respect to peer executives of the Company. (b) Compensation. (i) Base Salary. During the Employment ------------ ----------- Period, the Executive shall receive an annual base salary ("ANNUAL BASE SALARY"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company during the period between the initial public disclosure of the potential Change in Control and the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at intervals no less frequent than customary for the Executive prior to the Effective Date. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase during the Employment Period and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. (ii) Annual Bonus. In addition to Annual Base Salary, the ------------ Executive shall have, for each fiscal year ending during the Employment Period, the opportunity for an annual cash bonus (the "ANNUAL BONUS") equal to that of other peer executives on the Managing Committee or at Impact Level I as applicable, but in no event shall such bonus be less than the Executive's lowest bonus paid to the Executive under the Company's Senior Management Incentive Plan, or any comparable bonus under any predecessor or successor plan, for the last three full fiscal years prior to the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "RECENT LOWEST ANNUAL BONUS"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the --------------------------------------- Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, policies and programs applicable generally to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable, including the opportunity for 4114808.14 -4- cash and stock incentive awards (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable) equal to that of peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (v) Expenses. During the Employment Period, the Executive -------- shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the policies and procedures of the Company in effect generally with respect to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (vi) Fringe Benefits. During the Employment Period, the --------------- Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile, home security system and payment of related expenses, in accordance with the plans, programs and policies of the Company in effect generally with respect to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (vii) Office and Support Staff. During the Employment Period, ------------------------ the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, as provided generally with respect to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (viii) Vacation. During the Employment Period, the Executive -------- shall be entitled to paid vacation in accordance with the plans, policies and programs in effect generally with respect to other peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. 5. Termination of Employment. ------------------------- (a) Death or Disability. The Executive's employment shall ------------------- terminate automatically upon the Executive's death during the Employment Period. If the Executive suffers a Disability, the Executive's employment may end pursuant to the policy of Company governing extended medical absences as in effect on the date of the Change in Control. For purposes of this Agreement, "DISABILITY" shall mean the absence of the Executive from the Executive's duties with the Company as a result of incapacity due to mental or physical illness. 4114808.14 -5- (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "CAUSE" shall mean: (i) the willful and continued failure of the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for such performance is delivered to the Executive by the Board or the Chief Executive Officer of BankAmerica or of the subsidiary employing the Executive, which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of legal counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board (after reasonable notice is provided to the Executive and the Executive is given an opportunity to submit written comments to the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated ----------- by the Executive for Good Reason during the Employment Period. For purposes of this Agreement, "GOOD REASON" shall mean: (i) any failure by the Company to comply with any of the provisions of Section 4(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent failure not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 4114808.14 -6- (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof. (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by BankAmerica to comply with and satisfy Section 12(c) of this Agreement. For purposes of this Section 5(c), any determination of "Good Reason" made by the Executive reasonably and in good faith shall be conclusive. (d) Notice of Termination. Any termination by the Company for --------------------- Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "NOTICE OF TERMINATION" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "DATE OF TERMINATION" means (i) if ------------------- the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or the later date specified therein, as the case may be, but no more than 30 days after the giving of such notice absent the mutual agreement of the Executive and the Company, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability or on account of death, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the date employment ends under the Company policy concerning extended medical absences, as the case may be. 6. Obligations of the Company upon Termination. ------------------------------------------- (a) Good Reason; Other Than for Cause, Disability or ------------------------------------------------ Death. If the Company shall terminate the Executive's employment other than - ----- for Cause or Disability or on account of the Executive's death or the Executive shall terminate employment for Good Reason, and the Date of Termination shall occur within the Employment Period: 4114808.14 -7- (i) The Company shall pay to the Executive in a lump sum in cash, to the extent reasonably feasible within 30 days after the Date of Termination (except for the prorated Annual Bonus described in A.(2)), the aggregate of the following amounts: A. The sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid; (2) a prorated Annual Bonus for the fiscal year in which the Date of Termination occurs equal to the product of (x) the higher of (I) the Recent Lowest Annual Bonus and (II) the Annual Bonus paid or payable to peer executives of the Company on the Managing Committee or at Impact Level I, as applicable, for such fiscal year if any and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, which prorated Annual Bonus shall be payable at the customary time for the Annual Bonus for the fiscal year; and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "ACCRUED OBLIGATIONS"). B. The amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary and (y) the average of the actual annual bonus or bonuses received by the Executive for the period of up to three consecutive fiscal years, commencing with the 1994 fiscal year, ending immediately preceding the Effective Date. C. If the Executive forfeits any benefits under the BankAmerica 401(k) Investment Plan or Pension Plan or under any other qualified retirement plan of the Company, a payment equal to the amount of such forfeited benefits. The Executive shall also be 100% vested in any Supplemental Retirement Plan benefits, which shall be payable pursuant to the terms of such plan. D. The amount equal to the product of (1) three and (2) the current annual contribution provided by the Company for the Executive's medical and dental, long term disability, life and accidental death and dismemberment insurance, multiplied by 191% to compensate for the payment being taxable. (ii) If at the time the Executive's employment with the Company ends, the Executive qualifies as a retiree under the personnel policy of the Company, the Executive shall be eligible for benefits pursuant to the plans, programs and policies in effect from time to time for similarly situated retired peer executives of the Company on the Managing Committee or at Impact Level I, as applicable. (iii) The Company shall, at its sole expense as incurred, provide the Executive with outplacement services, the provider of which shall be selected by the Company, and financial counseling services for the calendar year in which the Date of Termination occurs and for one additional year pursuant to the financial counseling program in effect for peer Executives on the Managing Committee or at Impact Level I, as applicable. The Company does not 4114808.14 -8- warrant that the outplacement services will result in the Executive obtaining new employment. (iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is entitled to receive under any plan, program, policy or contract or agreement of the Company, other than severance pay or separation benefits subject to Section 13(g). (The other amounts or benefits required to be paid shall be hereinafter referred to as the "OTHER BENEFITS"). To the fullest extent permitted by law, payment under Section 6(a)(i)B shall be in lieu of any severance pay or pay in lieu of notice required under applicable law. (b) Death. If the Executive's employment is terminated by reason of ----- the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination to the extent reasonably feasible. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits equal to those provided by the Company to the estates and beneficiaries of peer executives of the Company on the Managing Committee or at Impact Level I, as applicable, under such plans, programs and policies relating to death benefits, if any, as in effect at the time of death. (c) Disability. If the Executive's employment is terminated by ---------- reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination to the extent reasonably feasible. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Date of Termination to receive, disability and other benefits equal to those generally provided by the Company to disabled executives and/or their families in accordance with such plans, programs and policies relating to disability, if any, as in effect generally with respect to other peer executives on the Managing Committee or at Impact Level I, as applicable, and their families, to the extent the Executive has enrolled in and paid for such benefits, as applicable. (d) Cause; Other than for Good Reason. If the Executive's employment --------------------------------- shall be terminated for Cause during the Employment Period, or if the Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to the Executive (other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination and any accrued vacation pay, and (y) Other Benefits, in each case to the extent theretofore unpaid). 4114808.14 -9- (e) Termination as a Result of Divestiture. This Section shall -------------------------------------- apply if the Executive ceases to be employed within the Company as a result of a sale of assets or stock of a BankAmerica subsidiary during the Employment Period. For purposes of this Section, a "COMPARABLE JOB" is a position with the purchaser with (i) at least the same base salary and substantially equivalent bonus opportunity as the Executive's then current position, (ii) duties and responsibilities which are not substantially less than, and with no duties or responsibilities substantially inconsistent with, the Executive's then current position, (iii) eligibility for benefits received by similarly situated executives of the purchaser, and (iv) a primary work location no more than 35 miles from the Executive's then current primary work location. If the Executive receives an offer for a comparable job with the purchaser, the Executive shall not receive payments or benefits under this Agreement, whether or not the Executive accepts the offer, other than payment of Accrued Obligations and the timely payment or provision of Other Benefits. However, if the Executive accepts the comparable job, and within one year of the effective date of the sale, the purchaser terminates the Executive's employment without Cause or the Executive resigns on account of the failure of the purchaser to fulfill the terms of an offer for a comparable job as defined above, the Executive shall, subject to Section 8, receive payment under Section 6(a)(i)B of this Agreement, less any severance payments paid to the Executive by the purchaser, and the Executive shall also receive associated payments under Section 9 of this Agreement. If the Executive accepts a position with the purchaser which is not a comparable job, which position is accepted on or before the effective date of the sale, the Executive shall not receive payments or benefits under the Agreement other than payment of Accrued Obligations and the timely payment or provision of Other Benefits, unless within one year of the date of the sale, the purchaser terminates the Executive's employment without Cause or the Executive resigns because the Executive's primary work location is moved more than 35 miles from the Executive's initial primary work location with the purchaser, in which case the Executive shall, subject to Section 8, receive payment under Section 6(a)(i)B of this Agreement, less any severance payments paid to the Executive by the purchaser, and the Executive shall also receive associated payments under Section 9 of this Agreement. For purposes of this provision, the Executive's Date of Termination shall be the date the Executive's employment with the purchaser ends. 7. Non-exclusivity of Rights. Nothing in this Agreement shall ------------------------- prevent or limit the Executive's continuing or future participation in any plan, program, or policy provided by the Company for which the Executive may qualify, nor, subject to Sections 13(f) and 13(g), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company. Amounts which are vested benefits, deferred compensation or which the Executive is otherwise entitled to receive under any plan, policy, or program of, or any contract or agreement with, the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, or program or contract or agreement except as explicitly modified by this Agreement. 8. Signing of Release and Full Settlement. -------------------------------------- 4114808.14 -10- (a) Execution and non-revocation of Release by Executive. The ----------------------------------------------------- Company's obligation to make the payments provided for in this Agreement (other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination and any accrued vacation pay, and (y) Other Benefits, in each case to the extent theretofore unpaid) and otherwise to perform its obligations hereunder are subject to the Executive's execution, after the Date of Termination, and delivery to the Company of a general release in the form of Appendix "A" attached hereto and the delivery to the Company of a statement of non-revocation in the form of Appendix "B" executed at least 8 days after the date of execution of the general release. (b) Right of Set-Off by Company; No Duty to Seek Employment. The ------------------------------------------------------- Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set- off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others, except that the Company shall be entitled to deduct from the amounts payable under this Agreement any amounts outstanding on the Executive's business credit card on the Termination Date which are not reimbursable under the Expense Guidelines of the Company then in effect. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. 9. Certain Additional Payments by the Company. ------------------------------------------ (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "PAYMENT") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "CODE"), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "EXCISE TAX"), then the Executive shall be entitled to receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b)(i) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young or such other nationally recognized certified public accounting firm as may be designated by the Company (the 4114808.14 -11- "ACCOUNTING FIRM") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days after the Accounting Firm has been advised that a Payment was made, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All reasonable fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive promptly following the receipt of the Accounting Firm's determination, unless the Company requests further calculations. Any determination made by the Accounting Firm shall be binding upon the Company and the Executive, although either party may challenge such a determination through a legal proceeding. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company, should have been made ("UNDERPAYMENT"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (b)(ii) To the extent the Company overpays any Excise Tax or Gross-Up Payment, the Executive agrees such overpayment(s) will be immediately returned to the Company by the Executive. As a condition to receipt of a Gross- Up Payment or Excise Tax Payment, the Executive consents to jurisdiction and venue in California in an action by Company to recover any overpayments. The Executive also agrees to provide Company all financial information and data, including tax information, reasonably requested by Company to calculate such overpayments. The Executive agrees that the Executive shall not be entitled to delay or avoid repayment of overpayments (A) based on other types of tax disputes the Executive may have with tax authorities, (B) based on a change in the residence of the Executive following receipt of a Gross-Up Payment or Excise Tax Payment, (C) based on any claim or claims by the Executive against Company for additional sums or benefits, or (D) based on any claims or claims for offset by the Executive against Company. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: 4114808.14 -12- (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 4114808.14 -13- 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after Company's receipt of such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a ------------------------ fiduciary capacity for the benefit of the Company all secret, confidential or non-public information, knowledge or data relating to the Company (including its employees, officers, directors, agents or representatives), which was obtained by the Executive during the Executive's employment by the Company, unless such information, data, or knowledge is disclosed to the public by an authorized Company representative. (If the data, information, or knowledge is disclosed by the Executive or by representatives of the Executive in violation of this Agreement, this shall not constitute authorized public disclosure.) However, nothing herein preventing the disclosure of such information, knowledge or data shall preclude the Executive from utilizing the general non-confidential knowledge or expertise of the Executive acquired while at the Company in any position which the Executive may hereafter hold with another employer outside of the Company. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. However, breach of this Section by the Executive is a material breach, and the Company reserves all other remedies both in law and equity against the Executive for breach of this Section 10. 11. Non-Disparagement. The Executive agrees that the Executive will ----------------- not publicly (e.g., via an interview or speech or presentation available to the ---- public) criticize, defame, or disparage the Company (including its employees, officers, directors, representatives or agents), its plans or its actions, orally or in writing, unless compelled by law to do so. However, if the Executive is publicly criticized, disparaged, or defamed by a representative of the Company who is speaking on behalf of the Company, the foregoing contractual limitations on the Executive's ability to criticize or disparage the Company shall cease to exist and shall be deemed null and void. In no event shall an asserted violation of the provisions of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. However, breach of this Section by the Executive is a material breach, and the Company reserves all other remedies both in law and equity against the Executive for breach of this Section 11. In addition, an action to enforce obligations under this Section by either party and statements made in such litigation itself shall not be deemed to violate this Section 11. 12. Successors. ---------- (a) This Agreement is personal to the Executive and without the prior written consent of an authorized representative of BankAmerica shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. 4114808.14 -14- (b) This Agreement shall inure to the benefit of and be binding upon BankAmerica and its successors and assigns. (c) BankAmerica will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of BankAmerica to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "BankAmerica" shall mean BankAmerica Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. Miscellaneous. ------------- (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the Executive and BankAmerica (or any successor), signed by the Chief Executive Officer or Personnel Relations Officer of BankAmerica, except as provided in the following sentence. If the Executive is the Chief Executive Officer of BankAmerica, the Chairman of the Executive Personnel and Compensation Committee of the BankAmerica Board of Directors (or its equivalent successor committee) shall sign the agreement on behalf of BankAmerica. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: - ------------------- If to the Company: - ----------------- BankAmerica Corporation Office of the General Counsel #3017 P.O. Box 37000 San Francisco, CA 94137 Street address: 555 California Street, 8th Floor San Francisco, CA 94104 4114808.14 -15- Attention: General Counsel, and a separate copy to the attention of the BankAmerica Personnel Relations Officer, at: BankAmerica Corporation Executive Offices #3001 P.O. Box 37000 San Francisco, CA 94137 Street address: 555 California Street, 40th Floor San Francisco, CA 94104 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and an authorized representative of the Company, the employment of the Executive by the Company is "at-will" and, the Executive's employment may be terminated by either the Executive or the Company at any time. If such termination or any other termination of employment occurs prior to the Effective Date, the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, although the employment of the Executive by the Company shall continue to be "at-will" and may be terminated by the Company or the Executive at any time. If the Executive is not an employee or officer of BankAmerica, the execution of this Agreement by BankAmerica shall not cause the Executive to become an employee or officer of BankAmerica, but rather, the Executive shall remain an employee of the BankAmerica subsidiary which employs the Executive. 4114808.14 -16- (g) If the Executive is eligible to receive severance pay under this Agreement, the Executive agrees that the Executive shall not be eligible to receive severance pay or separation benefits under any other plan, program, policy, guideline, or practice of the Company, including any staff reduction program of the Company then in effect, or under any agreement between the Executive and the Company. (h) "Peer" or "peer executives" as used in this Agreement shall be as reasonably determined by the Chief Executive Officer or Personnel Relations Officer of BankAmerica. (i) The Executive shall not have the right to alienate, assign, encumber, hypothecate, or pledge the Executive's interest in any payments or benefits under this Agreement, voluntarily or involuntarily, and any attempt to so dispose of any such interest shall be void. (j) This document is a complete statement of the Agreement and as of the date executed by both parties supersedes all prior plans, proposals, representations, promises, and inducements, written or oral, relating to its subject matter. The Company will not be bound by or liable to the Executive for any representation, promise, or inducement made by any person or entity relating to its subject matter which is not embodied in this Agreement. IN WITNESS WHEREOF, the Executive has executed this instrument and BankAmerica, pursuant to the authorization from its Board of Directors, has caused this instrument to be executed by its duly authorized officer, on the dates written below. Date: ____________________ ______________________________ [Executive] BANKAMERICA CORPORATION Dated: ___________________ By ___________________________ ______________________ 4114808.14 -17- APPENDIX A GENERAL RELEASE --------------- PLEASE READ THIS ENTIRE AGREEMENT CAREFULLY. NOTE THAT IT CONTAINS A RELEASE AND WAIVER OF CLAIMS. YOU ARE ENCOURAGED TO ------------------ CONTACT AN ATTORNEY OF YOUR CHOICE FOR ADVICE CONCERNING ITS TERMS AND LEGAL SIGNIFICANCE BEFORE SIGNING IT. IF YOU AGREE TO ITS TERMS, SIGN BELOW. ------ I have reviewed the terms of my Agreement with BankAmerica Corporation dated ______________ (the "Agreement") and have had the opportunity to read and understand its provisions. I received the Agreement together with this General Release more than 45 days prior to the date I am signing this General Release. In particular, I understand that to receive separation benefits, including severance pay, provided under the Agreement, I must agree to the terms of this General Release and to the terms of the Non-Revocation Form, which I have also received, and properly complete, sign and return both of these documents to the Company. I understand the Non-Revocation form may not be signed and returned any sooner than 8 days after I sign this General Release, and that I can revoke my agreement to this General Release for seven days after I sign the General Release. If signed by me, this General Release is my voluntary resignation from any and all directorships or board memberships or committee memberships I hold with or within BankAmerica Corporation, including its subsidiaries or its affiliates (hereinafter collectively the "Company") or on the Company's behalf or for the Company's benefit. I will promptly complete whatever documentation is required to effect these resignations. I also agree to make myself reasonably available, provide information and otherwise cooperate with the Company or its representatives after my employment ends in connection with any matter, dispute or the like for which the Company desires my availability or cooperation, or in connection with any data I possess which the Company wishes to obtain related to my employment with the Company. The Company will reimburse me for reasonable documented expenses in accord with then applicable company expense guidelines. As consideration and in exchange for my receipt and acceptance of the separation benefits, including severance pay, provided under the Agreement, and to the extent permitted by law, I hereby waive, release and fully discharge, and agree not to pursue, any and all claims, claims for relief and/or causes of action I have or may have as of the date I sign this General Release against BankAmerica Corporation, Bank of America NT&SA, and/or its or their current or former, affiliates, subsidiaries, successors, or predecessors, and/or any of the current or former, officers, directors, shareholders, employees, attorneys, employee benefit plans, representatives, successors or agents of the foregoing entities (Released Parties), arising out of and/or connected in any way with my employment relationship within the 4114808.14 -1- Company, and/or the termination of that employment relationship, and/or with respect to any other claim, matter, or event arising prior to the time I execute this General Release. I recognize and agree that such released claims, claims for relief, and/or causes of action include, but are not limited to, age claims under the federal Age Discrimination in Employment Act, as well as claims under Title VII of the Civil Rights Act of 1964, Section 1981 of Title 42 of the United States Code, the Employee Retirement Income Security Act of 1974, the Racketeer Influenced and Corrupt Organizations Act, the Financial Reform Recovery and Enforcement Act of 1989, the Americans With Disabilities Act, the Rehabilitation Act of 1973, the federal Family and Medical Leave Act, the California Fair Employment and Housing Act, the California Labor Code, the Equal Pay Act, the Fair Labor Standards Act, and all other laws, whether foreign, federal, state or local of any jurisdiction. This General Release does not waive rights or claims based on events that may occur after the date I sign it. To the extent permitted by law, I further hereby waive all rights under Section 1542 of the California Civil Code or any similar law of any jurisdiction against the Released Parties. I recognize that Section 1542 provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I understand that should any provision of this General Release be determined to be invalid by a court or government agency of competent jurisdiction or should I fail to fulfill my obligations under it, the remainder of this General Release shall, at the Company's option, remain in full force and effect and/or I shall be required to return, in full or in part, as determined by the Company, any and all consideration I received in exchange for my agreeing to this General Release. I hereby confirm my promise to adhere to the terms of the confidentiality clause and non-disparagement clause at Sections 10 and 11 of the Agreement and to fulfill my obligations and agreements relating to any payment under Section 9 of the Agreement. Nothing in this General Release constitutes an admission of liability by the parties. This General Release constitutes the complete understanding of the parties concerning its subject matter, and supersedes any and all prior agreements, promises or inducements, written or oral, except as specifically set forth in the Agreement. No other promises or agreements, or any modifications to or of this General Release, shall be binding unless reduced to writing and signed by an authorized representative of the Company and me. I acknowledge that I have read this General Release, that I fully understand and appreciate its meaning, and that I had an opportunity to consult my own attorney. This General Release does not release any vested rights I may have under the pension program or savings program, or any claims I may have for indemnification under applicable 4114808.14 -2- law or applicable by-laws, any claims I may have for workers compensation, disability, or unemployment insurance benefits, nor does it release any claims for breach of the Agreement itself. If I am retiring, this General Release also does not affect my participation in any benefit program made available to retirees by the Company. __________________________________ Signature __________________________________ Printed Name of Executive __________________________________ Date __________________________________ Social Security No. THIS GENERAL RELEASE MAY NOT BE SIGNED AND RETURNED UNTIL AFTER YOUR DATE OF TERMINATION. 4114808.14 -3- APPENDIX B STATEMENT OF NON-REVOCATION OF GENERAL RELEASE AS OF THE DATE SHOWN ON THIS FORM By signing below, I hereby verify that I have chosen not to revoke my agreement to and execution of the General Release. My signature also confirms my renewed agreement, as of the date shown below, to the terms of the General Release, including the release and waiver to the extent permitted by law of any and all claims I have or may have against BankAmerica Corporation, Bank of America NT&SA, including its or their subsidiaries and affiliates, and the officers, employees, directors, representatives and/or agents of any of the foregoing entities, or any other Released Parties, other than claims specifically excluded from release by the terms of the General Release itself. __________________________________ Signature __________________________________ Printed Name of Executive __________________________________ Date __________________________________ Social Security No. TO BE VALID, THIS DOCUMENT MAY NOT BE SIGNED AND RETURNED UNTIL 8 DAYS OR MORE AFTER THE DATE THE GENERAL RELEASE IS SIGNED 4114808.14 EX-10.P 7 GENERAL RELEASE AND SETTLEMENT AGREEMENT EXHIBIT 10.p. GENERAL RELEASE AND SETTLEMENT AGREEMENT ---------------------------------------- ("AGREEMENT") ------------- For good and valuable consideration, receipt of which is hereby acknowledged, and in order to resolve and settle finally, fully and completely all matters or disputes that now or may exist between them, the parties agree as follows: 1. PARTIES. The parties to this Agreement are Lewis W. Coleman, his -------- heirs, representatives, successors and assigns (hereinafter referred to collectively as "Mr. Coleman") and Bank of America National Trust and Savings Association, BankAmerica Corporation, and/or any of its or their current, former, or future, subsidiaries or affiliates (hereinafter referred to collectively as "Bank"). 2. VOLUNTARY RESIGNATION. Mr. Coleman hereby voluntarily tenders and ---------------------- Bank hereby accepts the voluntary resignation of his employment effective December 1, 1995 from all offices, officer positions, and other positions he holds within Bank except he shall be an employee (not an officer) of BankAmerica Corporation ("BAC") through February 15, 1996. Mr. Coleman hereby voluntarily tenders and Bank accepts the voluntary resignation of his employment from BAC effective February 15, 1996. 3. TIME TO SIGN AGREEMENT. Mr. Coleman acknowledges and agrees he, or ----------------------- his counsel on his behalf, received the Agreement on or before November 9, 1995. Mr. Coleman also acknowledges and agrees he had at least twenty-one (21) calendar days from the date he received this Agreement to decide whether to sign it. Mr. Coleman understands that for seven (7) calendar days after he signs this Agreement he has the right to revoke it, and this Agreement shall not become effective and enforceable until after the expiration of this seven day period. The Agreement may not be revoked after the seven day period. Mr. Coleman understands that he will not be entitled to receive or retain any of the consideration provided by this Agreement, except under Paragraph 4, unless he ------- signs and returns the fully executed Agreement and unless he signs and returns Attachment A confirming that he does not revoke the Agreement, and provided that Attachment A is signed no fewer than eight (8) calendar days after Mr. Coleman signs this Agreement. Mr. Coleman also understands and agrees that as an additional condition to receiving or retaining the consideration provided for by this Agreement, Mr. Coleman must execute and return to Bank the Confirmation of General Release and Settlement Agreement, attached as Attachment B, which may not be signed any earlier than February 16, 1996. 4. PAID NOTICE PERIOD. As consideration for the promises contained in ------------------- this Agreement, and without any other obligation to do so, Bank agrees that beginning December 1, 1995, and continuing through February 15, 1996, Mr. Coleman shall be relieved of the regular, day-to-day responsibilities and duties as an employee of BAC including being relieved of all decision-making power or authority and shall not have use of an office, but Mr. Coleman shall assist the Bank in the transition to a new Chief Financial Officer during this period. During this period, Mr. Coleman shall continue to receive the base salary ($58,333.33 per month, less legal deductions for applicable taxes and other withholdings) and be eligible for the medical, dental, vision, life, and accidental death and dismemberment insurance benefits he was receiving from Bank as of the date he first received this Agreement, but he shall not accrue, be eligible to accrue, or utilize any sickness leave and/or long-term disability benefits. During this period, he shall also remain subject to the insider trading rules of the Securities and Exchange Act of 1934, as well as any Bank policies, practices and procedures required by applicable law or as required or directed by any regulatory authority. 5. PAYMENTS TO BE MADE. In consideration of the promises of Mr. Coleman -------------------- as set forth herein, and without any other obligation to do so, the parties agree that, on January 2, 1996, Bank will pay Mr. Coleman the gross sum of Four Million Nine Hundred Ninety-Four Thousand Seven Hundred Ninety-One and 67/100 Dollars ($4,994, 791.67), less legal deductions for applicable taxes and other withholdings. 6. FURTHER CONSIDERATION - BENEFITS. As further consideration, and --------------------------------- without any other obligation to do so, Bank will pay Mr. Coleman within ten (10) business days of February 15, 1996, the gross sum of Twenty-Five Thousand Dollars ($25,000.00), less legal deductions for applicable taxes and other withholdings, to defray expenses for premiums that may be incurred by Mr. Coleman with respect to medical, dental, vision, life, long term disability and accidental death and dismemberment insurance. 7. BONUS ELIGIBILITY. As further consideration, and without any other ------------------ obligation to do so, the parties agree that Mr. Coleman will be eligible to receive a bonus for his 1995 performance (in lieu of payment under the Senior Management Incentive Program) in the amount of One Million Five Hundred Thousand Dollars ($1,500,000.00), less legal deductions for applicable taxes and other withholdings. This bonus will be payable on January 2, 1996. Except as specified in this Agreement, as of the date he executes this Agreement, Mr. Coleman agrees that he is not now nor will he in the future be entitled to any incentive or bonus payment(s) from Bank based on his employment through February 15, 1996. 8. FURTHER CONSIDERATION - OUTPLACEMENT. As further consideration, and ------------------------------------- without any other obligation to do so, Bank agrees to pay for Mr. Coleman to be provided with executive outplacement consulting services by a firm of Bank's choice, provided that, to be eligible for these services, Mr. Coleman must begin using such services within 6 months of February 15, 1996. Mr. Coleman acknowledges and agrees that Bank will expend no other sums in support of his efforts to obtain employment and that Bank makes no representation or guarantee that employment for him will be found as a result of its payment for the outplacement services. 4120669.14 2 9. STOCK OPTIONS. As further consideration, and without any other -------------- obligation to do so, the parties agree that, with respect to stock options previously issued to Mr. Coleman by Bank, Bank has recommended and the Executive Personnel and Compensation Committee of the BankAmerica Corporation Board of Directors has approved and agreed, subject to the provisions of Paragraph 3, that (1) all options and stock appreciation rights (including the DEC account credits associated therewith) previously granted to Mr. Coleman and outstanding as of February 15, 1996, shall become 100% vested and immediately exercisable as of February 16, 1996; and (2) that Mr. Coleman shall have three (3) years from February 16, 1996, or the expiration of the original option or stock appreciation rights period, whichever is less, to exercise such options or stock appreciation rights. Except as specified in this Paragraph and in Paragraph 10, as of the date he executes this Agreement, Mr. Coleman agrees that he is not now nor will he in the future be entitled to any further grants of stock options, restricted stock, credits to DEC accounts, or other stock based incentive award(s) based on his employment through February 15, 1996 or on any other basis, and that the Plan documents and Option Agreements shall govern. 10. PERFORMANCE SHARES. As further consideration, and without any other ------------------- obligation to do so, the parties agree that, with respect to Performance Share Units (stock and cash components) previously granted to Mr. Coleman, Bank has recommended and the Executive Personnel and Compensation Committee of the BankAmerica Corporation Board of Directors has approved and agreed, subject to the provisions of Paragraph 3, that such Units be retained by Mr. Coleman notwithstanding the separation of his employment on February 15, 1996, as if he had remained employed by the Bank, subject to the fulfilling of the stock price or shareholder return targets with respect to such Units. 11. SUPPLEMENTAL RETIREMENT PROGRAM. As further consideration, and -------------------------------- without any other obligation to do so, the parties agree that Mr. Coleman shall make an election under the Supplemental Retirement Program before February 15, 1996, as to whether he wishes to receive an immediate lump sum distribution or elect, subject to the consent of the BankAmerica Corporation Employee Benefits Administrative Committee, a different form of distribution. 12. FINANCIAL PLANNING. As further consideration, and without any other ------------------- obligation to do so, Bank agrees that, for 1996, Mr. Coleman shall continue to be provided with standard financial counselling services at Bank's expense to be provided by the Ayco Company, including estate planning advice during 1996 up to a maximum cost of $3,000 for estate planning. The parties understand and agree that these services include tax preparation assistance by the Ayco Company in 1997 with respect to Mr. Coleman's 1996 tax returns. Except as provided by this Paragraph, Mr. Coleman shall not be eligible for any financial counselling services by Ayco Company or any other company after December 31, 1996. 13. RELEASE OF CLAIMS. In exchange for the promises contained in this ------------------ Agreement, Mr. Coleman hereby waives, releases and forever discharges, and agrees to the 4120669.14 3 extent permitted by law that he will not in any manner institute, prosecute or pursue, any and all complaints, claims, charges, claims for relief, demands, suits, actions or causes of action, whether in law or in equity, which he asserts or could assert, at common law or under any statute, rule, regulation, order or law, whether federal, state, or local, or on any grounds whatsoever, including without limitation, any age discrimination claims under the federal Age Discrimination in Employment Act, and any claims under the California Fair Employment and Housing Act, the California Labor Code, Title VII of the Civil Rights Act of 1964, the Equal Pay Act, the Fair Labor Standards Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Rehabilitation Act of 1973, the Employee Retirement Income Security Act of 1974, the Racketeer Influenced and Corrupt Organizations Act, the Financial Reform Recovery and Enforcement Act of 1989, and/or Section 1981 of Title 42 of the United States Code, against Bank and/or any of its or their current or former, owners, officials, directors, officers, shareholders, affiliates, agents, employee benefit plans, representatives, servants, employees, attorneys, subsidiaries, parents, divisions, branches, units, successors, predecessors, and assigns (collectively referred to as "Released Parties") with respect to any event, matter, claim, damage or injury arising out of his employment relationship with Bank, and/or the termination of such employment relationship, and/or with respect to any other claim, matter, or event arising prior to execution of this Agreement by Mr. Coleman. This Agreement includes, but is not limited to, (i) release of any claims arising from or related to any statements (written or oral) made or distributed or published by any or all of the Released Parties, prior to signing of this Agreement by Mr. Coleman, including any statements by Mr. Coleman himself, and (ii) release of any claims for any type of wages, commissions, bonus, separation or severance benefits, stock, or any other form of compensation. This Agreement does not release or waive rights or claims based on events that may arise after the date the Agreement is executed by Mr. Coleman. In addition, this Agreement does not release or waive any rights or claims of Mr. Coleman (1) for indemnification as a director, officer or agent of the Bank under applicable law, applicable by-laws, or applicable charter provisions, (2) under this Agreement itself, (3) for health benefits or life insurance benefits based on claims already submitted or which are covered claims and are properly submitted in the future, or (4) for any vested rights under pension or retirement plans. 14. CIVIL CODE (S)1542 WAIVER. As a further consideration and inducement -------------------------- for this Agreement, to the extent permitted by law, Mr. Coleman hereby waives and releases any and all rights under Section 1542 of the California Civil Code or any analogous state, local, or federal law, statute, rule, order or regulation, he has or may have with respect to the Released Parties. California Civil Code Section 1542 reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." 4120669.14 4 Mr. Coleman hereby expressly agrees that this Agreement shall extend and apply to all unknown, unsuspected and unanticipated injuries and damages as well as those that are now disclosed. The rights and claims released or waived under Paragraphs 13 and 14 shall be collectively referred to as "Released Claims". 15. BANK'S RELEASE OF CLAIMS. In exchange for the promises contained in ------------------------- this Agreement, Bank hereby waives, releases and forever discharges, and agrees to the extent permitted by law that it will not in any manner institute, prosecute or pursue, any and all complaints, claims, charges, claims for relief, demands, suits, actions or causes of action, whether in law or in equity, which it asserts or could assert, at common law or under any statute, rule, regulation, order or law, whether federal, state, or local, or on any grounds whatsoever, arising from or attributable to Mr. Coleman's employment relationship with Bank, or based on any claim, matter, or event occurring prior to the execution of this Agreement by Bank; provided, however, that the waivers and releases of this Paragraph shall not extend to any criminal, malicious, dishonest, or fraudulent acts of Mr. Coleman in violation of any Federal or state laws or regulations, or in violation of Bank policies or guidelines, or arising out of a conflict of interest, bad faith actions, violations of public policy, or claims which are not waivable by law. Further, this release shall not extend to any banking or customer relationship Mr. Coleman may have with Bank, including, but not limited to, consumer or residential loans, personal loans, equity loans, lines of credit, checking, investment, savings, or trust accounts, business loans, credit cards, credit arrangements or any other financial agreements or obligations, including, but not limited to, any matters on which Mr. Coleman is a guarantor or co-signer, and Mr. Coleman represents to the best of his knowledge after reasonable inquiry that he is current with respect to all such obligations. 16. NO VACATION. Mr. Coleman acknowledges and agrees that he has no ------------ accrued and unused vacation days, in lieu or personal choice days as of the date he executes this Agreement and shall not earn or accrue any vacation, in lieu or personal choice days between the date he executes this Agreement and February 15, 1996. 17. DEFERRED COMPENSATION AMOUNTS. Mr. Coleman understands and agrees ------------------------------ that any and all deferred compensation amounts he has under any deferred compensation plan(s), if any, will be paid to him pursuant to the terms of such plan(s) following the effective date of the resignation of his employment on February 15, 1996. 18. CONFIDENTIAL INFORMATION. ------------------------- (a) Mr. Coleman agrees and acknowledges that the positions held by him within Bank gave him significant access to confidential information of substantial importance to the business of the Bank. Therefore, to the fullest extent permitted by applicable law, Mr. Coleman agrees that any and all information ("Confidential Information") obtained by or disclosed to him at any time during his employment with Bank, and which is treated as 4120669.14 5 confidential by the Bank and which is not generally known to the public, is strictly confidential and/or proprietary to Bank, shall be treated as trade secrets of Bank, and shall not be disclosed, discussed, or revealed to any persons, entities, or organizations, inside or outside of Bank, without prior written approval to do so from Kathleen Burke (or her successor or delegee). Confidential Information shall include, but not be limited to, customer lists, information concerning Bank's customers to the extent disclosure or use thereof would violate applicable banking and privacy laws or regulations or reveal confidential competitive information, strategies, tactics, methods of operation, processes, practices, policies, programs, marketing information, market research data, financial information, procedures, and/or personnel information. Further, to the fullest extent permitted by applicable law, Mr. Coleman agrees he will not (a) use any Confidential Information to solicit present or potential business or customers of the Bank or use any Confidential Information to otherwise compete with the Bank, or (b) use any Confidential Information to assist any other individual, company or entity to do so. A breach of this Paragraph 18, including this subparagraph 18(a) or subparagraph 18(b) below, is a material breach. The parties to this Agreement agree that, should Mr. Coleman violate the provisions of this Paragraph, Bank shall be relieved of any obligation it may have to provide any consideration to Mr. Coleman which has not yet been provided under this Agreement, except Mr. Coleman shall continue to receive the consideration provided for under Paragraphs 9, 10, and 11. In addition to any remedy for breach of this Paragraph which is provided by this Paragraph, Bank retains all other legal and equitable rights or remedies, including injunctive relief, which may be available under the law. (b) The parties agree that Confidential Information does not include: (i) information which was in the public domain at the time it was disclosed or comes into the public domain through no fault of Mr. Coleman or his agents, (ii) information as to which Mr. Coleman can carry the burden of proof that it was known to Mr. Coleman at the time he received it from the Bank, as can be shown by his files in existence at the time of receipt, (iii) information which is disclosed with the prior written approval of an authorized representative of the Bank, (iv) information which is known to Mr. Coleman from a source other than Bank and without any breach of this Agreement by Mr. Coleman, properly and legally disclosed to Mr. Coleman without confidentiality restrictions on its use, and otherwise not disclosed to Mr. Coleman in violation of the Bank's rights, (v) information which is deliberately disclosed to a third party by an authorized representative of the Bank without disclosure restrictions similar or analogous to those contained in this Agreement, other than disclosures to government regulators, or (vi) information which is disclosed by Mr. Coleman pursuant to the order or requirement of a court, administrative agency, regulatory authority or other governmental body, in respect of which Mr. Coleman shall make best, good faith efforts to promptly notify Bank of the pendency of such order or requirement so that Bank has a reasonable opportunity to move for a protective order in advance of any such disclosure. 4120669.14 6 19. NO RAIDING. As further consideration, to the fullest extent ----------- permitted by applicable law, Mr. Coleman agrees he will not solicit for employment or solicit for hire, on behalf of himself or any other person, company or entity, any employees of Bank, nor will he aid any other person, entity or company to do so, unless Mr. Coleman receives prior written authorization to do so from Kathleen Burke (or her successor or delegee), from the time he signs this Agreement through February 15, 1997, nor has he done so within the three months prior to the time he signs this Agreement with one exception with respect to an officer who made an inquiry of him (whose name has been disclosed to counsel for Bank). A general advertisement through the mass media soliciting applicants for a position or positions shall not constitute a violation of this Paragraph. A breach of this Paragraph is a material breach. The parties to this Agreement agree that, should Mr. Coleman violate the provisions of this Paragraph, Bank shall be relieved of any obligation it may have to provide any consideration to Mr. Coleman which has not yet been provided under this Agreement, except Mr. Coleman shall continue to receive the consideration provided for under Paragraphs 9, 10, and 11. In addition to any remedy for breach of this Paragraph which is provided by this Paragraph, Bank retains all other legal and equitable rights or remedies, including injunctive relief, which may be available under the law. 20. CONFIDENTIALITY OF AGREEMENT TERMS. To the extent not disclosed to ----------------------------------- the public by an authorized representative of Bank, Mr. Coleman also agrees that the terms and conditions of this Agreement and any and all actions by Bank in accordance therewith, are strictly confidential and, with the exception of Mr. Coleman's counsel, tax advisor, financial advisor, immediate family, or as required by applicable law or legal process, or to enforce Mr. Coleman's rights or secure performance by the Bank under this Agreement, have not been and shall not be disclosed, discussed, or revealed by Mr. Coleman or his agents or representatives to any other persons, entities, or organizations, whether within or outside Bank, without prior written approval by Kathleen Burke (or her successor or delegee); provided, however, that Mr. Coleman shall not be prohibited from disclosing the fact or terms of Paragraph 19. Mr. Coleman further agrees to take all reasonable steps necessary to insure that confidentiality is maintained by any of the individuals or entities referenced above to whom disclosure is authorized. Mr. Coleman shall make best, good faith efforts to promptly notify Bank of the pendency of any legal process or order which requests or requires disclosure of information governed by this Paragraph so that Bank has a reasonable opportunity to move for a protective order in advance of any such disclosure. A breach of this Paragraph is a material breach. The parties to this Agreement agree that, should Mr. Coleman violate the provisions of this Paragraph, Bank shall be relieved of any obligation it may have to provide any consideration to Mr. Coleman which has not yet been provided under this Agreement, except Mr. Coleman shall continue to receive the consideration provided for under Paragraphs 9, 10, and 11. In addition to any remedy for breach of this Paragraph which is provided by this Paragraph, Bank retains all other legal and equitable rights or remedies, including injunctive relief, which may be available under the law. 4120669.14 7 21. RETURN OF BANK PROPERTY. Mr. Coleman further represents and/or ------------------------ agrees that he has returned or, prior to February 15, 1996, will return, or allow to be returned, to Bank all equipment and/or other material property belonging to it (including, without limitation, business credit cards, building passes, building keys, parking passes, fax equipment, computer equipment, security equipment including the alarm box at his home (except Bank will not remove magnetic sensors from his home unless Bank compensates Mr. Coleman for damages to his home caused by such removal), and phone equipment) which has been or is in his care, custody, possession or control. Mr. Coleman agrees that, as of February 15, 1996, he will reimburse or reconcile to the Bank's satisfaction all outstanding expenses or bills charged or chargeable to the Bank under Bank guidelines, except that the parties understand and agree that there may be expenses incurred prior to February 15, 1996, for which the bills are received after such date, and Mr. Coleman shall promptly reimburse or reconcile any such bills. (Minimal if any such charges or expenses are anticipated after December 1, 1995.) In addition, Mr. Coleman agrees that, as of the date he executes this Agreement, he has submitted all charges or business expenses incurred by him and associated with his employment with the Bank and properly charged to Bank, except for those bills he receives after he signs this Agreement, which he shall promptly submit to the Bank. (Minimal if any such charges or expenses are anticipated after December 1, 1995.) 22. FUTURE COOPERATION. Mr. Coleman additionally agrees to make himself ------------------- reasonably available in connection with any and all claims, disputes, negotiations, investigations, lawsuits or administrative proceedings involving the Bank, to provide information or documents, provide declarations or statements to the Bank, meet with attorneys or other representatives of the Bank, prepare for and give depositions or testimony, and/or otherwise cooperate in the investigation, defense or prosecution of such matters. Mr. Coleman similarly agrees to cooperate with respect to providing information known to him as a result of his employment with Bank and related to Bank business. 23. NO ADMISSION OF LIABILITY. By entering into this Agreement, neither -------------------------- party admits any liability whatsoever to the other party or to any other person arising out of any claims heretofore or hereafter asserted by such party and both Bank and Mr. Coleman expressly deny any and all such liability. 24. PAYMENTS NOT PART OF PENSION OR RETIREMENT PLANS. Except for the ------------------------------------------------- amounts payable under Paragraph 4, none of the expenses to be incurred by Bank and/or payments or reimbursements to be made by Bank to Mr. Coleman pursuant to this Agreement shall count as earnings for purposes of Mr. Coleman's pension, regular or supplemental retirement, or regular or supplemental savings plan benefits, including specifically BankAmerishare or BankAmeraccount, or the 401(k) Investment Plan or the Pension Plan. 25. ATTORNEYS' FEES. As further mutual consideration of the promises set ---------------- forth herein, the Bank and Mr. Coleman agree that they each are responsible for their own 4120669.14 8 attorneys' fees and costs, and each agrees that they will not seek from the other reimbursement for attorneys' fees and/or costs incurred in connection with this Agreement or relating to any matters addressed in this Agreement. 26. JOINT PARTICIPATION IN PREPARATION OF AGREEMENT. The parties hereto ------------------------------------------------ participated jointly in the negotiation and preparation of this Agreement, and each party has had the opportunity to obtain the advice of legal counsel and to review, comment upon, and redraft this Agreement. Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of any party. This Agreement shall be construed as if the parties jointly prepared this Agreement, and any uncertainty or ambiguity shall not be interpreted against any one party and in favor of the other. 27. NO OTHER CLAIMS. ---------------- (a) Mr. Coleman agrees and represents that he has not filed or otherwise pursued any charges, complaints or claims of any nature with any local, state or federal government agency or court with respect to any Released Claims and, to the extent permitted by law, he will not do so in the future. If any government agency or court assumes jurisdiction of any Released Claim, Mr. Coleman will take such actions to ensure that such agency or court withdraws from and/or dismisses the matter with prejudice, including but not limited to, requesting such action by such agency or court, and he will not participate or cooperate in such matter(s) except as required by law or as specified in this Agreement. Mr. Coleman agrees that the Bank has no obligation to provide any consideration under this Agreement if, at any time from the date this Agreement is executed by Mr. Coleman through the date any such payment, payments or other consideration would otherwise become due or payable, Mr. Coleman has filed any lawsuit, administrative charge or claim of any nature with any local, state or federal government agency or court against any Released Party with respect to any Released Claim, except Mr. Coleman shall continue to receive the consideration provided for under Paragraphs 9, 10, and 11. (b) Bank agrees and represents that it has not filed or otherwise pursued any charges, complaints or claims of any nature with any local, state or federal government agency or court with respect to claims released or waived under Paragraph 15 of this Agreement and, to the extent permitted by law, it will not do so in the future. If any government agency or court assumes jurisdiction of any claims released or waived under Paragraph 15, Bank will take such actions to ensure that such agency or court withdraws from and/or dismisses the matter with prejudice, including but not limited to, requesting such action by such agency or court, and Bank will not participate or cooperate in such matter(s) except as required by law or as specified in this Agreement. 28. ASSIGNMENTS. Mr. Coleman represents and warrants that he has not ------------ assigned or transferred to any person, company or entity any of his Released Claims, including but not limited to any covenant not to sue. Bank represents and warrants that it has not assigned 4120669.14 9 or transferred to any person, company or entity any of its claims released or waived under Paragraph 15, including but not limited to any covenant not to sue. 29. SEVERABILITY. Should any of the clauses or provisions of this ------------- Agreement be rendered invalid by a court or government agency of competent jurisdiction, it is agreed that this shall not in any way or manner affect the enforceability of the other provisions of this Agreement which shall remain in full force and effect. The parties further agree that California law shall govern the validity and interpretation of this Agreement and that jurisdiction and/or venue of any action involving the validity, interpretation or enforcement of this Agreement or any of its terms, provisions or obligations or claiming breach thereof, shall exist exclusively in a court or government agency located within San Francisco, California. 30. SCOPE OF AGREEMENT. Mr. Coleman hereby affirms and acknowledges that ------------------- he has read the foregoing Agreement, that he has had the opportunity to review or discuss it and has reviewed or discussed it with the counsel of his choice, that changes have been made to the Agreement at his request, and that he fully understands and appreciates the meaning of each of its terms. The parties to this Agreement represent that this Agreement may be used as evidence in any subsequent proceeding in which any of the parties alleges a breach of this Agreement or seeks to enforce its terms, provisions or obligations. 31. RECOVERY OF FEES AND COSTS. In the event of litigation arising under --------------------------- this Agreement, the prevailing party is entitled to reasonable attorneys' fees and costs in addition to any other relief to which it is determined the prevailing party is entitled. 32. FAILURE TO MAKE PAYMENTS. This Agreement shall be null and void at ------------------------- Mr. Coleman's prompt election if Bank fails to, in fact, provide the payments as called for by Paragraphs 4, 5, and 7 or the consideration as called for by Paragraphs 9 and 10, promptly following a demand to do so by Mr. Coleman. However, a good faith dispute with respect to the number or amount of options, stock appreciation rights, DEC account credits, or Performance Share Units, or a good faith dispute with respect to the exercise periods or the terms or application of the Plan documents or Option Agreements, shall not serve as a basis for Mr. Coleman to elect to declare the Agreement null and void. Should Mr. Coleman declare the Agreement null and void, he may retain and continue to receive the consideration as called for by Paragraphs 9 and 10 but he shall return and no longer be eligible to receive the payments as called for by Paragraphs 5 and 7. In addition, should Mr. Coleman declare the Agreement null and void, in addition to the provisions of this Paragraph, Mr. Coleman may pursue any remedies against the Bank available under applicable law. 33. ENTIRE AGREEMENT. This Agreement constitutes the complete ----------------- understanding between Mr. Coleman and Bank and supersedes any and all prior agreements, promises, representations, or inducements, no matter its or their form, concerning its subject matter. Section headings in this Agreement are included for convenience of reference only and shall 4120669.14 10 not be considered part of this Agreement for any other purpose. No promises or agreements made subsequent to the execution of this Agreement by these parties shall be binding unless reduced to writing and signed by Mr. Coleman and Kathleen Burke (or her successor or delegee). PLEASE TAKE THIS AGREEMENT HOME AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT. YOU SHOULD CONSULT AN ATTORNEY OF YOUR CHOICE ABOUT THIS AGREEMENT BEFORE YOU SIGN THE AGREEMENT. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS TO THE EXTENT PERMITTED BY LAW. LEWIS W. COLEMAN DATED: December 1, 1995 /s/ LEWIS W. COLEMAN ---------------- ---------------------------- "BANK" DATED: December 4, 1995 by /s/ KATHLEEN J. BURKE ---------------- -------------------------- Kathleen J. Burke Vice Chairman 4120669.14 11 ATTACHMENT A STATEMENT OF NON-REVOCATION AS OF THE DATE SHOWN ON THIS FORM By signing below, I hereby verify that I have chosen not to revoke my agreement to and execution of the General Release and Settlement Agreement. My signature confirms my renewed agreement to the terms of that Agreement, including the release and waiver of any and all claims relating to my employment with Bank and/or the termination of that employment, and of all other claims released or waived under Paragraphs 13 and 14 of the General Release and Settlement Agreement. LEWIS W. COLEMAN ###-##-#### - -------------------------- --------------------------------- Name (Please Print) Social Security Number /s/ LEWIS W. COLEMAN December 13, 1995 - -------------------------- ---------------------------------- Signature* Date* *DO NOT SIGN, DATE OR RETURN THIS DOCUMENT UNTIL EIGHT (8) DAYS AFTER YOU SIGN THE GENERAL RELEASE AND SETTLEMENT AGREEMENT. 4120669.14 12 ATTACHMENT B CONFIRMATION OF GENERAL RELEASE AND SETTLEMENT AGREEMENT By signing below, I hereby acknowledge and confirm my agreement to all the terms of the General Release and Settlement Agreement ("Agreement"). I also agree, that as of the date I sign this document, I release and waive any and all additional employment claims (e.g., statutory employment claims, wrongful ---- discharge types of claims or related claims, breach of employment contract types of claims, but not claims for breach of the Agreement itself) I may have relating to my employment within BankAmerica Corporation and/or the termination of that relationship which I would not have but for my being an employee of BankAmerica Corporation since the time I signed the Agreement. /s/ LEWIS W. COLEMAN February 18, 1996 - --------------------------------- ----------------------------- Signature* Date* *DO NOT SIGN, DATE OR RETURN THIS DOCUMENT BEFORE FEBRUARY 16, 1996 4120669.14 13 EX-11 8 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 BANKAMERICA CORPORATION Computation of Earnings Per Common Share
Year Ended December 31 ---------------------------------------- (Dollar amounts in millions, except 1995 1994 1993 per share data) ------------ ------------ ------------ Net income $2,664 $2,176 $1,954 Less: Preferred stock dividends 227 248 241 ------ ------ ------ NET INCOME APPLICABLE TO COMMON STOCK $2,437 $1,928 $1,713 ====== ====== ====== Average number of common shares outstanding 370,981,593 357,312,433 355,106,722 Average number of common and common equivalent shares outstanding 375,555,919 359,793,169 357,679,670 Average number of common shares outstanding assuming full dilution 378,103,241 365,273,824 363,243,993 Earnings per common and common equivalent share $ 6.49 $ 5.36 $ 4.79 Earnings per common share- assuming full dilution $ 6.45 $ 5.33 $ 4.76
Earnings per common and common equivalent share are computed by dividing net income applicable to common stock by the total of the average number of common shares outstanding and the additional dilutive effect of stock options and warrants outstanding during the respective period. The dilutive effect of stock options and warrants is computed using the average market price of BankAmerica Corporation's common stock for the period. Earnings per common share, assuming full dilution, are computed based on the average number of common shares outstanding during the period, and the additional dilutive effect of stock options and warrants outstanding during the period. The dilutive effect of outstanding stock options and warrants is computed using the greater of the closing market price or the average market price of BankAmerica Corporation's common stock for the period. Earnings per common share, assuming full dilution, also includes the dilution which would result if BankAmerica Corporation's outstanding 6 1/2% Cumulative Convertible Preferred Stock, Series G (Convertible Preferred Stock) had been redeemed or converted during the period. Net income applicable to common stock was adjusted for dividends declared on the Convertible Preferred Stock of $3 million, $16 million, and $16 million during the years ended December 31, 1995, 1994 and 1993, respectively. The outstanding shares of the Convertible Preferred Stock were redeemed or converted during May 1995. EX-12.A 9 RATIOS OF EARNINGS Exhibit 12(a) Page 1 of 3 BANKAMERICA CORPORATION Ratio of Earnings to Fixed Charges
Year Ended December 31 -------------------------------------------- (dollar amounts in millions) 1995 1994 1993 1992 1991 -------- ------- ------- ------- ------- EXCLUDING INTEREST ON DEPOSITS Fixed charges: Interest expense (other than interest on deposits) $ 2,455 $1,505 $1,215 $1,126 $ 743 Interest factor in rent expense 120 109 112 95 82 Other - 3 2 1 1 ------- ------ ------ ------ ------ $ 2,575 $1,617 $1,329 $1,222 $ 826 ======= ====== ====== ====== ====== Earnings: Income from operations $ 2,664 $2,176 $1,954 $1,492 $1,124 Applicable income taxes 1,903 1,541 1,474 1,190 749 Fixed charges 2,575 1,617 1,329 1,222 826 Other (12) (55) (39) (14) (15) ------- ------ ------ ------ ------ $ 7,130 $5,279 $4,718 $3,890 $2,684 ======= ====== ====== ====== ====== Ratio of earnings to fixed charges, excluding interest on deposits 2.77 3.26 3.55 3.18 3.25 INCLUDING INTEREST ON DEPOSITS Fixed charges: Interest expense $ 7,378 $4,842 $4,186 $4,895 $5,388 Interest factor in rent expense 120 109 112 95 82 Other - 3 2 1 1 ------- ------ ------ ------ ------ $ 7,498 $4,954 $4,300 $4,991 $5,471 ======= ====== ====== ====== ====== Earnings: Income from operations $ 2,664 $2,176 $1,954 $1,492 $1,124 Applicable income taxes 1,903 1,541 1,474 1,190 749 Fixed charges 7,498 4,954 4,300 4,991 5,471 Other (12) (55) (39) (14) (15) ------- ------ ------ ------ ------ $12,053 $8,616 $7,689 $7,659 $7,329 ======= ====== ====== ====== ====== Ratio of earnings to fixed charges, including interest on deposits 1.61 1.74 1.79 1.53 1.34
Exhibit 12(a) Page 2 of 3 BANKAMERICA CORPORATION Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Year Ended December 31 -------------------------------------------- (dollar amounts in millions) 1995 1994 1993 1992 1991 -------- ------- ------- ------- ------- EXCLUDING INTEREST ON DEPOSITS Fixed charges and preferred dividends Interest expense (other than interest on deposits) $ 2,455 $1,505 $1,215 $1,126 $ 743 Interest factor in rent expense 120 109 112 95 82 Preferred dividend requirements/a/ 389 424 423 304 102 Other - 3 2 1 1 ------- ------ ------ ------ ------ $ 2,964 $2,041 $1,752 $1,526 $ 928 ======= ====== ====== ====== ====== Earnings: Income from operations $ 2,664 $2,176 $1,954 $1,492 $1,124 Applicable income taxes 1,903 1,541 1,474 1,190 749 Fixed charges, excluding preferred dividend requirements 2,575 1,617 1,329 1,222 826 Other (12) (55) (39) (14) (15) ------- ------ ------ ------ ------ $ 7,130 $5,279 $4,718 $3,890 $2,684 ======= ====== ====== ====== ====== Ratio of earnings to fixed charges, and preferred dividends, excluding interest on deposits 2.41 2.59 2.69 2.55 2.89 INCLUDING INTEREST ON DEPOSITS Fixed charges and preferred dividends Interest expense $ 7,378 $4,842 $4,186 $4,895 $5,388 Interest factor in rent expense 120 109 112 95 82 Preferred dividend requirement/a/ 389 424 423 304 102 Other - 3 2 1 1 ------- ------ ------ ------ ------ $ 7,887 $5,378 $4,723 $5,295 $5,573 ======= ====== ====== ====== ====== Earnings: Income from operations $ 2,664 $2,176 $1,954 $1,492 $1,124 Applicable income taxes 1,903 1,541 1,474 1,190 749 Fixed charges, excluding preferred dividend requirements 7,498 4,954 4,300 4,991 5,471 Other (12) (55) (39) (14) (15) ------- ------ ------ ------ ------ $12,053 $8,616 $7,689 $7,659 $7,329 ======= ====== ====== ====== ====== Ratio of earnings to fixed charges, and preferred dividends, including interest on deposits 1.53 1.60 1.63 1.45 1.32
SEE NOTES ON PAGE 3 OF THIS EXHIBIT Exhibit 12(a) Page 3 of 3 BANKAMERICA CORPORATION Notes to Ratio of Earnings to Fixed Charges and Preferred Stock Dividends /a/ Preferred stock dividend requirements represent pretax earnings necessary to cover preferred stock dividends declared during the years ended December 31, 1995, 1994, 1993, 1992, and 1991 of $227 million, $248 million, $241 million, $169 million, and $61 million, respectively. EX-12.B 10 PRO FORMA COMBINED RATIOS OF EARNINGS Exhibit 12(b) Page 1 of 2 BANKAMERICA CORPORATION HISTORICAL AND PRO FORMA COMBINED RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. The ratio of earnings to combined fixed charges and preferred stock dividends is computed by dividing earnings by the sum of fixed charges and preferred stock dividend requirements. Earnings consist primarily of income (loss) before income taxes adjusted for fixed charges. Fixed charges consist primarily of interest expense on short- and long-term borrowings and one-third (the portion deemed representative of the interest factor) of net rents under long-term leases. The following table sets forth (i) the historical ratios of earnings to fixed charges and the ratios of earnings to combined fixed charges and preferred stock dividends for the year ended December 31, 1992 for BankAmerica Corporation and its consolidated subsidiaries (BAC) and for Security Pacific Corporation and its consolidated subsidiaries (SPC) and (ii) the pro forma combined ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred stock dividends for the year ended December 31, 1992, giving effect to the April 22, 1992 merger between BAC and SPC (the Merger) as if it had been consummated on January 1, 1991. The pro forma combined ratio has been calculated using the pro forma combined financial information for the year ended December 31, 1992, and should be read in conjunction with and is qualified in its entirety by such pro forma combined information included in the 1994 Annual Report to Shareholders. Pro forma adjustments made to arrive at the pro forma combined ratio are based on the purchase method of accounting and are based upon actual amounts recorded by BAC subsequent to the effective time of the Merger. Exhibit 12(b) Page 2 of 2
Year Ended December 31, 1992 ------------------------------ Historical Pro Forma ------------- --------- BAC/a/ SPC Combined ----- --- -------- RATIO OF EARNINGS TO FIXED CHARGES Excluding interest on deposits 3.18 /b/ 2.05 Including interest on deposits 1.53 /b/ 1.27 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS Excluding interest on deposits 2.55 /b/ 1.87 Including interest on deposits 1.45 /b/ 1.26
- ---------- /a/ This financial information reflects the effects of the Merger subsequent to the Merger's consummation on April 22, 1992. /b/ Because the Merger was consummated on April 22, 1992, there is no year-to- date data for SPC. These pro forma combined ratios are intended for informational purposes and are not necessarily indicative of the future ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred stock dividends of the combined company or the ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred stock dividends of the combined company that would have actually occurred had the Merger been effective on January 1, 1991. EX-13 11 1995 BANKAMERICA CORP. ANNUAL REPORT TO S/H BankAmerica Corporation Computer icons depicting the Corporation's Major Business Sectors [LOGO OF BANKAMERICA APPEARS HERE] 1995 Annual Report - -------------------------------------------------------------------------------- Letter to Shareholders....................................................... 1 - -------------------------------------------------------------------------------- Review of Major Business Sectors............................................. 5 - -------------------------------------------------------------------------------- Financial Review - -------------------------------------------------------------------------------- Overview..................................................................... 16 Ratio and Stock Data....................................................... 16 Selected Financial Data.................................................... 17 Business Sectors............................................................. 17 Results of Operations........................................................ 21 Net Interest Income........................................................ 21 Noninterest Income......................................................... 23 Noninterest Expense........................................................ 24 Income Taxes............................................................... 25 Comparison of 1994 Versus 1993............................................. 25 Balance Sheet Review......................................................... 25 Investment Securities...................................................... 25 Deposits................................................................... 26 Pending Accounting Standards............................................... 26 Off-Balance-Sheet Financial Instruments...................................... 27 Credit-Related Financial Instruments....................................... 27 Foreign Exchange and Derivatives Contracts................................. 27 Risk Management.............................................................. 27 Credit Risk Management....................................................... 27 Overview................................................................... 27 Off-Balance-Sheet Credit Risk.............................................. 28 Loan Portfolio Management.................................................. 29 Allowance for Credit Losses................................................ 33 Nonperforming Assets....................................................... 35 Market Risk Management....................................................... 38 Overview................................................................... 38 Trading Activities......................................................... 38 Other Banking Activities................................................... 39 Objectives and Results of Interest Rate Risk Management.................... 39 Liquidity Risk Management.................................................... 42 Overview................................................................... 42 Liquidity Review........................................................... 42 Operational and Settlement Risk Management................................... 42 Capital Management........................................................... 43 - -------------------------------------------------------------------------------- Consolidated Financial Statements - -------------------------------------------------------------------------------- Report of Management......................................................... 46 Report of Independent Auditors............................................... 47 Consolidated Financial Statements............................................ 48 Notes to Consolidated Financial Statements................................... 52 - -------------------------------------------------------------------------------- Corporate Information - -------------------------------------------------------------------------------- Boards of Directors/BankAmerica Corporation and Bank of America NT&SA.................................................. 84 Honorary Directors/BankAmerica Corporation and Bank of America NT&SA (nonvoting)...................................... 84 Principal Officers/BankAmerica Corporation................................... 85 Senior Management Council/Bank of America NT&SA.............................. 86 Chairmen/Presidents/Other Subsidiary Banks................................... 87 Advisor/BankAmerica Corporation.............................................. 87 BankAmerica Corporate Governance Principles.................................. 88 - ---------------------------------------- BankAmerica Today - ---------------------------------------- BankAmerica Corporation and its consolidated subsidiaries provide diverse financial products and services to individuals, businesses, government agencies, and financial institutions throughout the world. BankAmerica Corporation is one of the three largest bank holding companies in the United States, based on total assets at December 31, 1995. BankAmerica's principal banking subsidiaries operate full-service branches in California, Washington, Texas, Arizona, Oregon, Nevada, New Mexico, Hawaii, Idaho, and Alaska, as well as corporate banking and business credit offices in major U.S. cities, and branches, corporate offices, and representative offices in 36 other countries and territories. Bank of America Illinois provides a full range of financial services to business and private banking clients in the Midwest. BankAmerica Business Credit is a national commercial finance company engaged in asset-based lending. Also on a national scale, BankAmerica Mortgage originates and services home loans, and BankAmerica Housing Services makes loans for manufactured housing. Bank of America Community Development Bank provides financing for small businesses and affordable housing in 11 western states, Chicago, Washington, D.C., and Atlanta. - -------------------------------------------------------------------------------- Note: The following abbreviations, among others, appear in the text of this report: BankAmerica Corporation and its consolidated subsidiaries (BankAmerica, BAC), BankAmerica Corporation (the parent), Bank of America NT&SA (Bank of America, BofA, the bank), Continental Bank Corporation (Continental), and Seattle-First National Bank (SFNB). BankAmerica Corporation 1995 / 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- To Our Shareholders - -------------------------------------------------------------------------------- ---------------------------------------------------- [PHOTO APPEARS HERE] ---------------------------------------------------- Richard M. Rosenberg David A. Coulter Chairman of the Board Chief Executive Officer We are pleased to report that the financial position of BankAmerica Corporation is strong and solid. 1995 was a very successful year for the corporation, capping a six-year period of growth. We are proud of having achieved our two primary financial goals during the year: increasing earnings per share and increasing return on common equity. Per-share earnings increased 21 percent to a record $6.49 from the previous year on net income of $2.664 billion - also a record. Return on average common equity increased 138 basis points,
- -------------------------------------------------------------------------------- Selected Financial Data - -------------------------------------------------------------------------------- (dollar amounts in millions, except per share data) 1995 1994 - -------------------------------------------------------------------------------- For the Year Net Income $ 2,664 $ 2,176 Earnings per common share 6.49 5.36 At Year End Loans $155,373 $140,912 Total assets 232,446 215,475 Deposits 160,494 154,394 Stockholders' equity 20,222 18,891 Selected Ratios Rate of return on average common equity 14.58% 13.20% Ratio of common equity to total assets 7.57 7.34 Tier 1 risk-based capital ratio 7.35 7.27
to 14.58 percent. From a perspective of increasing shareholder value, further increasing both of these measures of performance is a primary financial goal for 1996. We attribute our 1995 results to three factors: excellent, dedicated performance by BankAmerica employees, continuing support from our customers, and the strategic decisions we have made and put in place in recent years. We believe that our strategic plans, effectively implemented, will result in increasing the value of our shareholders' investment by allowing us to address three key areas: revenue generation, expense control, and capital allocation. Revenue Generation A large part of our success in 1995 was due to the steps we have taken throughout the 1990s to build a diversified franchise that has given us earnings momentum and still provides considerable potential for growth. In the retail markets, we grew from our California and Washington operations at the end of the last decade, to our present position of full-service banks in ten western states. The merger with Security Pacific Corporation in 1992 contributed to that growth and also added important new businesses such as personal trust, proprietary mutual funds, consumer financial operations, a nationwide commercial finance company, and a consumer banking presence in some of the fastest growing economies in Asia. We have invested in changing our retail delivery structure to reflect the changes in our customers' expectations and the practical realities of today's marketplace. We know, for example, that today's consumers increasingly demand broader choices of when, where, and how they access their banking services. Therefore, we have enhanced our delivery systems, particularly the lower cost alternative systems such as ATMs, in-store branches, and interactive banking technologies, including telephone banking. Together with other financial institutions, we purchased an interest in the company that offers the popular 2 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Managing Your Money(R) software. We have established an interactive presence on the Internet's World Wide Web and opened an electronic branch on America Online. The rapid development of consumer banking technology has given our customers an unprecedented range of choices for accessing banking services. We, frankly, don't yet know what the ideal long-term model will be for maximizing customer service and profitability at BankAmerica. But the scale of our business allows us to experiment broadly and refine our system as customer usage patterns begin to emerge. In the consumer banking market of the future, we are committing to a world-class delivery structure. We have also expanded the geographical reach of our consumer banking operations, enhancing our national mortgage origination and servicing capabilities with the acquisition of Arbor National Holdings, Inc. and establishing a credit card operation in Taiwan. The 1994 acquisition of Continental Bank Corporation increased the scale and scope of our wholesale banking activities, adding significantly to our middle- market presence in the Midwest and expanding our relationships with large corporations throughout the United States. In fact, a recent survey of Fortune 1,000 companies conducted by Goldman Sachs ranked BankAmerica the nation's leading relationship bank, with a 40 percent market share of primary relationships. To enhance relationships with our corporate and commercial customers, we intensified our investment in relationship-building businesses such as capital raising and capital markets. We have also strengthened our presence in selected foreign markets such as Vietnam, Mexico, and China, where we opened our fourth office. This growth in both retail and wholesale banking has enabled us to diversify our revenue streams, both geographically and by product lines, thereby reducing our exposure to regional and particular industry sector economic downturns. We believe that it is especially noteworthy that the corporation recorded gains in net income throughout the 1990s, despite the fact that, during that time, California endured one of the worst recessions in its history. - -------------------------------------------------------------------------------- Quarterly Earnings Per Share (plot point graph in non-EDGAR version appears here) - --------------------------------------------------------------------------------
Quarterly Earnings per Share (in dollars) 1994 1995 ------ ------ 1.27 1.46 1.33 1.56 1.36 1.72 1.41 1.74
- -------------------------------------------------------------------------------- Quarterly Return on Average Common Equity - --------------------------------------------------------------------------------
Quarterly return on Average Common Equity (plot point graph in non-EDGAR version appears here) (in percent) 1994 1995 ------ ------ 13.00 13.86 13.32 14.30 13.12 15.09 13.24 14.96
BankAmerica Corporation 1995 / 3 - -------------------------------------------------------------------------------- "BankAmerica Corporation has experienced tremendous growth during the 1990s, in size, geographic scope, and the diversity of its products and business lines. I truly believe that we have built one of the best franchises in banking today." -- Richard M. Rosenberg We have also achieved our goal of establishing and maintaining leadership in our industry for corporate responsibility and community reinvestment, with a broad range of programs that have increased both our revenue and our stature in the communities where we do business. Since initiating the Neighborhood Advantage(R) program in 1990, we have made more than $10 billion in low-income home loans. And our Community Development Bank loaned approximately $550 million for low- cost housing and small business development in 1995. We believe that the franchise we have established during the course of this decade provides a solid base from which to continue building an organization that can succeed in a changing environment. Expense Control While we have significant potential to improve profitability by selectively growing our existing operations, we also place equal emphasis on controlling noninterest expense. We have succeeded in increasing our operating efficiency, as measured by the expense to revenue ratio, which has improved steadily over the last six quarters. To a large extent, this has been due to the efforts of thousands of employees and their managers working in our processing centers both in the United States and overseas. BankAmerica is a high volume processor of loans, checks and other payments. As we have expanded geographically, we have also taken steps to consolidate some of these processing operations and made substantial investments in advanced technology, thereby enhancing the efficiency of the businesses they support. For example, we now process indirect auto loans through dedicated dealer centers in Nevada and Washington. Consumer and residential loans in our Southwestern and Northwestern banking subsidiaries are serviced out of regional centers in Arizona and Oregon, and some phases of credit card processing are being outsourced to reduce expenses and improve flexibility. Capital Allocation We believe that capital must be invested in ways that generate appropriate returns for the risks involved. That means increasing investments in those businesses that earn more than their cost of capital, decreasing the investment in businesses that do not meet that test, and returning excess capital to shareholders by repurchasing common stock, redeeming preferred stock, and paying dividends. During 1995, we sold the Institutional Trust and Securities Services business at an attractive price, which freed up additional risk capital. We also divested some traditional bank branches in areas where the present and potential customer base was too small to justify our investment. Under a program authorized by our Board of Directors early in the year, we repurchased 16.6 million shares of our common stock for $894 million, redeemed approximately $200 million of preferred stock, and converted $248 million of preferred stock into 5.4 million shares of common stock. In February 1996, The Board approved the redemption of approximately $200 million more of preferred stock. At the same time, the Board declared a quarterly common stock dividend of $0.54 per share - a 17 percent increase and the highest level ever. 4 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- "We remain focused on managing our businesses in ways that create value for our shareholders. That means continuing to find ways to broaden the relationships we have with our customers, to allocate our resources prudently, to reduce costs, and to return excess capital to our shareholders." -- David A. Coulter The Importance of Employees None of the programs and strategies outlined in this letter could succeed without the efforts of BankAmerica's 95,000 employees around the world. These are the people who have brought the company to its present position in the industry and who operate the franchise day in and day out. They have shown themselves willing and able to undertake a variety of challenges, from building market share, to reducing expenses, to expanding or consolidating their operations. Their experience, integrity, and pride in the company and in the jobs they do produce results for our shareholders every day. In a relationship business such as ours, teamwork across disciplines and business lines is an important ingredient for success. We actively encourage and facilitate teamwork at every level of the corporation by seeking ways to eliminate artificial barriers and rewarding people who achieve excellence through teamwork. Change and Opportunity We face a future that promises continuing change and challenge for the financial services industry. Competition continues to increase, particularly from nonbanks, which sometimes play by different rules than those that we must follow. Congress continues to debate these very rules, and the outcome of their deliberations is difficult to predict. Technology alters the nature of both our competition and our customers' expectations. Consolidations keep the competitive landscape in flux. Change also brings opportunity, particularly for institutions that have the flexibility to adapt and the will to stay ahead of the curve. We believe that we have the franchise, the customer base, the capital, the earnings momentum, and the talent - in short, the scale and scope we need - to succeed in this challenging environment. We also have an extremely capable and hard-working Board of Directors whose guidance and leadership during this recent period of growth and change has been invaluable. One of our longest serving Directors, Philip M. Hawley, is retiring from the Board this year. We would like to acknowledge and thank him for his many years of dedicated service. /s/ Richard M. Rosenberg Richard M. Rosenberg Chairman of the Board /s/ David A. Coulter David A. Coulter Chief Executive Officer San Francisco, California February 8, 1996 BankAmerica Corporation 1995 / 5 - -------------------------------------------------------------------------------- - ---------------------------------------- Major Business Sectors - ---------------------------------------- Pie chart of the Corporation's Major Consumer Banking Business Sectors, including the following listed in order of magnitude: Consumer U.S. Corporate and Banking, U.S. Corporate and International International Banking Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Commercial Real Estate Investment Services with all sectors highlighted (Pie chart in non-EDGAR Middle-Market Banking version appears here) Private Banking and Investment Services BankAmerica Corporation derives its income from five primary business sectors, ranked, for the purpose of the discussion in the following 10 pages, in order of their contribution to net income in 1995. Although each sector provides discrete lines of products and services and pursues strategic goals aligned to the needs and potentials of its own customer base, there is synergy among the sectors. The ability to offer customers access to a comprehensive range of financial services by managing relationships across sector boundaries is a competitive advantage for BankAmerica. At the same time, maintaining operating results and balance sheets for discrete business sectors enables management to focus its allocation of capital to those businesses that it believes can best increase returns for shareholders. 6 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Consumer Banking - -------------------------------------------------------------------------------- Computer icons depicting the Corporation's Major Business Sectors including Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Investment Services, with the Consumer Banking icon highlighted appears here Consumer Banking Strategy Combine superior quality and locally managed sales and service capabilities with large-scale, cost-efficient processing and distribution channels. Offer customers a wide variety of transaction choices, enabling them to access the bank when, where, and how they wish. Pie chart of the Corporation's Major Business Sectors, including the following listed in order of magnitude: Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle-Market Banking, and Private Banking and Investment Services with the Consumer banking sector highlighted (Pie chart in non-EDGAR version appears here) Consumer Banking provides a full array of deposit and loan products to individuals and small businesses through branches, ATMs, phones, and other delivery channels throughout ten western states and through in-store ATMs in the Chicago metropolitan area. It also provides credit card, home mortgage, manufactured housing financing, and consumer finance products throughout the United States, and a range of consumer banking products and services in Hong Kong, India, Taiwan, Singapore, and the Philippines.
- -------------------------------------------------------------------------------- Net Income 1995 $1,154 million - -------------------------------------------------------------------------------- ($ millions) - -------------------------------------------------------------------------------- Retail Deposit Services $779 Other $41 Consumer Lending $334 - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 7 - -------------------------------------------------------------------------------- BankAmerica's consumer banking operations serve the largest customer base of any bank in the western United States - nearly 11 million households in 1995. In the ten western states in which we operate, we offer the largest full-service branch network - nearly 2,000 branches, approximately 200 of them in supermarkets and other stores. Our proprietary network of more than 6,600 ATMs handles nearly 2 million transactions per day. The trend away from traditional branches toward alternative delivery systems continues to increase. We now conduct two telephone and ATM transactions for every traditional teller transaction. To keep pace with our customers' changing expectations, we have implemented a variety of options, including in-store banking facilities and interactive banking services. In-store banking remains a high growth area and a high priority because of its popularity with customers and its cost-effectiveness. We now have 183 full- service in-store branches operating with extended hours in nine states, in addition to 323 in-store ATM or sales kiosks and more than 400 ATM-only installations. The addition of in-store ATMs in Washington state has expanded the reach of our Seattle-First National Bank operation still further. And we are now able to offer consumers access to the bank through more than 170 ATMs in the Chicago area. Cost-effectiveness and customer service are also the reasons behind our continuing investment in interactive banking: the delivery of products and services remotely through customer-owned devices. Our Interactive Banking Group develops and manages systems such as a new telephone bill-paying service, personal computer banking, "smart card" technology, and the delivery of services through BankAmerica's Internet site on the World Wide Web: [http://www.bankamerica.com]. Bank of America has become the first bank to open a site on America Online through which customers will be able to access their accounts and initiate loan applications. Interactive banking enables us to sell more products to existing customers and also to expand our geographic base. For example, we are now able to offer home mortgage products in nearly every state through an efficient combination of offices, regionalized processing centers, and telephone- and computer-based delivery. Electronic tools also help to give us a competitive edge in selling consumer loans. In some of our markets, computerized credit scoring now enables us to give customers approval for consumer loans at the time they make their applications. We are also using technology to improve our understanding of customer profitability and to anticipate purchasing behaviors through our "corporate data store," one of the largest information warehouses in the financial services industry. We have increased both the number and use of credit card accounts, both within our traditional western markets and in other parts of the United States, as the result of marketing initiatives such as co-branding, photocard, balance consolidation premiums, and competitive pricing.
- -------------------------------------------------------------------------------- Consumer Highlights - -------------------------------------------------------------------------------- ($ millions) 1995 - -------------------------------------------------------------------------------- Net Interest Income $ 5,358 Provision for Credit Losses 646 Noninterest Income 2,011 Noninterest Expense 4,700 Net Income 1,154 Average Loans 75,907 Average Deposits 95,495 Average Common Equity 5,800 Return on Average Common Equity 18.54% - --------------------------------------------------------------------------------
BankAmerica is California's leading small business lender in terms of loan outstandings, and the fifth-largest in the nation. To encourage small business clients to broaden their relationships with us, we recently began to offer relationship pricing on term loans and lines of credit, as well as discounts on checking service charges. Our retail operations in Asia give us access to consumers in some of the world's fastest growing economies. These operations also provide opportunities to enhance service to millions of Asian-Americans and recent emigres who live in the western United States and maintain close ties to Asia. We are in the process now of upgrading and standardizing our processing systems in Asia, introducing credit cards, and bringing additional new products to market. The challenge for the future in all our consumer markets is to determine the mix of delivery systems that both meets our customers' needs and offers us the best opportunities for profitability. 8 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. Corporate and International Banking - -------------------------------------------------------------------------------- Computer icons depicting the Corporation's Major Business Sectors including Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Investment Services, with the U.S. Corporate and International Banking icon highlighted appears here U.S. Corporate and International Banking Strategy Be the most important provider of financial services to customers in our markets by developing deep relationships based on our breadth of high-quality financial products and services and our global capabilities. Pie chart of the Corporaton's Major Business Sectors, including the following listed in order of magnitude: Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle-Market Banking, and Private Banking and Investment Services with the U.S. Corporate and International Banking sector highlighted (Pie chart in non-EDGAR version appears here) U.S. Corporate and International Banking provides capital-raising services, trade finance, cash management, investment banking, capital markets products, and financial advisory services to large public- and private-sector institutions that are part of the global economy and affected by global financial flows. With offices in the United States and 36 countries in North and South America, Asia, Europe, Africa, and the Middle East, and the ability to serve the needs of institutional clients anywhere in the world, BankAmerica is one of the leading U.S.-based providers of financial services to institutions conducting business within the United States and across international boundaries.
- -------------------------------------------------------------------------------- Net Income 1995 $872 million - -------------------------------------------------------------------------------- ($ millions) - -------------------------------------------------------------------------------- U.S. Corporate Group $337 Asia Wholesale $ 68 Latin America/Canada $131 Other $217 Europe, Middle East & Africa $119 - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 9 - -------------------------------------------------------------------------------- As business becomes increasingly globalized, the ability to analyze a client's needs and provide a wide range of products and services to meet those needs becomes increasingly important. BankAmerica leverages its global network for its clients through coordinated teams of relationship, product, industry, and regional bankers who utilize their knowledge and experience to study a client's business issues and opportunities and deliver tailored solutions. We are a client-focused organization, managing relationships through teams that cross geographic, product, and organizational lines, driven by our clients' needs. We have recently launched a new international network initiative to further strengthen client relationships where we believe that both we and our clients can benefit. Capital raising is growing in importance to our clients, as the credit and securities markets continue to converge across both markets and products. In 1995, our large client base, including both issuers and investors, enabled us to achieve leadership in capital raising in a number of areas, including the following: . We were the number one provider of commercial and industrial loans in the United States, . We were one of the top two providers of agented/co-agented syndicated loans, . We had the largest number of commercial paper programs among bank-affiliated dealers, and . We were number one in private placements of corporate debt by banks. In recognition of our leadership, we were named "Loan House of the Year" by the International Financial Review in Asia, "Best Syndicated Loan House" in Asia by Asia Risk Manager, top arranger of U.S. commercial paper for Latin America by LatinFinance Magazine, and top agent and agent/co-agent in syndicated lending in Latin America by Gold Sheets. We have continued to invest in BA Securities, Inc., through which we are able to underwrite and manage corporate debt issues for our clients. We are also a major player in capital markets, trading in more than 125 currencies with approximately 4,000 counterparties worldwide, maintaining an average daily foreign exchange volume of about $60 billion. In 1995 we were the number one foreign exchange bank in terms of top-tier relationships and the number one derivatives house in terms of both market penetration and lead relationships. We have a world-class leasing operation in BA Leasing & Capital Corporation. We have also substantially expanded our presence in the private global equity business with increased focus on Latin America, Asia, and Eastern Europe. We continue to have a strong commitment and market presence in the global payments business. In the United States, BankAmerica ranked first in the nation in terms of key corporate banking relationships in 1995. With a customer franchise that includes most of the 500 largest U.S. corporations, we have the opportunity to participate in most major financial transactions and the ability to establish and build lasting and mutually beneficial relationships with clients.
- -------------------------------------------------------------------------------- U.S. Corporate and International Highlights - -------------------------------------------------------------------------------- ($ millions) 1995 - -------------------------------------------------------------------------------- Net Interest Income $ 1,408 Provision for Credit Losses (30) Noninterest Income 1,861 Noninterest Expense 1,840 Net Income 872 Average Loans 39,379 Average Deposits 36,962 Average Common Equity 6,062 Return on Average Common Equity 13.02% - --------------------------------------------------------------------------------
Our positioning in major markets in Europe, Asia, Latin America, and the Middle East, makes us one of a very few U.S. banking companies with the capability of serving our clients' needs virtually anywhere in the world. Our most rapidly growing offshore market is the Asia-Pacific region, including the Far East and Latin America. This region is a natural market for BankAmerica with its west coast headquarters and Pacific Basin focus. Asia, in particular, continues to be an attractive market for us, one in which we have been investing heavily, particularly in the countries whose financial markets are undergoing rapid expansion. We have also expanded in Latin America, where we have a physical presence in the six countries whose economies comprise 90 percent of the region's GDP. In response to opportunities arising out of NAFTA, we opened commercial banking and leasing subsidiaries in Mexico during 1995. Our operations in Europe and the Middle East remain profitable and vital to the global network we offer to our clients. 10 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Commercial Real Estate - -------------------------------------------------------------------------------- Computer icons depicting the Corporation's Major Business Sectors including Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Investment Services, with the Commercial Real Estate icon highlighted appears here Commercial Real Estate Strategy Build comprehensive relationships with leading firms in selected segments of the real estate industry by leveraging off of our in-depth real estate knowledge, credit capacity, and broad product offerings. Pie chart of the Corporation's Major Business Sectors, including the following listed in order of magnitude: Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle-Market Banking, and Private Banking and Investment Services with the Commercial Real Estate sector highlighted (Pie chart in non-EDGAR version appears here) The Commercial Real Estate Group provides credit and other financial services to a variety of real estate market segments, including developers, investors, pension fund advisors, real estate investment trusts, and property managers. Local clients are served through offices across California and in ten other states. National clients, such as publicly traded corporations and private entities, are served through offices in California and Chicago. - -------------------------------------------------------------------------------- Net Income 1995 $326 million - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 11 - -------------------------------------------------------------------------------- Our focus in the commercial real estate business is to create and expand close relationships with a select list of clients. We know from more than 90 years' experience with real estate companies that dependable credit underwriting is key in their choice of relationship banks and in their purchase of other non-credit services. That dependability is the foundation of our client approach in this business. At the same time, we are actively moving beyond our traditional dependency on credit in this sector, to provide clients with a broader range of BankAmerica's products and services and diversify the revenue stream. As developers seek alternatives to traditional credit, we are finding opportunities to provide them with capital raising services including private placements and syndications, and capital markets activities such as risk management. We are also an important provider of non-credit services such as deposits, cash management and related services, and loan administration services to our clients in this sector. In all of these activities, we have found that we can succeed in this business by striving toward seamless service delivery. Real estate project finance teams structure individualized packages of products and services for clients whose needs may include various types of credit; risk management; deposit, cash management and related services; syndications; private placements; or loan administration services. BankAmerica's commercial mortgage specialists can usually close approved loans within 60 days of the receipt of completed applications. In the last year, we have expanded our client base significantly in our traditional markets in the West, as well as in other parts of the country. In California, the construction lending business continued to be affected by low demand for new construction. But we have been able to emphasize term lending on existing properties as well as working capital financing for our national clients. Another demonstration of our recent progress in client relationships was the increase in accounts in which we acted as an agent bank. We hope to increase real estate loan syndication volumes by advancing more of our client relationships into primary or agent bank status, which tend to be more profitable for us. Our challenge now is to continue to keep pace with the changing markets in which our clients operate. Significantly more funding options are now available to our clients than have been available in the past, and we expect this trend to continue. The capital markets will continue to be an important source of funds for many sectors of the business, and we will continue
- -------------------------------------------------------------------------------- Commercial Real Estate Highlights - -------------------------------------------------------------------------------- ($ millions) 1995 - -------------------------------------------------------------------------------- Net Interest Income $ 467 Provision for Credit Losses (189) Noninterest Income 35 Noninterest Expense 133 Net Income 326 Average Loans 10,102 Average Deposits 1,519 Average Common Equity 1,189 Return on Average Common Equity 26.04% - --------------------------------------------------------------------------------
to expand our services to encompass a broader range of these activities. The growth in capital markets has also provided us opportunities to service loans and collateral for commercial mortgage-backed securities originated and owned by others. Our focus on service quality and our economies of scale make us competitive with the best servicers in the industry. Over the long term, we believe we will be successful in our markets if we focus on our clients' needs, execute service with high standards, and deliver value in the process. 12 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Middle-Market Banking - -------------------------------------------------------------------------------- Computer icons depicting the Corporation's Major Business Sectors including Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Investment Services, with the Middle-Market Banking icon highlighted appears here Middle-Market Banking Strategy Become the most important provider of diversified financial services to our customers based on strong relationships with companies, their ownership, and management. Pie chart of the Corporation's Major Business Sectors, including the following listed in order of magnitude: Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle-Market Banking, and Private Baking and Investment Services, with the Middle-Market Banking sector highlighted (Pie chart in non-EDGAR version appears here) Middle-Market Banking provides a full range of financial products and services to companies with annual revenues between $5 million and $250 million throughout the West and in the Midwest. We include in this sector financial results from a national commercial finance company that serves mid-sized and large companies with specialized needs throughout the United States and in Canada. - -------------------------------------------------------------------------------- Net Income 1995 $325 million - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 13 - -------------------------------------------------------------------------------- Middle-market banking is an excellent stable business for BankAmerica. We are able to operate at relatively low cost, provide credit, deposit, and other services to a broad range of businesses with a widely differing range of needs, and change the nature of our relationships with clients as their businesses grow and their needs change. Although middle-market banking is primarily a credit business for BankAmerica, the fact that we can deliver the full range of the corporation's products and services, including cash management, capital raising, capital markets, and access to our global network, is a distinct competitive advantage for us. No other financial institution in our markets can provide such a comprehensive level of service to such a complete range of businesses within the sector. In addition, many middle-market companies are privately owned, creating a strong connection between the businesses and the individuals who own them. This offers significant opportunities for us to cross-sell the services of The Private Bank to both the owners and senior executives of middle-market companies. In some cases, we are also able to offer consumer financial services to the employees of our client companies. For the growing number of businesses involved in globalization and foreign trade, our international trade bank is now among the top two providers of trade finance for both middle-market and large corporate clients. We are expanding the geographic base of our middle-market business. In addition to the western states, we also have significant market presence in the Chicago area. In 1995, we expanded into Michigan, Wisconsin, Indiana, and Missouri. Our plans for 1996 include further expansion in the Midwest. We have also opened a commercial banking office in Atlanta to serve clients in eight states in the rapidly growing markets within the southeastern United States. We have been able to expand in these markets without additional high-cost infrastucture, and we are able to offer a broader range of products and services than most of our local competitors. We serve the middle-market sector in a number of different ways, collectively striving to reach businesses at all levels of development. Through BankAmerica Business Credit, the largest commercial finance company in the United States, we are able to provide asset-based lending services to companies in all 50 states. Middle-market banking is first and foremost a relationship business at BankAmerica. We seek to become the financial services provider of choice for our clients, developing a complete
- -------------------------------------------------------------------------------- Middle-Market Highlights ($ millions) 1995 - -------------------------------------------------------------------------------- Net Interest Income $ 858 Provision for Credit Losses (20) Noninterest Income 203 Noninterest Expense 524 Net Income 325 Average Loans 17,371 Average Deposits 7,691 Average Common Equity 1,285 Return on Average Common Equity 23.91% - --------------------------------------------------------------------------------
financial relationship with each company, its owners, and management, by offering them the full range of BankAmerica's products and services, matching our resources with their needs and priorities, and seeking opportunities to enhance our mutual interests. We continually seek more effective - and more profitable - ways of nurturing customer relationships and increasing the amount of business we conduct with each client company. Going forward, we will endeavor to improve profitability further by increasing the number of products and services we provide to our customers. At the same time, we are striving to attract new customers to further leverage the company's investment in various product areas. 14 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Private Banking and Investment Services - -------------------------------------------------------------------------------- Computer icons depicting the Corporation's Major Business Sectors including Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle- Market Banking, and Private Banking and Investment Services, with the Private Banking and Investment Services icon highlighted appears here Private Banking and Investment Services Strategy Use our extensive domestic and international distribution systems to offer high quality investment, fiduciary, and wealth management services designed to meet the needs of consumers, high-net-worth individuals, and institutions in the process of building or preserving wealth. Pie chart of the Corporation's Major Business Sectors, including the following listed in order of magnitude: Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle-Market Banking, and Private Banking and Investment Services, with the Private Banking and Investment Services sector highlighted (Pie chart in non-EDGAR version appears here) Through BankAmerica's domestic affiliates and select international offices, The Private Bank provides a broad range of banking, personal trust, and investment services to high-net-worth clients worldwide who require specialized personal services. Investment Services encompasses BankAmerica's investment management, brokerage, and mutual fund activities. The two businesses use BankAmerica's domestic network of branches and other delivery points, more than 400 securities brokers, offices in 36 foreign countries, and correspondent relationships with more than 2,000 banks throughout the world to address the wealth management needs of customers ranging from the very wealthy to the middle class saving for retirement. - -------------------------------------------------------------------------------- Net Income 1995 $45 million - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 15 - -------------------------------------------------------------------------------- The accumulation of wealth by an aging population, the transfer of wealth between generations, and the growing globalization of investment opportunities are creating new customers and increasing the need for sophisticated expertise in serving the needs of individuals with high net worth or investible assets. In both The Private Bank and the investment services business, the acquisition of new clients and the deepening of relationships with existing clients require a broad range of products and an efficient and effective delivery capability, as well as highly qualified professionals dedicated to assisting their clients in finding the right solutions for their needs. Consequently, we are building a staff of investment brokers, Private Banking representatives, and personal trust officers who have the knowledge, experience, and resources to identify their clients' needs and help them find the right products and services to meet those needs. Our Private Bankers, for example, are equipped to function as "financial general practitioners" who know their clients well enough to recommend specialized service providers when the need arises, whether it be in tax or estate planning, property titles, sophisticated investment advice, or any of the complex needs that may arise with high-net-worth clients. In the brokerage business, we have nearly completed a multi-year project to give our representatives the electronic support they need to provide their clients with the best tools available for retirement and estate planning, asset allocation, education planning, and other available products and services. To enhance the fiduciary services that are a key part of these businesses, our personal trust department has been actively strengthening the quality of its team by internal recruiting and outside hires. In both The Private Bank and the brokerage business, our focus is on the full client relationship rather than just the current transaction. In the fiduciary part of the business we position ourselves as "trusted financial advisors", helping clients to design and implement solutions to their long-term investment needs. We continue to work on improving strategic alliances with the consumer bank and especially with the commercial bank, to make investment and fiduciary services part of the total complement of services they can provide to their clients. At the same time, the consumer and commercial operations - particularly middle- market banking - are significant sources of new clients for The Private Bank. In product development, too, our emphasis is on improving our accessibility to clients and making it easy for them to do business with us. We have recently introduced a number of highly competitive asset-gathering products. Time Horizon(TM) Mutual Funds, for example, are designed to enable investors to achieve financial goals over specified periods of time by seeking to maximize total return over a stated investment period, while also increasing the emphasis on capital preservation as the
- -------------------------------------------------------------------------------- Private Banking and Investment Services Highlights - -------------------------------------------------------------------------------- ($ millions) 1995 - -------------------------------------------------------------------------------- Net Interest Income $ 170 Provision for Credit Losses (2) Noninterest Income 327 Noninterest Expense 423 Net Income 45 Average Loans 3,741 Average Deposits 6,124 Average Common Equity 351 Return on Average Common Equity 11.48% - --------------------------------------------------------------------------------
funds approach their targeted time horizons. TrustAmerica(TM) is a fiduciary product offering comprehensive trust services to clients of modest means who might not be able to afford a corporate trustee. While maintaining this focus on growing both our client base and individual client relationships, we have also maintained a competitive performance record in our mutual fund activities. During 1995, we consolidated the money-market products of Continental Bank into our core investment products: the Pacific Horizon(R) Funds. At the same time, effective marketing, relationship service, and competitive yields enabled us to bring nearly $2 billion in new money into the funds in the last year. In both The Private Bank and the investment business, we believe that our combination of centralized asset management expertise and decentralized distribution should allow us to operate efficiently, while serving the needs of our clients. 16 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Financial Review - -------------------------------------------------------------------------------- [Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with Financial Review icon highlighted appears here] Overview BankAmerica Corporation and subsidiaries' (BAC) earnings per share for 1995 were $6.49, an increase of 21 percent from $5.36 in 1994. Net income in 1995 was $2,664 million, up 22 percent from $2,176 million in 1994. Return on average common equity was 14.58 percent in 1995, up 138 basis points from 13.20 percent in 1994. In addition, the return on average total assets increased to 1.17 percent in 1995 from 1.08 percent in 1994. - -------------------------------------------------------------------------------- Price Range of Common Stock (Bar chart in non-EDGAR version) (in dollars)
- -------------------------------------------------------------------------------- 1991 1992 1993 1994 1995 ------ ------ ------ ------ ------ High 44.75 49.75 55.50 50.25 68.50 Low 23.125 35.375 40.375 38.375 39.50 - --------------------------------------------------------------------------------
Net interest income was $8,462 million in 1995, up $920 million from $7,542 million in 1994. BAC's net interest margin was 4.51 percent for 1995, essentially unchanged from the amount reported in 1994. Noninterest income increased $411 million, or 10 percent, from $4,135 million in 1994 to $4,546 million in 1995. Noninterest expense was $8,001 million in 1995, up $501 million from $7,500 million in 1994. BAC's expense to revenue ratio, or efficiency ratio, improved from 60.4 percent in 1994 to 58.1 percent in 1995. Total loans at December 31, 1995 were $155.4 billion, up $14.5 billion, or 10 percent, from $140.9 billion at year-end 1994. Average loans in 1995 increased $18.5 billion, or 14 percent, over 1994. Total nonaccrual assets declined by $189 million, or 9 percent, from $2,080 million at year-end 1994 to $1,891 million at year-end 1995. In addition, BAC's nonaccrual coverage ratio (computed as allowance for credit losses to total nonaccrual assets) was 188 percent at year-end 1995, up from 177 percent at December 31, 1994. During 1995, BAC repurchased 16.6 million shares of its common stock for $894 million and redeemed approximately $200 million of its preferred stock. In addition, $248 million of convertible preferred stock was converted into 5.4 million shares of common stock. During 1995, BAC also continued to maintain capital ratios above the regulatory "well-capitalized" levels. - -------------------------------------------------------------------------------- Ratio and Stock Data
- ---------------------------------------------------------------------------------------------------------------------- Year Ended December 31 ----------------------------------------------------- 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------- Selected Financial Ratios Rate of return (based on net income) on: Average common equity 14.58% 13.20% 12.88% Average total equity 13.62 12.30 12.00 Average total assets 1.17 1.08 1.05 Capital Ratios Ratio of common equity to total assets 7.57 7.34 7.58 Ratio of total equity to total assets 8.70 8.77 9.17 Ratio of average total equity to average total assets 8.61 8.76 8.79 Common dividend payout ratio 28.01 29.63 28.99 Stock Data Book value per common share at year end $47.90 $42.63 $39.58 Closing common stock price 64 3/4 39 1/2 46 3/8 Number of common shares outstanding at year end/a/ 367,447,202 371,182,004 357,912,170 - ----------------------------------------------------------------------------------------------------------------------
/a/ There were 152,763 common stockholders of record at January 31, 1996. - -------------------------------------------------------------------------------- Note: Information included in the text and tables of the Financial Review reflects the effects of the Continental Bank Corporation merger subsequent to its consummation on August 31, 1994 and the effects of the Security Pacific Corporation merger subsequent to its consummation on April 22, 1992. BankAmerica Corporation 1995 / 17 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Selected Financial Data
- ---------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 ------------------------------------------------------------ (dollar amounts in millions, except per share data) 1995 1994 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------- Operating Results Interest income $ 15,840 $ 12,384 $ 11,627 $ 11,613 $ 9,860 Interest expense 7,378 4,842 4,186 4,895 5,388 ------------------------------------------------------------ Net interest income 8,462 7,542 7,441 6,718 4,472 Provision for credit losses 440 460 803 1,009 805 Noninterest income 4,546 4,135 4,261 3,649 2,408 Noninterest expense 8,001 7,500 7,471 6,676 4,202 ------------------------------------------------------------ Income before income taxes 4,567 3,717 3,428 2,682 1,873 Provision for income taxes 1,903 1,541 1,474 1,190 749 ------------------------------------------------------------ Net Income $ 2,664 $ 2,176 $ 1,954 $ 1,492 $ 1,124 Per Share Data Earnings per common and common equivalent share $ 6.49 $ 5.36 $ 4.79 $ 4.24 $ 4.81 Earnings per common share -- assuming full dilution 6.45 5.33 4.76 4.21 4.78 Dividends declared per common share 1.84 1.60 1.40 1.30 1.20 Balance Sheet Data at Year End Loans $155,373 $140,912 $126,556 $126,611 $ 86,634 Total assets 232,446 215,475 186,933 180,646 115,509 Deposits 160,494 154,394 141,618 137,883 94,067 Long-term debt and subordinated capital notes 15,328 15,428 14,115 16,395 4,378 Common equity 17,599 15,823 14,165 12,509 6,737 Total equity 20,222 18,891 17,144 15,488 8,063 - ----------------------------------------------------------------------------------------------------------------------------
Business Sectors For reporting purposes, BAC segregates its operations into business or operating sectors. BAC's Vice Chairmen oversee the operations of the businesses that comprise the sectors and are responsible for their financial performance. The Vice Chairmen regularly review their respective businesses to evaluate past performance and make decisions regarding the future allocation of resources. All Vice Chairmen are accountable to the Chief Executive Officer. BAC determines its business sector results based on an internal management reporting system, which allocates revenues, expenses, assets, and liabilities to each business sector. Furthermore, for internal business sector monitoring, the unallocated allowance for credit losses and related provision for credit losses are assigned to the business sectors. Equity is assigned to each internal business sector on a risk-adjusted basis, as discussed on page 45. While BAC manages its hedging activities centrally, the effects of hedging are allocated to the business sectors through a transfer pricing process. As a result, the effects of hedging interest rate risk are reflected in the appropriate business sectors. The information set forth in the tables on pages 18-20 reflects the condensed income statements and selected average balance sheet line items and financial ratios by business sectors. The expense to revenue ratio in the tables excludes net other real estate owned (OREO) expense and amortization of intangibles. The information presented does not necessarily represent the business sectors' financial condition and results of operations as if they were independent entities. Results from prior periods are restated for changes in sector composition and in allocation and assignment methodologies to allow for comparability. For a detailed discussion of the composition of each business sector, refer to pages 6-15. 18 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Computer icon depicting the Consumer Banking sector appears here Consumer Banking Net income for Consumer Banking was up $322 million, or 39 percent, from 1994, primarily reflecting improved results in BAC's California retail deposit business and its non-California banks. Improved results in these businesses were partially offset by declines in net income in BAC's credit card and Asia retail operations. Net interest income increased from the amount reported in 1994 as a result of higher spreads. Noninterest income increased $80 million primarily due to higher service charge revenues on deposit accounts and transactions. Noninterest expense increased $65 million primarily due to growth in residential lending activities, reflecting BAC's expanded mortgage banking operations. In addition, BAC incurred higher direct mail advertising expenses and branch promotional costs to market new co-branding and photocard products. These increases were partially offset by a decrease in Federal Deposit Insurance Corporation (FDIC) deposit premiums, as discussed on page 24. During 1995, average loan outstandings grew $7.7 billion, or 11 percent. This increase was broadly based, both in terms of loan type and geographic region. Average deposits declined $3.6 billion, reflecting decreases in most deposit categories. The expense to revenue ratio for this sector improved from 63.2 percent in 1994 to 59.5 percent in 1995. Net income in 1994 for Consumer Banking was up $153 million, or 23 percent, from the amount reported for 1993, largely reflecting improved results in BAC's retail deposit and credit card businesses, as well as its non-California retail franchises. Noninterest expense decreased primarily due to lower personnel expense resulting from the centralization of support functions and various other operational efficiencies. The provision for credit losses declined primarily due to improved credit quality in the credit card business. The $2.9 billion increase in average loan outstandings primarily reflected an increase in residential first mortgages. Average deposits decreased $2.5 billion, largely reflecting a decline in time deposits. - -------------------------------------------------------------------------------- Consumer Banking
- -------------------------------------------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Operating Results Net interest income $ 5,358 $ 4,884 $ 4,983 Provision for credit losses 646 693 896 Noninterest income 2,011 1,931 2,029 Noninterest expense 4,700 4,635 4,874 --------------------------------------- Income before income taxes 2,023 1,487 1,242 Provision for income taxes 869 655 563 --------------------------------------- Net Income 1,154 832 679 Preferred stock dividends 79 89 95 --------------------------------------- Net income attributable to common equity $ 1,075 $ 743 $ 584 Selected Average Balance Sheet Components Loans $75,907 $68,257 $ 65,340 Earning assets 76,556 68,918 66,058 Total assets 84,365 76,752 73,215 Deposits 95,495 99,083 101,604 Common equity 5,800 5,247 5,282 Selected Financial Ratios Return on average common equity 18.54% 14.16% 11.05% Expense to revenue 59.49 63.20 64.55 - --------------------------------------------------------------------------------
Computer icon depicting the U.S. Corporate and International Banking sector appears here U.S. Corporate and International Banking U.S. Corporate and International Banking's net income in 1995 increased $268 million, or 44 percent, from that of the previous year. The increase in this sector's revenue and expense levels and average loans and deposits was largely a result of a full year's impact of BAC's acquisition of Continental Bank Corporation (Continental). In addition, net interest income grew due to loan growth in the commercial and industrial and foreign sectors. Noninterest income rose in connection with improved results from BAC's venture capital, trading, and loan syndication activities, partially offset by lower income from assets pending disposition. Noninterest expense grew primarily due to continued expansion of BAC's global capital markets operations. Average deposits increased, reflecting higher foreign interest-bearing deposits that were utilized primarily to fund loan growth. BankAmerica Corporation 1995 / 19 - -------------------------------------------------------------------------------- U.S. Corporate and International Banking's net income in 1994 decreased $166 million, or 22 percent, from 1993. This decrease was primarily due to an increase in the provision for credit losses from ($158) million in 1993 to $10 million in 1994. Noninterest income increased in 1994 largely due to gains on sales of assets pending disposition and certain equity investments, partially offset by lower trading income. Noninterest expense grew primarily due to the Continental acquisition and to investments made to support and expand BAC's global capital markets operations. Average loans increased due to the Continental acquisition and strong demand from commercial and industrial customers. - -------------------------------------------------------------------------------- U.S. Corporate and International Banking
- -------------------------------------------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Operating Results Net interest income $ 1,408 $ 1,025 $ 967 Provision for credit losses (30) 10 (158) Noninterest income 1,861 1,528 1,477 Noninterest expense 1,840 1,522 1,371 ---------------------------------- Income before income taxes 1,459 1,021 1,231 Provision for income taxes 587 417 461 ---------------------------------- Net Income 872 604 770 Preferred stock dividends 83 81 73 ---------------------------------- Net income attributable to common equity $ 789 $ 523 $ 697 Selected Average Balance Sheet Components Loans $39,379 $32,187 $30,571 Earning assets 65,245 52,287 41,149 Total assets 85,483 68,600 49,374 Deposits 36,962 26,076 19,515 Common equity 6,062 4,724 4,027 Selected Financial Ratios Return on average common equity 13.02% 11.08% 17.30% Expense to revenue 54.89 58.37 54.75 - --------------------------------------------------------------------------------
Computer icon depicting the Commercial Real Estate sector appears here Commercial Real Estate Commercial Real Estate's net income for 1995 decreased $21 million, or 6 percent, from 1994. Net interest income was up in 1995 due to Continental's contribution. Noninterest income declined $32 million during 1995 due to fewer asset sales, as a majority of the sector's sales of problem assets occurred during 1993 and 1994. Commercial Real Estate's net income for 1994 increased $222 million, or 178 percent, from 1993. This increase was attributable to a decrease in the provision for credit losses from $78 million in 1993 to $(218) million in 1994, lower OREO expense, and increased net interest income, partially offset by lower noninterest income. OREO expense decreased due to stabilized values, resulting in declines in writedowns of foreclosed properties, and to increased gains on the disposition of problem real estate assets. Net interest income was up in 1994 due to increased interest collections that resulted from a lower level of nonperforming assets. Noninterest income declined during 1994 due to fewer asset sales, resulting in lower gains on assets sold. - -------------------------------------------------------------------------------- Commercial Real Estate
- -------------------------------------------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Operating Results Net interest income $ 467 $ 444 $ 396 Provision for credit losses (189) (218) 78 Noninterest income 35 67 124 Noninterest expense 133 134 232 ---------------------------------------- Income before income taxes 558 595 210 Provision for income taxes 232 248 85 ---------------------------------------- Net Income 326 347 125 Preferred stock dividends 16 22 19 ---------------------------------------- Net income attributable to common equity $ 310 $ 325 $ 106 Selected Average Balance Sheet Components Loans $10,102 $10,182 $12,192 Earning assets 10,104 10,182 12,209 Total assets 10,023 10,017 12,414 Deposits 1,519 1,814 2,505 Common equity 1,189 1,261 1,040 Selected Financial Ratios Return on average common equity 26.04% 25.79% 10.24% Expense to revenue 25.81 25.88 39.01 - --------------------------------------------------------------------------------
20 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Computer icon depicting the Middle- Market Banking sector appears here Middle-Market Banking Middle-Market Banking's net income for 1995 grew $60 million, or 23 percent, from 1994. This growth primarily reflected improved net interest income results in BAC's commercial businesses, as loan volumes increased and spreads widened. In addition, the improved results included the effects of the Continental acquisition. Increases in noninterest income, noninterest expense, and average loans were largely due to BAC's expanded midwestern banking operations. Middle-Market Banking's net income in 1994 grew $45 million, or 20 percent, from 1993. This increase was primarily due to a decrease in the provision for credit losses in 1993 from $(19) million to $(66) million in 1994. The increase in net interest income was primarily attributable to the acquisition of Continental. Noninterest expense in 1994 was essentially unchanged from 1993, even after the inclusion of post-Continental acquisition operations in this sector. - -------------------------------------------------------------------------------- Middle-Market Banking
- -------------------------------------------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Operating Results Net interest income $ 858 $ 695 $ 659 Provision for credit losses (20) (66) (19) Noninterest income 203 167 164 Noninterest expense 524 470 468 ----------------------------------- Income before income taxes 557 458 374 Provision for income taxes 232 193 154 ----------------------------------- Net Income 325 265 220 Preferred stock dividends 18 19 16 ----------------------------------- Net income attributable to common equity $ 307 $ 246 $ 204 Selected Average Balance Sheet Components Loans $17,371 $14,183 $13,459 Earning assets 17,404 14,221 13,499 Total assets 19,853 16,216 15,374 Deposits 7,691 7,769 7,556 Common equity 1,285 1,110 886 Selected Financial Ratios Return on average common equity 23.91% 22.18% 23.03% Expense to revenue 47.26 51.97 54.41 - --------------------------------------------------------------------------------
Computer icon depicting the Private Banking and Investment Services sector appears here Private Banking and Investment Services Net income for Private Banking and Investment Services in 1995 increased $45 million from the amount reported in 1994. Noninterest expense in 1994 includes $83 million of capital additions to the Pacific Horizon money market mutual funds. Net interest income increased $32 million primarily due to increased loan volumes generated by the Continental acquisition. Noninterest income increased $26 million largely as a result of expanded private banking activities in the Midwest, which was partially offset by investment financial management fees and mutual fund and annuity fees. Net income for Private Banking and Investment Services in 1994 decreased $61 million from 1993 primarily due to the capital additions discussed above. This decrease was partially offset by reduced operating costs, improved results from the personal trust business, and Continental's contribution. - -------------------------------------------------------------------------------- Private Banking and Investment Services
- -------------------------------------------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Operating Results Net interest income $ 170 $ 138 $ 123 Provision for credit losses (2) -- (7) Noninterest income 327 301 308 Noninterest expense 423 441 335 ----------------------------------- Income (loss) before income taxes 76 (2) 103 Provision for (benefit from) income taxes 31 (2) 42 ----------------------------------- Net Income 45 -- 61 Preferred stock dividends 5 6 4 ----------------------------------- Net income (loss) attributable to common equity $ 40 $ (6) $ 57 Selected Average Balance Sheet Components Loans $3,741 $2,991 $2,384 Earning assets 3,788 3,046 2,472 Total assets 4,358 3,501 2,839 Deposits 6,124 5,053 5,039 Common equity 351 321 250 Selected Financial Ratios Return on average common equity 11.48% (1.73)% 22.63% Expense to revenue 82.01 97.21 74.60 - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 21 - -------------------------------------------------------------------------------- Other Other amounts are primarily associated with BAC's institutional trust and securities services (ITSS), certain corporate expenses, and various other support services. The other sector also includes the results from corporate liquidity management activities as discussed on page 42, along with any residual differences between actual centrally managed external hedging results and the allocation of interest rate risk hedging to the business sectors. This sector had a net loss of $58 million in 1995, compared with net income of $128 million in 1994. This decrease was primarily attributable to an increase in unallocated corporate occupancy expenses, a higher net loss in the ITSS business, and lower results from corporate liquidity management activities. During 1995, BAC began to divest its ITSS business, as management determined that the investment required to remain competitive was not justified by the anticipated returns. In connection with this divestiture, BAC recognized a net gain of $36 million associated with the completed components of the sale. During 1996, BAC anticipates receiving additional revenues in conjunction with the finalization of the remaining components of the divestiture. Results Of Operations Net Interest Income Net interest income is the difference between interest earned on assets and interest paid on liabilities. Interest income and expense are affected by changes in the volume and mix of interest-earning assets and interest-bearing deposits and other interest-bearing liabilities, as well as fluctuations in interest rates. On a taxable-equivalent basis, net interest income amounted to $8,487 million in 1995, up $921 million, or 12 percent, from the amount reported in 1994. The main factor contributing to this increase was loan growth, as average loans increased $18.5 billion, or 14 percent, during 1995. In addition, net interest income in 1995 included $215 million of interest recoveries, up from $120 million in 1994. - -------------------------------------------------------------------------------- Net Interest Margin (Plot point graph in non-EDGAR version) (in percent)
- --------------------------------------------------------------------------------------------------------- 1991 1992 1993 1994 1995 ------ ------ ------ ------ ------ Net Interest Margin 4.36 4.71 4.69 4.50 4.51 - ---------------------------------------------------------------------------------------------------------
BAC's net interest margin for 1995 was 4.51 percent, essentially unchanged from the margin in 1994. Net interest margin is the net yield on interest- earning assets and includes the effects of interest recoveries, as previously discussed. Heightened price competition for loan volume negatively influenced the margin in 1995. In addition, BAC's growth in average earning assets was largely funded by increases in foreign interest-bearing deposits and domestic purchased funds, which are more costly than traditional core deposits. If these trends continue, the net interest margin in 1996 may continue to decline as it has over the last three quarters of 1995. BAC's net interest income and margin include the results of hedging with certain on- and off-balance-sheet financial instruments. During 1995, approximately $65 million of net interest income attributable to hedging with derivative instruments was included in BAC's net interest income results, compared with approximately $390 million in 1994. The derivative hedging amounts for 1995 and 1994 accounted for approximately 5 basis points and 25 basis points, respectively, of the net interest margins for those periods. 22 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Average Balances and Rates
- ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 --------------------------------------------------------------------- 1995 1994 1993 -------------------- -------------------- -------------------- (dollar amounts in millions) Balance/a/ Rate Balance/a/ Rate Balance/a/ Rate Assets Interest-bearing deposits in banks $ 5,853 7.95% $ 4,912 6.62% $ 2,642/b/ 7.36% Federal funds sold 548 5.89 1,318 4.13 1,131 3.12 Securities purchased under resale agreements 8,823 7.00 6,378 5.51 3,903 4.46 Trading account assets 9,106 8.18 6,713 7.09 6,341 5.91 Available-for-sale securities/c/ 9,768/b/ 7.83 9,675/b/ 6.13 4,118 6.79 Held-to-maturity securities/c/ 7,192 7.29 10,805/b/ 7.35 15,759 7.13 Domestic loans: Consumer--residential first mortgages 35,407 7.06 32,012 5.97 29,548 6.29 Consumer--residential junior mortgages 13,832 9.05 13,196 7.65 13,388 7.89 Consumer--credit card 8,230 14.95 7,280 15.65 7,499 16.26 Other consumer 14,149 9.89 11,847 10.27 11,271 10.41 Commercial and industrial 30,927 8.47 23,643 7.04 20,580 6.32 Commercial loans secured by real estate 10,586 9.04 9,407 8.04 9,707 7.51 Construction and development loans secured by real estate 3,367 11.07/d/ 3,948 7.78 5,718 5.17 Financial institutions 2,511 5.69 2,142 5.06 1,948 3.48 Lease financing 1,835 6.06 1,675 7.70 1,773 12.36 Agricultural 1,619 9.67 1,641 7.87 1,605 7.62 Loans for purchasing or carrying securities 1,303 7.02 1,814 5.06 1,447 4.05 Other 1,394 6.56 1,244 6.10 1,099 5.03 --------------------------------------------------------------------- Total domestic loans 125,160 8.73 109,849 7.77 105,583 7.73 Foreign loans 21,754 8.24 18,572 6.86 19,531 6.72 --------------------------------------------------------------------- Total loans/b/ 146,914 8.65 128,421 7.64 125,114 7.57 --------------------------------------------------------------------- Total earning assets 188,204 8.43 168,222 7.38 159,008 7.32 Nonearning assets 42,641 37,366 30,144 Less: Allowance for credit losses 3,672 3,520 3,826 --------------------------------------------------------------------- Total Assets $227,173 $202,068 $185,326 Liabilities and Stockholders' Equity Domestic interest-bearing deposits: Transaction $ 13,241 1.20% $ 13,761 1.16% $ 13,469 1.34% Savings 13,550 2.08 14,427 2.04 13,977 2.23 Money market 29,070 2.99 32,625 2.51 34,182 2.49 Time 30,002 4.90 28,259 3.06 30,939 2.50 --------------------------------------------------------------------- Total domestic interest-bearing deposits 85,863 3.24 89,072 2.40 92,567 2.29 Foreign interest-bearing deposits: Banks located in foreign countries 10,245 6.63 6,771 6.23 3,346 6.88 Governments and official institutions 6,845 5.80 4,646 4.67 1,927 4.08 Time, savings, and other 16,131 6.60 11,371 4.95 10,276 5.32 --------------------------------------------------------------------- Total foreign interest-bearing deposits 33,221 6.44 22,788 5.27 15,549 5.50 --------------------------------------------------------------------- Total interest-bearing deposits 119,084 4.13 111,860 2.98 108,116 2.75 Federal funds purchased 2,222 5.89 611 4.48 570 2.78 Securities sold under repurchase agreements 9,110 6.38 6,455 5.44 2,837 5.58 Other short-term borrowings 9,301 6.77 4,231 6.50 3,088 6.52 Long-term debt 15,156 7.04 13,920 5.82 14,090 5.16 Subordinated capital notes 605 7.58 606 6.84 1,499 7.52 --------------------------------------------------------------------- Total interest-bearing liabilities 155,478 4.75 137,683 3.52 130,200 3.22 Domestic noninterest-bearing deposits 33,272 31,938 30,688 Foreign noninterest-bearing deposits 1,630 1,498 1,425 Other noninterest-bearing liabilities 17,238 13,258 6,728 --------------------------------------------------------------------- Total liabilities 207,618 184,377 169,041 Stockholders' equity 19,555 17,691 16,285 --------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $227,173 $202,068 $185,326 Interest income as a percentage of average earning assets 8.43% 7.38% 7.32% Interest expense as a percentage of average earning assets (3.92) (2.88) (2.63) --------------------------------------------------------------------- Net Interest Margin 4.51% 4.50% 4.69% - -----------------------------------------------------------------------------------------------------------------------------------
/a/ Average balances are obtained from the best available daily, weekly, or monthly data. /b/ Average balances include nonaccrual assets. /c/ Refer to the table on page 26 of the Balance Sheet Review for more detail on available-for-sale and held-to-maturity securities. /d/ Rates reflect a higher level of interest recoveries on nonaccrual loans during the year ended December 31, 1995 as compared to the years ended December 31, 1994 and 1993. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 23 - -------------------------------------------------------------------------------- Noninterest Income Noninterest income for 1995 increased $411 million, or 10 percent, from the amount reported in 1994. Fees and commissions, the largest component of noninterest income, increased $259 million from the amount reported in 1994. Retail deposit account fees increased due to an increase in the number of fee- paying accounts, growth in teleservicing fee revenues, and higher service charge revenues on other transactions. Financial services fees increased $88 million from 1994. This increase was largely attributable to expanded loan syndication volume. Off-balance-sheet credit-related instrument fees and personal and other trust fees increased primarily due to the Continental acquisition. Loan fees and charges increased over 1994 amounts due primarily to higher revenues from late payment charges on credit card accounts. This increase in loan fees and charges was partially offset by amortization expense and valuation adjustments on mortgage servicing rights recognized in connection with the fourth-quarter 1995 adoption of Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights." For more information on the adoption of SFAS No. 122, refer to Note 1 of the Notes to Consolidated Financial Statements on pages 52-56. The above increases in fees and commissions were partially offset by a decline in credit card membership fees, as fee waivers were granted under certain circumstances to retain and increase card membership. Trading income increased $170 million, or 48 percent, from the amount reported in 1994, reflecting improved market conditions and strengthening customer demand in 1995. Improved performance in BAC's debt securities trading operations was largely attributable to gains on Latin American and other emerging market debt securities. Foreign exchange trading-related income increased due to higher transaction volume that resulted from strong global demand for these - -------------------------------------------------------------------------------- Noninterest Income (Stacked block graph in non-EDGAR version)
- -------------------------------------------------------------------------------- (in millions of dollars) 1994 1995 -------------------------------- Total Noninterest Income 4,135 4,546 ================================ Fees and Commissions 2,928 3,187 Trading Income 357 527 Other Noninterest Income 850 832 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Noninterest Income
- -------------------------------------------------------------------------------- Year Ended December 31 ----------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Fees and commissions Deposit account fees: Retail $ 931 $ 841 $ 815 Commercial 372 360 383 Credit card fees: Membership 49 79 83 Other 266 252 259 Trust fees: Corporate and employee benefit 53 70 79 Personal and other 247 215 215 Other fees and commissions: Loan fees and charges 310 296 313 Off-balance-sheet credit-related instrument fees 344 282 250 Financial services fees 189 101 63 Mutual fund and annuity commissions 81 89 99 Other 345 343 358 ----------------------------- 3,187 2,928 2,917 Trading income 527 357 569 Other noninterest income Income from assets pending disposition 13 166 171 Net gain on sales of assets/a/ 71 126 106 Venture capital activities 337 136 129 Net gain on available-for-sale securities 34 24 61 Other income 377 398 308 ----------------------------- 832 850 775 ----------------------------- $4,546 $4,135 $4,261 - --------------------------------------------------------------------------------
/a/ Net gain on sales of assets includes gains and losses from the disposition of loans, premises and equipment, and certain other assets. - -------------------------------------------------------------------------------- products by BAC customers. For more information on the components of trading income, refer to Note 20 of the Notes to Consolidated Financial Statements on pages 70-76. Other noninterest income for 1995 was $832 million, compared with $850 million reported in 1994. Income from assets pending disposition decreased $153 million from the amount reported in 1994, as sales of such assets were substantially completed in 1994. Net gain on sales of assets decreased $55 million due to fewer asset sales in 1995. These decreases were partially offset by higher revenues from venture capital activities, which increased $201 million from 1994 due to higher realized capital gains and partnership distributions in connection with a strong equity market in 1995. Other income in 1995 included a $50 million gain from the sale of an asset received in lieu of debt repayment and a $36 million gain associated with the completed components of the previously announced divestiture of BAC's ITSS business. Other income in 1994 included a gain of $85 million on the sales of a minority interest in Burns-Fry Holdings Corporation and two Asian branches. 24 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Noninterest Expense Noninterest expense for 1995 increased $501 million from the amount reported in 1994 primarily due to an increase in personnel expense. In 1994, noninterest expense included $50 million of merger-related charges incurred in connection with the acquisition of Continental. In addition, noninterest expense in 1994 included $83 million of capital additions to two Pacific Horizon money market mutual funds, for which Bank of America NT&SA serves as investment advisor. - -------------------------------------------------------------------------------- Noninterest Expense (Stacked block graph in non-EDGAR version)
- -------------------------------------------------------------------------------- (in millions of dollars) 1994 1995 ------------------------ Total Noninterest Expense 7,500 8,001 ======================== Personnel Expense 3,639 4,027 Occupancy and Equipment Expense 1,279 1,401 Amortization of Intangibles 411 428 Other Noninterest Expense 2,171 2,145 - --------------------------------------------------------------------------------
Personnel expense (salaries and employee benefits), the largest component of noninterest expense, totaled $4,027 million in 1995, up $388 million from the amount reported for 1994. The increase in personnel expense was largely attributable to increases in base salaries and incentive-based compensation. Base salaries increased $190 million primarily as a result of a full year's effect of the Continental merger and mortgage banking acquisitions in 1994, as well as a change in the mix of employees. Incentive-based compensation increased $183 million largely due to increases in executive stock-based incentive bonuses and discretionary variable pay plans, which were largely correlated with BAC's 1995 financial performance and common stock appreciation. BAC's staff level on a full-time-equivalent (FTE) basis was approximately 79,900 at December 31, 1995, down from 82,100 at December 31, 1994. FTE is a measurement equal to one full-time employee working a standard day. BAC had approximately 95,300 employees at December 31, 1995, down from 98,600 employees at the same time a year earlier. These amounts include both full-time and part- time employees. - -------------------------------------------------------------------------------- Staff Levels (Plot-point graph in non-EDGAR version)
- ------------------------------------------------------------------------------------- December 31 -------------------------------------- (in thousands) 1991 1992 1993 1994 1995 - ------------------------------------------------------------------------------------- Number of Employees 62.6 99.2 96.4 98.6 95.3 Full-time-equivalent staff 54.4 83.2 79.2 82.1 79.9 =====================================================================================
Regulatory fees and related expenses declined $114 million primarily due to a reduction in FDIC assessment rates. When the FDIC achieved its mandated ratio of Bank Insurance Fund (BIF) reserves to insured deposits of 1.25 percent in May 1995, it reduced the assessment rates for well-capitalized and highest-rated institutions from 23 cents to 4 cents per $100 of eligible deposits for the balance of 1995. In November 1995, the FDIC reduced the 1996 insurance premium rate for well-capitalized and highest-rated BIF-insured banks to zero. Under the new rate structure, the well-capitalized and highest-rated banks will only pay a membership fee for BIF insurance, effective January 1996. Congress is also considering proposed legislation that would recapitalize the FDIC's Savings Association Insurance Fund (SAIF) to 1.25% of insured deposits through a special one-time assessment. However, at this time it is not possible to predict the ultimate provisions of any final legislation or their effect on BAC. For more information regarding this special deposit assessment, refer to Note 22 of the Notes to Consolidated Financial Statements on page 79. Excluding the previously discussed $83 million of capital additions to the Pacific Horizon funds that occurred in 1994, - -------------------------------------------------------------------------------- Noninterest Expense
- -------------------------------------------------------------------------------- Year Ended December 31 ---------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Salaries $3,309 $2,936 $2,886 Employee benefits 718 703 573 Occupancy 738 690 684 Equipment 663 589 610 Amortization of intangibles 428 411 421 Communications 359 323 330 Regulatory fees and related expenses 176 290 309 Merger-related expenses -- 50 9 Net other real estate owned expense 18 34 127 Other expense 1,592 1,474 1,522 ---------------------------- $8,001 $7,500 $7,471 - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 25 - -------------------------------------------------------------------------------- other expense for 1995 increased $201 million from the amount reported in 1994. This increase reflected higher professional services fees and external data processing costs. Income Taxes BAC's effective income tax rates for 1995 and 1994 were 41.7 percent and 41.5 percent, respectively. For further information concerning the provisions for federal, state, and foreign income taxes, refer to Note 17 of the Notes to Consolidated Financial Statements on page 66. Comparison of 1994 versus 1993 The increase in 1994 earnings over 1993 was primarily attributable to substantial improvement in credit quality and increased net interest income. Taxable-equivalent net interest income for 1994 was $103 million higher than the amount reported in 1993. The main factor contributing to this increase was a 3 percent increase in average total loans, which included the effects of the Continental acquisition. The net interest margin for 1994 was 4.50 percent, down 19 basis points from 4.69 percent in 1993. The provision for credit losses in 1994 decreased $343 million, or 43 percent, from the amount reported in 1993, reflecting improvements in most portfolio segments. Noninterest income for 1994 decreased $126 million over the amount reported for 1993. This decrease primarily reflected lower trading results, offset by higher other noninterest income. Total fees and commissions for 1994 remained relatively unchanged from the amount reported for 1993. Excluding Continental's contribution, various categories of fees and commissions in 1994 declined from 1993. Trading income for 1994 decreased $212 million from the amount reported in 1993, as a result of less favorable market conditions throughout 1994. In particular, BAC experienced declines related to foreign debt instruments and currencies associated with certain foreign markets. Other noninterest income increased $75 million in 1994 from the amount reported in 1993. This increase was largely due to the sales of a minority interest in Burns-Fry Holdings Corporation and two Asian branches, which resulted in a total gain of $85 million. This increase was partially offset by a decline in the net gain on available-for-sale securities. Noninterest expense for 1994 was essentially unchanged from the amount reported in 1993. Noninterest expense in 1994 included amounts related to post- Continental-acquisition operations, as well as an additional $50 million of merger-related charges incurred in connection with the Continental acquisition. Personnel expense for 1994 increased $180 million from the amount reported in 1993, reflecting higher severance-related benefits and staff levels. Severance-related expenses increased $61 million over the amount reported in 1993, while staff levels increased due to Continental and other 1994 acquisitions. Partially offsetting increased personnel costs were decreased professional services and regulatory-related expenses. In addition, net OREO expense in 1994 decreased $93 million from 1993. This decrease was due to a decline in writedowns of foreclosed properties and increased gains on sales of OREO, partially offset by a reduction in OREO- related income. Other expense for 1994 was essentially unchanged from the amount reported in 1993. Other expense in 1994 included $83 million of capital additions to two money market mutual funds, as discussed on page 24. Other expense for 1993 included a nonrecurring charge of $90 million related to the accrual of various restructuring expenses. BAC's effective income tax rate for 1994 decreased to 41.5 percent from 43.0 percent in 1993. This decrease was primarily due to reductions in the state effective tax rate and effective tax rates applied to leveraged lease income. Balance Sheet Review Total assets increased $17.0 billion, or 8 percent, during 1995. Earning assets were up $14.9 billion, primarily reflecting a $14.5 billion increase in total loans. Increases in foreign deposits and other short-term borrowings, primarily bank notes and commercial paper, largely funded the growth in earning assets. Investment Securities Total investment securities averaged $17.0 billion in 1995, a 17 percent decrease from $20.5 billion in 1994. This decline occurred as loan growth exceeded deposit growth and some proceeds of maturing securities were used to fund loans, instead of being reinvested in securities. Available-for-sale securities and held-to-maturity securities comprised 72 percent and 28 percent, respectively, of total investment securities at year- end 1995, compared with 55 percent and 45 percent, respectively, at year-end 1994. This shift was primarily due to a $2.1 billion reclassification of certain debt securities from the held-to-maturity to the available-for-sale portfolio during the fourth quarter of 1995. For more information on this reclassification, refer to Note 6 of the Notes to Consolidated Financial Statements on pages 58 and 59. During 1995, BAC experienced unrealized valuation gains of $327 million on its available-for-sale portfolio. These unrealized gains, which resulted primarily from mortgage-backed securities, were recorded on a net-of-tax basis in stockholders' equity. 26 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Available-for-Sale and Held-to-Maturity Securities - Average Balances and Rates
- ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 1995 1994 1993 ----------------------------------- ----------------------------------- ----------------------- Rate based Rate based Rate based Rate based Rate based on fair on amortized on fair on amortized on amortized (dollar amounts in millions) Balance/a/ value cost Balance/a/ value cost Balance/a/ cost - ------------------------------------------------------------------------------------------------------------------------------------ Available-for-sale securities U.S. Treasury and other government agency securities $1,659 6.49% 6.45% $3,029 5.42% 5.41% $1,646 5.20% Mortgage-backed securities 4,962 6.94 6.89 4,410 5.96 5.88 1,606 7.35 Other domestic securities 660 5.22 5.84 427 4.78 5.00 39 7.19 Foreign securities 2,487/b/ 11.17/c / 10.10/c/ 1,809/b/ 8.05 7.09 827 8.83 ------------------------------------------------------------------------------------------------- $9,768 7.83% 7.64% $9,675 6.13% 5.95% $4,118 6.79% Year Ended December 31 ----------------------------------------------------------------- 1995 1994 1993 ----------------------------------------------------------------- (dollar amounts in millions) Balance/a/ Rate Balance/a/ Rate Balance/a/ Rate - ---------------------------------------------------------------------------------------------------------------------------------- Held-to-maturity securities U.S. Treasury and other government agency securities $ 388 6.72% $ 689 6.72% $ 3,554 5.28% Mortgage-backed securities 4,490 7.15 6,985 7.20 10,784 7.28 State, county, and municipal securities 445 7.89 479 8.12 553 7.93 Other domestic securities 178 7.62 224 7.11 740 13.01/d/ Foreign securities 1,691 7.62 2,428/b/ 7.83 12 7.61 -------------------------------------------------------------- $7,192 7.29% $10,805 7.35% $15,759 7.13% - ----------------------------------------------------------------------------------------------------------------------------------
/a/ Average balances are obtained from the best available daily, weekly, or monthly data. /b/ Average balances include nonaccrual assets. /c/ Rates reflect interest received on nonaccrual debt-restructuring par bonds. /d/ Rates reflect income recognized on call premiums received and unamortized discounts related to debentures called prior to maturity. - -------------------------------------------------------------------------------- Deposits Total deposits were $160.5 billion at December 31, 1995, an increase of $6.1 billion, or 4 percent, from year-end 1994. During 1995, BAC continued to experience a shift in its funding structure. Average domestic interest-bearing deposits decreased $3.2 billion, while foreign interest-bearing deposits increased $10.4 billion. The decline in domestic interest-bearing deposits was largely reflected in money market accounts and other retail deposit categories. Funds raised through wholesale sources in the domestic and offshore markets, including foreign interest-bearing deposits replaced the decline in retail deposits and helped support balance sheet growth in 1995. Management expects this trend to continue in 1996. For further information related to BAC's management of assets and liabilities, as well as information on BAC's liquidity and capital, refer to the Risk Management section and Liquidity and Capital Management sections that follow on pages 27-45. Pending Accounting Standards In March 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121), which is effective for fiscal years beginning after December 15, 1995 and will be adopted by BAC effective January 1, 1996. BAC expects that, at adoption, SFAS No. 121 will not have a material effect on its financial position or results of operations. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). This Statement establishes financial accounting and reporting standards for stock-based compensation plans. SFAS No. 123 is effective for fiscal years beginning after December 15, 1995, and BAC will adopt it effective January 1, 1996. BAC expects to continue to account for stock-based employee compensation plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as SFAS No. 123 permits, and to follow the pro forma net income and earnings per share disclosure requirements set forth in SFAS No. 123. BAC expects that, at adoption, SFAS No. 123 will not have an effect on its financial position or results of operations. BankAmerica Corporation 1995 / 27 - -------------------------------------------------------------------------------- Off-Balance-Sheet Financial Instruments Credit-Related Financial Instruments BAC continually makes commitments to extend credit to a wide range of customers. Additionally, BAC issues financial guarantees and letters of credit to ensure performance of customer financial obligations. BAC generally enters into these contracts to offer short-term financing and facilitate domestic and foreign trade transactions for customers. Foreign Exchange and Derivatives Contracts BAC uses foreign exchange and derivatives contracts in both its trading and its asset and liability management activities. Foreign exchange and derivatives contracts include swaps, futures, forwards, and option contracts, all of which derive their value from underlying interest rates, foreign exchange rates, commodity values, or equity instruments. Certain transactions involve standardized contracts executed on organized exchanges, while others are negotiated over-the-counter (OTC), with the terms tailored to meet the needs of BAC and its customers. For a detailed discussion of these instruments and transactions, refer to Note 20 of the Notes to Consolidated Financial Statements on pages 70-76. BAC executes transactions to aid its customers in managing exposures to interest rates, foreign exchange rates, prices of securities, and financial or commodity indices. For example, a multinational manufacturing company may want to control the cost of purchasing raw materials in foreign currencies at a future date. BAC will transact cross currency swaps or foreign exchange contracts with the customer to meet this management objective. Counterparties to BAC's foreign exchange and derivative transactions generally include U.S. and foreign banks, nonbank financial institutions, corporations, domestic and foreign governments, and asset managers. BAC generates trading revenue by executing transactions to support customers' risk management needs, by efficiently managing the positions that result from these transactions, and by making markets in a wide variety of products. In its trading activities, BAC primarily employs traditional or "plain-vanilla" products such as spot and forward foreign exchange contracts, exchange-traded futures contracts, and conventional interest rate swaps, caps and floors. These instruments are designed to be used by a wide variety of market participants. Such products accounted for approximately 95 percent of all foreign exchange and derivatives contracts outstanding at December 31, 1995. The remaining 5 percent involved nontraditional products or transactions and were executed primarily to meet unique client needs. In the future, BAC plans to prudently increase its usage of nontraditional derivative financial instruments to take greater advantage of its market and industry expertise in meeting customer demand and anticipating market conditions. As an end-user, BAC employs foreign exchange and derivatives contracts to hedge interest rate risk in connection with its own asset and liability management activities. For a detailed discussion of BAC's hedging objectives and the strategies and financial instruments used to achieve such objectives, refer to Note 20 of the Notes to Consolidated Financial Statements on pages 70-76. Similar to on-balance-sheet financial instruments such as loans and investment securities, off-balance-sheet financial instruments subject BAC to various types of risk. For a discussion of these risks and how they are managed, refer to the Risk Management section below and on pages 28-42. Risk Management Since risk is inherent in most of BAC's business activities, risk management is integral to BAC's operations and a key determinant of its overall financial performance. BAC applies various strategies to mitigate the risks to which it is exposed; namely credit, market, liquidity, and operational and settlement risks. These strategies are discussed in the following sections. Credit Risk Management Overview Credit risk is the possibility of loss in the event that a borrower or other counterparty fails to perform under the terms of a contract. The existence of credit risk indicates that not all borrowers or others who enter into credit- related contractual relationships with BAC will completely meet the terms of their agreements. Credit risk arises primarily from BAC's lending activities, as well as from transactions involving certain foreign exchange and derivatives contacts. Credit risk also includes transfer risk, which is the risk that although foreign customers possess adequate funds, their local central banks preclude them from exchanging their local currency for the foreign currency (usually U.S. dollars) with which they agreed to repay their obligations. 28 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Total Loan Outstandings by Geographic Area (Pie chart in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- December 31 ------------------ 1994 1995 ------------------ Southern California 23.3% 21.4% Northern California 12.0% 11.1% Other U.S. 23.0% 23.4% Central California 9.2% 8.8% Other Western States 18.0% 20.2% Foreign 14.5% 15.1% ------------------ Total 100.0% 100.0% ================== - --------------------------------------------------------------------------------
BAC's Credit Policy Committee (CPC) oversees all credit-related activities. The CPC is responsible for establishing credit standards and guidelines that define and quantify credit risk, and for managing BAC's overall credit exposure. The CPC also oversees compliance with established credit limits and conducts reviews of industry, geographic region or country, product, and individual borrower or counterparty exposure, together with reviews of problem credits and credit losses. Managing credit risk within the guidelines established by the CPC is the responsibility of all BAC line officers involved in granting credit to customers. For these employees, the primary focus of managing credit risk is to evaluate a borrower's or counterparty's ability to repay an obligation from identified financial sources. When collateral-secured transactions are involved, the focus is to ensure that sufficient collateral is obtained at the outset of the contract and that sufficient collateral margins are maintained throughout the contract's life. In making credit recommendations and decisions, line officers are supported by credit specialists within BAC who have expertise in specific areas, including specialized industries, geographic regions, or types of products. The adherence of line officers to the CPC's established limits and exposure levels is monitored on an ongoing basis by BAC's credit examination officers and is ultimately overseen by senior credit management. BAC makes substantial investments in credit risk training to ensure competence among all credit officers and to better serve its customers' changing needs. Like the banking industry as a whole, BAC's operations are affected by certain business and economic cycles. To mitigate the potential financial impact of these cycles, the CPC monitors various external statistics and internal measures that serve as benchmarks to highlight emerging issues. Among them are a portfolio's sensitivity to interest rate changes, governmental actions such as spending cutbacks, global economic trends, and fluctuations in energy prices. Along with other economic, social, and political factors, these benchmarks are incorporated in periodic CPC reviews of industries and countries. BAC also manages credit risk by diversifying both on- and off-balance-sheet portfolios by industry, product, and geographic concentration. The extent of diversification of the loan portfolio is evident in the accompanying charts and tables on pages 29-32. No individual loan type exceeded 24 percent of total loans outstanding at December 31, 1995. The product diversification in BAC's off-balance-sheet portfolio is exemplified in the tables in Note 20 of the Notes to Consolidated Financial Statements on pages 70-76. Off-Balance-Sheet Credit Risk Foreign exchange and derivatives contracts introduce two additional elements of credit risk: closeout risk and settlement risk. Closeout risk is the possibility that a counterparty to a transaction will be unable to comply with the terms of its contract and BAC will need to replace that contract at current market value. Settlement risk occurs when BAC pays out funds or delivers assets before it receives payment from the counterparty in the transaction. BAC manages closeout and settlement risk by dealing with creditworthy counterparties. In evaluating creditworthiness, BAC utilizes the same policies, procedures, and internal credit risk rating system established for all on- balance-sheet credit exposures. At December 31, 1995, approximately 95 percent of the counterparties with whom BAC had credit exposure from foreign exchange and derivatives contracts had investment grade ratings. BAC measures both current and potential future exposure when evaluating its closeout credit risk on foreign exchange and derivative contracts. Current exposure is the amount BAC would have the right to receive if a foreign exchange or derivative contract were terminated on the date of evaluation. Potential exposure is calculated based on the estimated change in the contract's fair value over its remaining life. To further mitigate closeout risk, BAC obtains collateral where appropriate and makes use of master netting agreements wherever possible. Master netting agreements, such as the internationally recognized International Swap and Derivatives BankAmerica Corporation 1995 / 29 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Loan Outstandings
- --------------------------------------------------------------------------------------------------------------------------- December 31 ------------------------------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------------- Domestic Consumer: Residential first mortgages $ 36,572 $ 33,818 $ 30,483 $ 29,306 $18,897 Residential junior mortgages 13,777 13,589 12,847 13,870 9,281 Other installment 13,834 10,598 9,129 9,509 5,702 Credit card 9,139 8,020 7,474 8,306 7,712 Other individual lines of credit 1,847 1,736 1,901 1,725 1,567 Other 319 403 215 260 138 ------------------------------------------------------------------- 75,488 68,164 62,049 62,976 43,297 Commercial: Commercial and industrial 32,745 28,814 20,486 21,632 13,831 Loans secured by real estate 10,975 10,277 9,251 10,123 5,366 Construction and development loans secured by real estate 3,153 3,616 4,418 6,781 4,002 Financial institutions 2,834 2,872 2,170 2,017 1,427 Lease financing 1,927 1,814 1,715 1,889 779 Agricultural 1,737 1,840 1,679 1,704 1,124 Loans for purchasing or carrying securities 1,458 1,529 3,090 987 216 Other 1,574 1,623 1,478 1,360 497 ------------------------------------------------------------------- 56,403 52,385 44,287 46,493 27,242 ------------------------------------------------------------------- 131,891 120,549 106,336 109,469 70,539 Foreign Commercial and industrial 15,003 13,496 11,448 10,338 9,538 Banks and other financial institutions 3,386 2,516 2,279 1,855 2,080 Governments and official institutions 1,020 896 3,429 3,513 3,557 Other 4,073 3,455 3,064 1,436 920 ------------------------------------------------------------------- 23,482 20,363 20,220 17,142 16,095 ------------------------------------------------------------------- Total loans 155,373 140,912 126,556 126,611 86,634 Less: Allowance for credit losses 3,554 3,690 3,508 3,921 2,420 ------------------------------------------------------------------- $151,819 $137,222 $123,048 $122,690 $84,214 - ---------------------------------------------------------------------------------------------------------------------------
Association (ISDA) agreement and the International Foreign Exchange Master Agreement (IFEMA), allow for the netting of a counterparty's current positive and negative closeout exposures associated with all individual transactions of that counterparty. BAC's policy is to execute legally enforceable master netting agreements with its foreign exchange and derivative customers whenever possible. BAC reduces settlement risk through novation netting (a mutual agreement to substitute a new contract for two or more existing contracts that are then discharged) or settlement netting arrangements (a contract to settle mutual obligations at the net value of the individual contracts), which may be included as part of a master netting agreement. Current credit exposure, based on current positive fair values of open contracts at December 31, 1995 and 1994, and taking into account the effect of master netting agreements and arrangements, was $8.1 billion and $6.6 billion, respectively. Had the above described netting agreements and arrangements for foreign exchange and derivative contracts not been in effect at year-end 1995 and 1994, current credit risk would have been $20.5 billion and $14.4 billion. The increase in credit risk and credit exposure between year-end 1994 and 1995 was primarily reflected in derivative financial instruments held or issued for trading purposes and was attributable to volume-related growth in interest rate derivative contracts in response to customer demand and to fluctuations in foreign exchange spot rates. Risk-mitigating netting agreements and arrangements helped to limit BAC's actual credit losses from counterparty nonperformance to $3 million in both 1995 and 1994. Loan Portfolio Management Total loans at December 31, 1995 increased $14.5 billion, or 10 percent, from year-end 1994. Average total loans for 1995 increased $18.5 billion over 1994, reflecting increases in both the domestic and foreign sectors. 30 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Domestic Consumer Loans by Geographic Area and Loan Type as of December 31, 1995
- --------------------------------------------------------------------------------------------------------------------- Residential Residential First Junior Credit Manufactured Other Total (in millions) Mortgages Mortgages Card Housing Auto Consumer Consumer - --------------------------------------------------------------------------------------------------------------------- California $27,815 $ 9,518 $4,595 $1,074 $1,940 $2,597 $47,539 Washington 1,646 1,574 1,325 322 1,299 402 6,568 Arizona 1,155 782 298 164 567 161 3,127 Oregon 1,243 474 258 123 304 144 2,546 Texas 580 157 382 408 561 277 2,365 Other/a/ 4,133 1,272 2,281 3,985 399 1,273 13,343 ------------------------------------------------------------------------------------------------ $36,572 $13,777 $9,139 $6,076 $5,070 $4,854 $75,488 - ---------------------------------------------------------------------------------------------------------------------
/a/ No other state individually exceeded 2 percent of total domestic consumer loans. - -------------------------------------------------------------------------------- Domestic Consumer Loans Domestic consumer loan outstandings at year-end 1995 increased $7.3 billion, or 11 percent, from year-end 1994, reflecting increases in most consumer loan categories. As evidenced in the table on page 29, the most significant changes were in residential first mortgages, other installment loans, and credit card loans, which grew $2.8 billion, $3.2 billion, and $1.1 billion, respectively. The increase in residential first mortgages reflected BAC's continued efforts to geographically diversify its mortgage lending activities and expand its national mortgage banking operations. In 1995, mortgage origination and servicing levels grew in most regions of the country. The increase in other installment loans was largely due to increases in manufactured housing and auto loans. Manufactured housing loans grew in the southern and midwestern regions primarily as a result of strong customer demand and BAC's continued expansion and marketing efforts in these regions. The growth in auto loans was primarily attributable to increases in auto leases in Southern California and loans in other western states. During 1995, the number of credit card accounts increased, which resulted from new co-branding relationships with selected nonfinancial institutions, and increased direct mail and branch advertising. In addition, attrition levels decreased from 1994 in response to fee waivers and BAC's launching of a new variable-rate credit card product. Some consumer loan categories, including residential first mortgages, credit card, and other consumer, experienced higher delinquency ratios during 1995. For further information regarding BAC's domestic consumer loan delinquencies, refer to the table at right. Domestic Commercial Loans Domestic commercial loan outstandings increased $4.0 billion, or 8 percent, during 1995, primarily reflecting increases of $3.9 billion and $0.7 billion in commercial and industrial loans and loans secured by real estate, respectively. These increases - -------------------------------------------------------------------------------- Domestic Consumer Loan Delinquency Information/a/
- -------------------------------------------------------------------------------- December 31 --------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Delinquent consumer loans Residential first mortgages $ 642 $566 $ 685 Residential junior mortgages 90 92 102 Credit card 190 153 179 Other 100 69 73 ---------------------------------- $1,022 $880 $1,039 Delinquent consumer loan ratios/b/ Residential first mortgages 1.76% 1.68% 2.25% Residential junior mortgages 0.67 0.68 0.80 Credit card 2.08 1.91 2.39 Other 0.62 0.54 0.65 ---------------------------------- 1.36% 1.29% 1.67% - --------------------------------------------------------------------------------
/a/ 60 days or more past due. /b/ Ratios represent delinquency balances expressed as a percentage of total loans for that loan category. - -------------------------------------------------------------------------------- were partially offset by a decrease of $0.5 billion in construction and development loans secured by real estate. The increase in commercial and industrial loans was primarily attributable to strong loan demand from large corporate and middle market borrowers in various industries, including transportation, energy, communications, utilities, wholesale manufacturing, and consumer products. In particular, BAC's loan syndication activities benefited from this demand. During 1995, BAC acted in lead agent and co-agent roles to structure loan transactions totaling approximately $300 billion, a 25 percent increase from 1994 levels. Commercial loans secured by real estate increased as a result of stronger loan demand and BAC's ability to meet this demand with its broadening commercial lending operations, particularly in the southwestern United States. The decline in construction and development loans was primarily attributable to a slowdown in such lending activities in California and the resolution of problem loans. BankAmerica Corporation 1995 / 31 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Domestic Commercial Loans Secured by Real Estate by Geographic Area and Project Type
- ---------------------------------------------------------------------------------------------------------------- December 31, 1995 ------------------------------------------------------------------------------------- Light Apartment & (in millions) Retail Office Industry Condominium Hotel Other Total - ---------------------------------------------------------------------------------------------------------------- California $1,739 $1,201 $1,149 $ 785 $152 $ 612 $ 5,638/a/ Washington 369 391 461 433 163 490 2,307 Nevada 401 58 44 99 53 125 780 Arizona 236 25 25 52 2 77 417 Oregon 93 40 63 130 32 50 408 Other/b/ 237 527 69 170 300 122 1,425 --------------------------------------------------------------------------------------- $3,075 $2,242 $1,811 $1,669 $702 $1,476 $10,975 December 31, 1994 --------------------------------------------------------------------------------------- Light Apartment & (in millions) Retail Office Industry Condominium Hotel Other Total - ---------------------------------------------------------------------------------------------------------------- California $1,993 $ 815 $ 942 $ 617 $165 $ 911 $ 5,443/a/ Washington 360 445 457 429 152 449 2,292 Nevada 171 108 69 54 124 92 618 Oregon 85 37 59 96 31 45 353 Arizona 194 27 25 24 2 80 352 Other/b/ 161 451 72 131 257 147 1,219 --------------------------------------------------------------------------------------- $2,964 $1,883 $1,624 $1,351 $731 $1,724 $10,277 - ----------------------------------------------------------------------------------------------------------------
/a/ Approximately 55 percent and 50 percent of domestic commercial loans secured by real estate in California at December 31, 1995 and 1994, respectively, were secured by properties in the following Southern California counties: Los Angeles, Orange, San Bernardino, San Diego, Riverside, and Ventura. /b/ For each period presented, no other state individually exceeded 2 percent of total domestic loans secured by real estate. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Domestic Construction and Development Loans by Geographic Area and Project Type
- ----------------------------------------------------------------------------------------------------------------------------- December 31, 1995 ---------------------------------------------------------------------------------------------------- Apartment & Light (in millions) Office Subdivision Retail Condominium Hotel Industry Other Total - ----------------------------------------------------------------------------------------------------------------------------- California $366 $342 $256 $136 $114 $ 81 $ 85 $1,380/a/ Washington 138 197 105 60 7 16 65 588 Nevada 33 51 67 32 16 8 30 237 Pennsylvania 202 -- -- -- -- -- -- 202 Arizona 9 45 33 53 2 5 10 157 Texas 1 18 19 72 -- -- 2 112 Florida -- 5 96 8 -- -- -- 109 Georgia -- 5 56 6 1 14 -- 82 Illinois 37 15 12 10 -- -- -- 74 Other/b/ 20 29 72 53 4 8 26 212 ---------------------------------------------------------------------------------------------------- $806 $707 $716 $430 $144 $132 $218 $3,153 December 31, 1994 ---------------------------------------------------------------------------------------------------- Apartment & Light (in millions) Office Subdivision Retail Condominium Hotel Industry Other Total - ----------------------------------------------------------------------------------------------------------------------------- California $ 512 $467 $252 $208 $127 $ 95 $142 $1,803/a/ Washington 211 189 84 74 27 20 48 653 Pennsylvania 202 -- -- -- -- -- -- 202 Texas 2 23 63 37 -- 1 6 132 Illinois 39 32 47 -- -- 10 -- 128 Arizona 3 37 34 18 1 2 9 104 Georgia 15 8 48 14 -- 14 3 102 Nevada 24 14 19 19 -- 3 4 83 Florida -- 13 59 7 -- -- 3 82 Other/b/ 94 21 66 52 7 14 73 327 ---------------------------------------------------------------------------------------------------- $1,102 $804 $672 $429 $162 $159 $288 $3,616 - -----------------------------------------------------------------------------------------------------------------------------
/a/ Approximately 70 percent and 65 percent of domestic construction and development loans in California at December 31, 1995 and 1994, respectively, were secured by properties in the following Southern California counties: Los Angeles, Orange, San Bernardino, San Diego, Riverside, and Ventura. /b/ For each period presented, no other state individually exceeded 2 percent of total domestic construction and development loans. - -------------------------------------------------------------------------------- 32 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Emerging Market Exposure
- ----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------- Loans Available-for-Sale Securities/a/ ------------------------ ----------------------------------- Medium- and (in millions) Total/c/ Short-Term Long-Term Collateralized Uncollateralized - ----------------------------------------------------------------------------------------------- Mexico $2,562 $ 318 $ 604/d/ $306 $14 Brazil 1,318 606 13 5 18 India 920 134 66 -- -- Chile 839 280 224 -- -- Argentina 510 165 19 -- 2 Indonesia 460 259 15 -- -- Venezuela 448 8 35/d/ 55 -- China 439 125 19 -- -- Colombia 354 134 159 -- -- Pakistan 310 44 68 -- -- Philippines 245 78 23 19 30 Other/e/ 438 46 130 49 -- --------------------------------------------------------------------------- $8,843 $2,197/f/ $1,375/f/ $434/g/ $64/g/ - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- December 31, 1995 - ----------------------------------------------------------------------------------- Held-to-Maturity Securities/a/ Other/b/ --------------------------------- --------------------------- Medium- and (in millions) Collateralized Uncollateralized Short-Term Long-Term - ----------------------------------------------------------------------------------- Mexico $ 856 $111 $ 301 $ 52 Brazil -- 49 627 -- India -- -- 720 -- Chile -- -- 246 89 Argentina -- 48 276 -- Indonesia -- -- 186 -- Venezuela 302 7 23 18 China -- -- 295 -- Colombia -- 8 53 -- Pakistan -- -- 198 -- Philippines -- -- 83 12 Other/e/ -- -- 213 -- --------------------------------------------------------------- $1,158/h/ $223/h/ $3,221 $171 - -----------------------------------------------------------------------------------
/a/ Represents medium- and long-term exposure. /b/ Includes the following assets, primarily in U.S. dollars, with borrowers or customers in a foreign country: accrued interest receivable, acceptances, interest-bearing deposits with other banks, trading account assets, other interest-earning investments, and other monetary assets. /c/ Excludes local currency outstandings that were funded by local currency borrowings as follows: $56 million for Mexico, $49 million for Brazil, $266 million for India, $172 million for Chile, $6 million for Argentina, $58 million for Indonesia, $20 million for Venezuela, $81 million for Pakistan, and $41 million for the Philippines. /d/ Mexico and Venezuela include $30 million and $4 million, respectively, of loans that are collateralized by zero-coupon U.S. Treasury securities. /e/ No other country individually exceeded 2 percent of total emerging market exposure. /f/ Total loans include nonaccrual loans of $28 million. /g/ Total available-for-sale securities includes $62 million of nonaccrual debt- restructuring bonds. /h/ Total fair value of total held-to-maturity securities was approximately $930 million. - -------------------------------------------------------------------------------- Foreign Loans Foreign loan outstandings were $23.5 billion at December 31, 1995, up $3.1 billion from year-end 1994. This growth was mainly attributable to increases of $1.5 billion and $0.9 billion in foreign commercial and industrial loans and loans to banks and other financial institutions, respectively. Growth in these loan categories was largely due to increased loan demand in BAC's Asia operations. Emerging Market Exposure In connection with its efforts to maintain a diversified portfolio, BAC limits its exposure to any one country. In particular, BAC strives to monitor its exposure to economies that are considered emerging markets. As indicated in the table above, at December 31, 1995, BAC's emerging market exposure totaled $8,843 million, or 4 percent of total assets, compared to $6,677 million at year-end 1994. This exposure represents loans, restructured debt, which is included in the securities portfolios, and other monetary assets. Investment in emerging markets is predominantly concentrated in Latin America and in Asia. During 1996, BAC plans to continue to expand its investment in these regions. BAC's growth in these regions is expected to be primarily concentrated in the transportation and utility sectors, as developing countries in these regions focus on improving their infrastructure bases and regional trade capabilities. Since high growth in these countries is expected to be driven by foreign direct investment and the availability of funding from offshore capital markets, BAC is strategically positioned to participate in this expansion with its global presence and diverse product offerings. - ------------------------------------------------------ Total Loans Outstandings by Type (Pie chart in non-EDGAR version appears here)
- ------------------------------------------------------ 1994 1995 -------------------- Domestic Consumer 48.4% 48.6% Domestic Commercial 37.2% 36.3% Foreign 14.4% 15.1% -------------------- Total 100.0% 100.0% ==================== - ------------------------------------------------------
BankAmerica Corporation 1995 / 33 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Allowance for Credit Losses
- ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31 --------------------------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Balance, beginning of year $3,690 $3,508 $3,921 $2,420 $2,912 Credit Losses Domestic consumer: Residential first mortgages 49 49 23 15 3 Residential junior mortgages 74 88 104 38 6 Credit card 386 382 488 538 429 Other consumer 252 231 300 321 185 Domestic commercial: Commercial and industrial 139 47 230 197 179 Loans secured by real estate 50 52 91 60 32 Construction and development loans secured by real estate 36 86 291 376 86 Financial institutions 1 2 18 41 6 Lease financing 1 1 9 12 3 Agricultural 3 8 7 10 2 Loans for purchasing or carrying securities 5 -- 2 9 -- Other commercial -- -- -- 2 1 Foreign 15 42 36 126 375 --------------------------------------------------------------- Total credit losses 1,011 988 1,599 1,745 1,307 Credit Loss Recoveries Domestic consumer: Residential first mortgages 1 4 1 1 -- Residential junior mortgages 16 18 14 6 3 Credit card 41 54 53 48 36 Other consumer 84 87 100 86 48 Domestic commercial: Commercial and industrial 83 94 111 77 56 Loans secured by real estate 16 25 34 10 5 Construction and development loans secured by real estate 66 82 87 19 3 Financial institutions 5 16 2 1 1 Lease financing 4 6 6 9 4 Agricultural 7 8 10 6 7 Loans for purchasing or carrying securities -- -- -- -- -- Other commercial -- -- -- 4 1 Foreign 99 124 66 174 54 --------------------------------------------------------------- Total credit loss recoveries 422 518 484 441 218 --------------------------------------------------------------- Total net credit losses 589 470 1,115 1,304 1,089 Provision for credit losses 440 460 803 1,009 805 Allowance related to mergers and acquisitions/a/ 3 241 12 2,782 -- Losses on the sale or swap of loans to restructuring countries -- -- (3) (72) (207) Other net additions (deductions) 10 (49) (110)/b/ (914)/b/ (1) --------------------------------------------------------------- Balance, End of Year/c/ $3,554 $3,690 $3,508 $3,921 $2,420 - ------------------------------------------------------------------------------------------------------------------------------------
/a/ Represents the addition of consummation date allowances for credit losses of Arbor National Holdings, Inc. in 1995, Continental and Liberty Bank of $238 million and $3 million, respectively, in 1994, First Gibraltar in 1993, and SPC, Valley Capital Corporation, and H.F. Holdings, Inc. of $2,701 million, $63 million, and $18 million, respectively, in 1992. /b/ Due to the transfer of certain assets net of their related allowance to other assets, the allowance for credit losses was reduced by $128 million and $685 million during 1993 and 1992, respectively. The 1993 amount included $88 million of regulatory-related allocated transfer risk reserve (ATRR). In addition, the allowance for credit losses related to loans of subsidiaries and operations pending disposition totaling $220 million was reclassified to other assets during 1992. /c/ Includes ATRR of $67 million at December 31, 1992 and $145 million at December 31, 1991. Due to the transfer of certain assets net of their related allowance to other assets during 1993, the allowance for credit losses did not include any ATRR subsequent to the transfer. - -------------------------------------------------------------------------------- Allowance for Credit Losses The allowance for credit losses at December 31, 1995 was $3,554 million, or 2.29 percent of total loan outstandings, compared with $3,690 million, or 2.62 percent, at December 31, 1994. Excluding outstandings in the residential first mortgage loan portfolio and the portion of the allowance associated with these outstandings, the ratios were 2.89 percent and 3.36 percent of loans at year-end 1995 and 1994, respectively. 34 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Allocation of Allowance for Credit Losses by Loan Type
- ----------------------------------------------------------------------------------------------------------------------- December 31 - ----------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 ------------------- ------------------- ------------------- -------------------- Percent Percent Percent Percent of Loan of Loan of Loan of Loan (dollar amounts in millions) Allowance Category Allowance Category Allowance Category Allowance Category - ----------------------------------------------------------------------------------------------------------------------- Domestic consumer: Residential first mortgages $ 115 0.31% $ 91 0.27% $ 55 0.18% $ 62 0.21% Residential junior mortgages 177 1.28 186 1.37 152 1.18 134 0.95 Other consumer 955 3.80 782 3.77 865 4.62 904 4.68 Domestic commercial: Commercial and industrial/a/ 458 1.28 396 1.24 368 1.47 636 2.65 Loans secured by real estate 140 1.28 166 1.62 165 1.78 232 2.29 Construction and development loans secured by real estate 293 9.28 389 10.76 611 13.83 884 13.04 Financial institutions 10 0.37 6 0.21 8 0.38 14 0.70 Lease financing 48 2.51 51 2.81 48 2.81 55 2.90 Agricultural 35 1.99 38 2.07 39 2.30 37 2.19 Foreign 428 1.82 391 1.92 322 1.59 559 3.26 Unallocated 895 -- 1,194 -- 875 -- 404 -- ------------------------------------------------------------------------------------ $3,554 2.29% $3,690 2.62% $3,508 2.77% $3,921 3.10% - ----------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------- 1991 ---------------------- Percent of Loan (dollar amounts in millions) Allowance Category - --------------------------------------------------------- Domestic consumer: Residential first mortgages $ 31 0.16% Residential junior mortgages 34 0.37 Other consumer 452 3.03 Domestic commercial: Commercial and industrial/a/ 321 2.21 Loans secured by real estate 48 0.90 Construction and development loans secured by real estate 367 9.17 Financial institutions 23 1.62 Lease financing 8 1.09 Agricultural 28 2.46 Foreign 808 5.02 Unallocated 300 -- - --------------------------------------------------------- $2,420 2.79% - ---------------------------------------------------------
/a/ Includes the allowance for credit losses for commercial and industrial loans, loans for purchasing or carrying securities, and other commercial loans. - -------------------------------------------------------------------------------- Composition of Allowance for Credit Losses
- -------------------------------------------------------------------------------- December 31 --------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------- Special mention and classified: Historical loss experience component $ 506 $ 516 $ 475 $1,273 $ 718 Credit management allocated component 377 428 770 601 172 --------------------------------------------- Total special mention and classified 883 944 1,245 1,874 890 Other: Domestic consumer 1,247 1,059 1,072 1,100 517 Domestic commercial 229 223 151 215 74 Foreign 300 270 165 328 639 --------------------------------------------- Total allocated 2,659 2,496 2,633 3,517 2,120 Unallocated 895 1,194 875 404 300 --------------------------------------------- $3,554 $3,690 $3,508 $3,921 $2,420 - --------------------------------------------------------------------------------
The table above shows the allocation of the allowance for credit losses by loan type. This allocation is based on management's judgment of potential losses in the respective loan portfolios. While management has allocated the allowance to various portfolio segments, it is general in nature and is available for the loan portfolio in its entirety. Management develops the allowance for credit losses using a "building block approach" for various portfolio segments. Significant loans, particularly those considered to be impaired, are individually analyzed while other loans are analyzed by portfolio segment. In establishing the allowance for the portfolio segments, credit officers include results obtained from statistical models using historical loan performance data. The allowance amounts are calculated, in part, based on historical loss experience. In addition, the credit officer responsible for each portfolio segment makes adjustments based on qualitative evaluations of individual classified assets, knowledge of portfolio segment conditions, and on the officer's judgment of factors that are expected to influence the future performance of the portfolio. These factors include geographic and portfolio concentrations, new products or markets, evaluations of the changes in the historical loss experience component, and projections of this component into the current and future periods based on current knowledge and conditions. The Composition of Allowance for Credit Losses table at left displays how the allowance for credit losses associated with special mention and classified assets is determined by combining the historical loss experience component with the credit management allocated component. The statistical model that BAC uses in calculating the historical loss experience component reflects the portfolio experience over a full economic cycle. BankAmerica Corporation 1995 / 35 - -------------------------------------------------------------------------------- After an allowance has been established for the loan portfolio segments, credit management establishes an unallocated portion of the allowance for credit losses, which is attributable to factors that cannot be associated with a specific loan or portfolio segment. These factors include general economic conditions, recognition of specific regional and international geographic concerns, and trends in portfolio growth. The special mention and classified amounts in the table on page 34 include all loans that have been internally risk rated as "special mention," "substandard," or "doubtful." Special mention assets are potentially weak, as the borrower has begun to exhibit deteriorating trends which, if not corrected, could jeopardize repayment of the loan and result in a "substandard" classification. Classified assets include those that are deemed "substandard" or "doubtful." Substandard assets have a well-defined weakness which if not corrected, jeopardizes the full satisfaction of the debt. An asset classified as "doubtful" has critical weaknesses that make full collection improbable. However, because of pending events that may work to strengthen the asset, the amount and timing of the possible loss cannot be determined. BAC's actual historical loss experience since 1991 indicates ultimate loss rates for "special mention," "substandard," and "doubtful" loans of approximately 2 percent, 6 percent, and 33 percent, respectively. In 1995, net credit losses were $589 million, an increase of $119 million from the amount reported in 1994. Net credit losses in the domestic consumer loan portfolio, the largest component of BAC's net credit losses, increased $32 million from the amount reported in 1994. This increase was primarily due to growth in the manufactured housing and consumer credit card portfolios and increased personal bankruptcy filings in these categories. Net credit losses in the domestic commercial loan portfolio amounted to $54 million in 1995, compared with net credit recoveries of $35 million in 1994. This increase in credit losses was largely associated with significant charge- offs on certain large corporate borrowers within the commercial and industrial sector and lower recoveries in the domestic commercial loan - ------------------------------------------------------------------------------- Net Credit Losses (Recoveries) as a Percentage of Average Loan Outstandings
- ------------------------------------------------------------------------------- Year Ended December 31 ------------------------------------------------ 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------- Domestic consumer: Residential first mortgages 0.14 0.14 0.07 0.05 0.02 Residential junior mortgages 0.42 0.53 0.67 0.28 0.03 Credit card 4.19 4.50 5.81 6.16 5.41 Other consumer 1.19 1.21 1.77 2.03 2.02 Domestic commercial: Commercial and industrial 0.18 (0.20) 0.58 0.61 0.89 Loans secured by real estate 0.32 0.29 0.59 0.57 0.49 Construction and development loans secured by real estate (0.89) 0.10 3.57 5.32 2.08 Financial institutions (0.17) (0.64) 0.80 2.18 0.30 Lease financing (0.16) (0.30) 0.20 0.14 (0.15) Agricultural (0.23) -- (0.23) 0.29 (0.46) Loans for purchasing or carrying securities 0.36 -- 0.11 0.86 -- Other commercial -- -- -- (0.15) -- Total domestic 0.54 0.50 1.09 1.37 1.13 Foreign (0.39) (0.44) (0.16) (0.28) 1.97 Total loans 0.40 0.37 0.89 1.12 1.29 - --------------------------------------------------------------------------------
portfolio. Partially offsetting increased credit losses in the commercial and industrial sector were recoveries on construction and development loans that resulted from the workout of problem loans. Net credit recoveries in the foreign loan portfolio amounted to $84 million in 1995, compared to net credit recoveries of $82 million in 1994. In 1995, BAC recognized recoveries on loans to borrowers in Brazil and Ecuador. In 1994, BAC recognized recoveries on loans to borrowers in Poland and Ecuador. Nonperforming Assets Total nonaccrual assets decreased $189 million, or 9 percent, between year-end 1994 and December 31, 1995. This decrease reflected improvements in most segments of the loan portfolio, particularly in construction and development loans, foreign loans, and commercial loans secured by real estate. These improvements can be primarily attributed to full or partial payments on nonaccrual loans, and to a lesser degree, the restoration of nonaccrual loans to accrual status. These decreases were partially offset by an increase in domestic nonaccrual commercial and industrial loans, which reflected the placement of various large corporate borrowers on nonaccrual status during the second half of 1995. 36 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Nonaccrual Assets
- ------------------------------------------------------------------------------------- December 31 -------------------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------- Domestic Loans Consumer: Residential first mortgages $ 311 $ 319 $ 406 $ 267 $ 93 Residential junior mortgages 72 56 49 55 3 Other consumer 2 7 4 30 1 Commercial: Commercial and industrial 544 453 457 898 675 Loans secured by real estate 280 347 570 721 286 Construction and development loans secured by real estate 462 647 1,037 2,430 960 Financial institutions 46 3 64 49 97 Lease financing -- 1 18 3 2 Agricultural 29 31 49 94 43 -------------------------------------------------------- 1,746 1,864 2,654 4,547 2,160 Foreign Loans Commercial and industrial 117 157 139 314 536 Banks and other financial institutions -- 22 11 78 145 Governments and official institutions 17 24 42 175 387 Other 8 12 40 116 75 -------------------------------------------------------- 142 215 232 683 1,143 Other interest-bearing assets 3 1 -- 5 46 -------------------------------------------------------- $1,891/a/ $2,080/a/ $2,886/a/b/ $5,235/b/ $3,349 - -------------------------------------------------------------------------------------
/a/ Excludes certain nonaccrual debt-restructuring par bonds and other instruments that were included in available-for-sale and held-to-maturity securities of $62 million and $441 million at December 31, 1995 and 1994, respectively. Also excludes certain other nonaccrual loans and other instruments issued by various governments of $1 million, $8 million, and $196 million at December 31, 1995, 1994, and 1993, respectively, that were included in other assets at the lower of cost or fair value. /b/ Excludes nonaccrual assets that were identified for accelerated disposition with carrying values prior to reclassification to other assets of $0.6 billion and $2.6 billion at December 31, 1993 and 1992, respectively. These non-accrual assets were included in other assets at the lower of cost or fair value. The balance at December 31, 1992 primarily represents nonaccrual assets that were acquired in the SPC merger and identified for accelerated disposition at the merger date. - --------------------------------------------------------------------------- Analysis of Change in Nonaccrual Assets
- --------------------------------------------------------------------------- December 31 --------------------------------- (in millions) 1995 1994 1993 - --------------------------------------------------------------------------- Balance, beginning of year $2,080 $2,886 $5,235 Additions: Loans placed on nonaccrual status 1,432 1,058 1,440 Acquired in the Continental merger -- 245 -- Deductions: Sales (35) (210) (150) Restored to accrual status (399) (616) (988) Foreclosures (113) (155) (689) Charge-offs (188) (143) (433) Restructuring-country- related assets transferred to other assets -- -- (310) Other, primarily payments (886) (985) (1,219) --------------------------------- Balance, End of Year $1,891 $2,080 $2,886 - ---------------------------------------------------------------------------
Loans past due 90 days or more and still accruing interest, which are generally well-secured and in the process of collection, decreased $25 million in 1995. Decreases in the commercial loan sector were primarily due to paydowns and year-end 1994 loans being restored to current status. Partially offsetting these decreases were increases in residential first mortgages and other consumer loans, which were primarily attributable to growth in these portfolios. - -------------------------------------------------------------------------- Loans Past Due 90 Days or More and Still Accruing Interest
- -------------------------------------------------------------------------- December 31 ----------------------------------------- (in millions) 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------- Domestic Consumer: Residential first mortgages $180 $133 $153 $181 $ 96 Residential junior mortgages 12 23 23 70 6 Other consumer 162 136 152 219 180 Commercial: Commercial and industrial 20 25 20 19 26 Loans secured by real estate 1 54 138 22 23 Construction and development loans secured by real estate -- 38 86 117 28 Financial institutions 16 16 -- -- -- Lease financing 1 1 -- 1 1 Agricultural -- 8 -- 4 -- ----------------------------------------- 392 434 572 633 360 Foreign 19 2 6 -- 8 ----------------------------------------- $411 $436 $578 $633 $368 - --------------------------------------------------------------------------
BankAmerica Corporation 1995 / 37 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Restructured Loans
- -------------------------------------------------------------------------------- December 31 ------------------------------------------------- (in millions) 1995 1994 1993 1992 1991 - -------------------------------------------------------------------------------- Domestic Commercial and industrial $ 78 $71 $ 66 $ 69 $41 Commercial loans secured by real estate 18 15 21 12 6 Construction and development loans secured by real estate 15 2 10 34 20 Financial institutions -- -- -- 1 2 Lease financing -- -- 1 -- -- Agricultural 1 7 -- 20 -- ------------------------------------------------- 112 95 98 136 69 Foreign/a/ 1 2 36 40 10 ------------------------------------------------- $113 $97 $134 $176 $79 - --------------------------------------------------------------------------------
/a/ Excludes debt restructurings with countries that have experienced liquidity problems of $1.6 billion, $1.8 billion, $2.4 billion, $2.3 billion, and $2.2 billion at December 31, 1995, 1994, 1993, 1992, and 1991, respectively. Beginning in the first quarter of 1994, the majority of these instruments were classified as either available-for-sale or held-to-maturity securities. Prior to January 1, 1994, these instruments were classified as loans. For further information on these restructurings, refer to Note 7 of the Notes to Consolidated Financial Statements on pages 59-60. - -------------------------------------------------------------------------------- BAC's nonperforming assets ratios also improved during 1995. The ratio of nonperforming assets (comprised of nonaccrual assets and OREO) to total assets declined 19 basis points from year-end 1994 to 1.03 percent at December 31, 1995. In addition, at December 31, 1995, the ratio of nonaccrual loans to total loans was 1.22 percent, down from 1.48 percent at December 31, 1994. Management expects that these measures of credit quality may not continue to improve in the future. - -------------------------------------------------------------------------------- Allowance for Credit Losses as a Percentage of Nonaccrual Assets (Bar chart in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- 1993 1994 1995 -------------------------------- Allowance for Credit Losses as Percentage 122% 177% 188% of Nonaccrual Assets - --------------------------------------------------------------------------------
OREO, which is recorded in other assets, primarily includes properties acquired through foreclosure or in full or partial satisfaction of loans. OREO was $492 million at December 31, 1995, down $63 million from year-end 1994. At year-end 1995 and 1994, the aggregate fair value of properties included in OREO represented approximately 123 percent and 118 percent, respectively, of their net carrying value. - -------------------------------------------------------------------------------- Nonaccrual Assets at Year End (in millions of dollars) (Bar chart in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- (in millions of dollars) 1993 1994 1995 -------------------------------- Nonaccrual Assets at Year End 2,886 2,080 1,891 - --------------------------------------------------------------------------------
38 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Cash Interest Payments on Nonaccrual Assets by Loan Type/a/
- -------------------------------------------------------------------------------------------------------------- December 31, 1995 ------------------------------------------------------------------------- Contractual Cumulative Nonaccrual Book as a Principal Cumulative Interest Applied Book Percentage of (dollar amounts in millions) Balance Charge-offs to Principal Balance Contractual - -------------------------------------------------------------------------------------------------------------- Domestic Consumer: Residential first mortgages $ 313 $ 1 $ 1 $ 311 99% Residential junior mortgages 74 2 -- 72 97 Other consumer 18 13 3 2 13 Commercial: Commercial and industrial 998 354 100 544 55 Loans secured by real estate 449 136 33 280 62 Construction and development loans secured by real estate 603 121 20 462 77 Financial institutions 60 10 4 46 78 Agricultural 47 12 6 29 63 ------------------------------------------------------------------------- 2,562 649 167 1,746 68 Foreign Commercial and industrial 265 127 21 117 44 Banks and other financial institutions 5 1 1 3 62 Governments and official institutions 17 -- -- 17 98 Other 33 23 2 8 22 ------------------------------------------------------------------------- 320 151 24 145 45 ------------------------------------------------------------------------- $2,882 $800 $191 $1,891 66% - -------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Year Ended December 31, 1995 ------------------------------------------------------------ Cash Interest Average Payments Applied Nonaccrual ------------------------------------ Book As Interest (dollar amounts in millions) Balance Income Other/b/ Total - ----------------------------------------------------------------------------------------------------- Domestic Consumer: Residential first mortgages $ 311 $ 9 $ -- $ 9 Residential junior mortgages 66 5 -- 5 Other consumer 4 -- 1 1 Commercial: Commercial and industrial 539 27 31 58 Loans secured by real estate 329 20 15 35 Construction and development loans secured by real estate 444 19 16 35 Financial institutions 14 -- -- -- Agricultural 35 5 2 7 - ----------------------------------------------------------------------------------------------------- 1,742 85 65 150 Foreign Commercial and industrial 142 13 6 19 Banks and other financial institutions 10 1 1 2 Governments and official institutions 25 3 -- 3 Other 10 -- 1 1 - ----------------------------------------------------------------------------------------------------- 187 17 8 25 - ----------------------------------------------------------------------------------------------------- $1,929 $102 $73 $175 Cash yield on average total nonaccrual book balance 9.06% - -----------------------------------------------------------------------------------------------------
/a/ Includes information related to all nonaccrual loans including those that are fully charged off or otherwise have a book balance of zero. /b/ Primarily represents cash interest payments applied to principal. Also includes cash interest payments accounted for as credit loss recoveries, which are recorded as increases to the allowance for credit losses. - -------------------------------------------------------------------------------- Market Risk Management Overview Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates (interest rate risk) and foreign currency exchange rates (foreign exchange risk). As a financial institution that engages in transactions involving derivative and other financial instruments, BAC is exposed to interest rate risk and, to a much less significant extent, foreign exchange risk. Derivative financial instruments include futures, forwards, swaps, options, and other financial instruments with similar characteristics. Other financial instruments that expose BAC to market risk include securities, loans, deposits, long-term debt, and subordinated capital notes. Bank of America NT&SA's (the bank) Asset, Liability, and Financial Management Committee (ALFI) has the overall responsibility for BAC's market risk management policies. The Market Risk Committee (MRC), a subcommittee of ALFI, is responsible for approving all global trading activities in all financial instruments, as well as all foreign treasury activities. It also approves market risk limits for these activities. The Auditing and Examining Committee regularly reviews the policies for establishing these limits. The members of the MRC are senior line managers who are responsible for trading and market risk management, and senior corporate officers who are responsible for accounting policy, treasury, and credit policy. BAC has separate and distinct mechanisms for managing the market risk associated with its trading activities and its other banking activities, as discussed below. Trading Activities BAC's trading activities include derivatives, foreign currency, and securities trading. These activities expose BAC to two primary types of market risk-- interest rate risk and, at a much lower level, foreign exchange risk. BAC manages its exposure to market risk in a variety of ways. First and foremost, the MRC establishes and monitors various limits on trading activities. These limits include product volume, gross and net position, earnings-at-risk, and profit and loss simulation limits. Product volume limits establish maximum aggregate amounts of specific categories of derivatives, foreign exchange contracts, and securities. Position limits restrict the amount of contracts by specific maturity groupings. Earnings- BankAmerica Corporation 1995 / 39 - -------------------------------------------------------------------------------- at-risk (EAR) limits measure potential loss at a certain statistical confidence level. Finally, profit and loss simulation limits measure the potential loss in various segments of the trading portfolio as a result of specific and extremely adverse scenarios, without regard to the statistical probability of their occurring. On a day-to-day basis, BAC reduces the market risk to which it is exposed by executing offsetting transactions with other counterparties. However, BAC may also temporarily retain an open position in an effort to generate revenue by correctly anticipating future market conditions and customer demand and by taking advantage of price differentials in the various markets in which it operates. The day-to-day management of market risk takes place at a decentralized level within various BAC trading centers. Documented trading policies and procedures define acceptable boundaries within which traders can execute transactions in their assigned markets. BAC uses an EAR methodology to measure the overall market risk inherent in its trading activities. Under this methodology, management models historical data to statistically calculate with 97.5 percent confidence the potential loss in earnings that BAC might experience if an adverse one-day shift in market prices were to occur. BAC performs this EAR calculation for each major portfolio segment on a daily basis. It then calculates the combined EAR 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). During 1995 and 1994, BAC's combined EAR calculated on a perfectly correlated basis averaged $32 million and $18 million, respectively, and peaked at $41 million and $28 million. BAC's EAR calculated on an uncorrelated basis averaged $13 million and $8 million, respectively, and peaked at $18 million and $13 million. These EAR calculations include the effects of both interest rate and foreign exchange risks and are measured on a pre-tax basis. For each amount presented, management estimates that interest rate risk generally comprises at least 80 percent of the total. BAC's trading risk profile is exemplified in the histogram of 1995 daily trading-related revenues, which is presented at the right. During 1995, daily trading-related revenues averaged $2.9 million. The shaded band in the histogram represents a 95 percent confidence interval around the average daily revenue amount. This confidence band demonstrates BAC's success during 1995 in controlling the volatility of its daily trading activities, which was a result of its diversified approach to market risk management. - -------------------------------------------------------------------------------- Histogram of Daily Trading-Related Revenue for 1995 (Bar chart in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- Daily Revenue Number of Days - -------------------------------------------------------------------------------- (in millions of dollars) (is less than) -6 0 -6 to -5 0 -5 to -4 0 -4 to -3 0 -3 to -2 4 -2 to -1 6 -1 to 0 10 0 to 1 22 1 to 2 46 2 to 3 41 3 to 4 60 4 to 5 26 5 to 6 16 6 to 7 12 7 to 8 7 8 to 9 2 9 to 10 2 (is greater than) 10 0 --------- 254 - --------------------------------------------------------------------------------
Other Banking Activities BAC's other banking activities other than trading include lending, accepting deposits, investing in securities, and issuing debt as needed to fund assets. Substantially all of the market risk that arises from these activities is interest rate risk, which BAC manages as discussed below. Objectives and Results of Interest Rate Risk Management BAC's governing objective in interest rate risk management is to minimize the potential for significant loss as a result of changes in interest rates. BAC measures interest rate risk in terms of potential impact on both its economic value and reported earnings. Economic value calculations measure the changes in the present value of net future cash flows. BAC measures its exposure to earnings variability by estimating the potential effect of changes in interest rates on projected net income over a three-year period. As discussed in the following sections, there are three sources of interest rate risk. These are gap mismatches, options mismatches, and index mismatches. To minimize exposure to declines in economic value due to gap mismatches, BAC's policy is that assets and liabilities must have approximately equal total duration. This asset and liability management policy protects against losses of economic value in the event of major upward and downward interest rate movements. BAC uses an internally developed model to translate the mismatch in each repricing period (i.e., the "gap") into a one-year mismatch with the same economic risk. For example, a six-month gap of $200 million is treated as having approximately the same economic risk as a one-year gap of $100 million. As shown in the graph on page 40, BAC's net one-year position has been essentially balanced throughout the last five years. 40 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. Dollar Denominated Interest Rate Sensitivity By Repricing or Maturity Dates
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1995 -------------------------------------------------------------------------------- (in millions) (is greater than) (is greater than) Over 0-6 months 6-12 months 1-5 years 5 years Total - ------------------------------------------------------------------------------------------------------------------------------------ Domestic Assets Interest-bearing deposits in banks $ 5 $ -- $ -- $ -- $ 5 Federal funds sold and securities purchased under resale agreements 1,692 -- -- -- 1,692 Trading account securities 1,092 -- -- -- 1,092 Loans: Prime indexed 18,393 -- -- -- 18,393 Adjustable rate residential first mortgages 10,716 5,026 8,510 4,909 29,161 Other loans, net 40,594 5,908 16,421 9,014 71,937 Other assets 23,460 341 11,276 9,948 45,025 -------------------------------------------------------------------------------- Domestic Assets 95,952 11,275 36,207 23,871 167,305 -------------------------------------------------------------------------------- Domestic Liabilities and Stockholders' Equity Domestic deposits (64,620) (9,792) (23,071) (18,552) (116,035) Other short-term borrowings (10,024) (775) -- -- (10,799) Long-term debt and subordinated capital notes (7,442) (175) (2,242) (5,316) (15,175) Other liabilities and stockholders' equity (12,671) 102 (9,543) (16,015) (38,127) -------------------------------------------------------------------------------- Domestic Liabilities and Stockholders' Equity (94,757) (10,640) (34,856) (39,883) (180,136) Offshore Funding Books, net (1,782) 287 314 1,181 -- -------------------------------------------------------------------------------- Core Gap before Risk Management Positions (587) 922 1,665 (14,831) (12,831) -------------------------------------------------------------------------------- Interest Rate Risk Management Positions Investment securities/a/ 2,017 1,528 4,768 4,518 12,831 Off-balance-sheet financial instruments/b/ (6,672) 399 (2,600) 8,873 -- -------------------------------------------------------------------------------- Total Interest Rate Risk Management Positions (4,655) 1,927 2,168 13,391 12,831 -------------------------------------------------------------------------------- Net Gap (5,242) 2,849 3,833 (1,440) -- -------------------------------------------------------------------------------- Cumulative Gap $ (5,242) $ (2,393) $ 1,440 $ -- $ -- - ------------------------------------------------------------------------------------------------------------------------------------
/a/ Available-for-sale and held-to-maturity securities. /b/ Represents the repricing effect of off-balance-sheet positions, which include interest rate swaps, futures contracts, and similar agreements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net Interest Rate Risk (Plot-point graph in non-EDGAR version)
- ------------------------------------------------------------------------------- (in billions of dollars) 1991 1992 1993 1994 1995 ------------------------------------------ Net Interest Rate Risk (8.1) (6.9) 1.0 (2.8) 0 - -------------------------------------------------------------------------------
Graph indicates the composite net asset(+) or net liability(-) repricing position measured across the entire maturity mismatch profile and expressed as a one-year mismatch position bearing the same aggregate level of risk. Sources and Management of Interest Rate Risk Gap Risk Management--Gap mismatches result from timing differences in the repricing of assets, liabilities, and off-balance-sheet instruments (e.g., loan commitments). For example, if BAC makes long-term fixed-rate loans and funds them with floating-rate deposits that reprice every six months, a gap mismatch is created. In this example, in a rising interest rate environment, BAC would be exposed to the risk of having to pay more interest on its floating-rate deposits than it would receive on its fixed-rate loans. BAC has imposed limits on the level of gap mismatches that it will retain, and uses both securities and derivatives to keep its exposure within these limits. The table above labeled "U.S. Dollar-Denominated Interest Rate Sensitivity By Repricing or Maturity Date" shows BAC's mismatch positions. At year-end 1995, liabilities and equity exceeded assets by nearly $15 billion in the over five- year repricing period. Risk management positions, including interest rate swaps in which BAC received fixed-rate interest payments, significantly reduced this imbalance. The negative net position in the under six-months repricing period reflects the pay-floating side of these swaps. BankAmerica Corporation 1995 / 41 - -------------------------------------------------------------------------------- BAC must make a number of estimates and assumptions to calculate its exposure to gap risk and develop the table described on page 40. For example, BAC estimates deposit maturities based on its expectations about future market interest rate movements and its customers' reactions to those movements. Similarly, adjustable-rate mortgage repricings reflect the existence of periodic interest rate caps, floors, and lifetime ceilings, as well as an estimated amount of loan prepayments. Finally, for purposes of estimating gap risk, BAC assumes that its common stock outstanding is an intermediate- to long-term source of funds. Overall, management measures gap risk by modeling potential changes in economic value across a range of upward and downward interest rate scenarios that encompass over 99 percent of statistically probable occurrences. This model recognizes that longer-maturity gap mismatches pose greater risk to economic value. Based on this analysis, management believes that BAC's maximum economic value exposure attributable to gap positions represented less than 1 percent of common equity at December 31, 1995. The near term earnings exposure to gap positions is evaluated in the context of upward and downward interest rate changes assumed to occur ratably over a twelve-month period. This calculation indicated that, as of December 31, 1995, an adverse change in interest rates of 200 basis points would have reduced forecasted annual after-tax earnings by less than 1 percent per year for each of the next three years. Options and Index Risk Management--In addition to gap risk, two other significant sources of interest rate risk for BAC are options mismatches and index mismatches. Both of these exposures primarily arise from BAC's lending and deposit-taking activities. Options commonly exist in BAC's retail banking products (e.g., mortgage loans, retail deposits) and generally work to the customer's advantage. These options are often referred to as "embedded options" and examples include limits on floating-rate loan and deposit repricings (i.e., interest rate caps and floors), loan prepayment rights, and depositors' ability to withdraw certain deposits on demand. Index mismatches relate to floating-rate assets and floating-rate liabilities that may reprice simultaneously, but that are not tied to the same index. This risk arises from fluctuating spreads between various indices to which floating rates are tied (e.g., prime rate, commercial paper rate, London interbank offered rate (LIBOR), U.S. Treasury rate). BAC measures options and index risk by developing models based on actual historical patterns of changes in interest rate levels, yield curve shapes, and index spreads. Similar to the gap risk analysis, BAC must make a number of estimates and assumptions in the process. For example, risk is measured assuming existing embedded options and index mismatch positions will be open throughout the lives of the related assets and liabilities, a period that can be as long as 30 years. This is consistent with the expectation that loans and deposits will be held to maturity. BAC then simulates numerous scenarios using a Monte Carlo statistical process. Scenarios generated by this process cover an array of possible future rate levels, yield curve slopes, index spreads, and rates of change in these scenarios. This process includes a representative number of scenarios that diverge widely from market expectations. This process ensures that the range and probability of the potential financial effects presented by options and index positions are measured in the context of a comprehensive mix of possible future interest rate scenarios. For each simulated scenario, BAC separately models and values cash flows attributable to options and index mismatches. Risk is measured based on the deviation of individual scenario values from the average value of all scenarios. Based on this analysis, at year-end 1995, there was a 75 percent probability that BAC's loss of economic value would not exceed 2 percent of common equity. At 90 percent and 99 percent probability levels, the analysis indicated maximum losses of 5 percent and 9 percent, respectively, of common equity. Management believes that these losses, if realized, would be distributed over several years. Residual option and index risk is unavoidable because it reflects the individual decisions of many individual customers, and because the hedging products available to BAC may not wholly protect against the kinds of risk embedded in retail products. In addition, the risk measurement methodology depends on predictions of customer responses, which may not match actual customer behavior. Finally, BAC accepts a certain level of risk in situations where the hedging costs exceed the likely realized benefits. BAC's risk management policy only permits transactions that reduce options risk. Accordingly, BAC does not use written options (which expose an institution to unlimited loss potential), either free-standing or embedded in off-balance- sheet products, for risk management purposes. At December 31, 1995, BAC's purchased option contracts, which reduce option risk, had a gross notional value of $9.2 billion. 42 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Liquidity Risk Management Overview Liquidity risk is the possibility that BAC's cash flows may not be adequate to fund operations and meet commitments on a timely and cost-effective basis. Since liquidity risk is closely linked to both credit and market risk, many of the previously discussed market risk limits, risk control mechanisms, and market and product participation limitations also apply to the monitoring and managing of liquidity risk. Fundamental to the management of liquidity is the coordination of relative maturities of assets and liabilities. Through BAC's ability to raise funds in money and capital markets, it can tap a broad variety of funding mechanisms, providing flexibility in managing liquidity and mitigating the potential for liquidity risk. ALFI determines the nature and extent of BAC's on- and off-balance-sheet activities and products. ALFI seeks to balance BAC's sources and uses of funds while minimizing market exposure. In this capacity, ALFI places limits on the level of investments in various assets and off-balance-sheet instruments, as well as on funding levels for wholesale and other deposits. BAC manages its liquidity at both the parent and subsidiaries levels. The parent is funded primarily by debt and equity issues, as well as by dividend and interest income from its subsidiaries. BAC may issue common stock, preferred stock, commercial paper, and senior and subordinated debt from time to time when market conditions are judged appropriate in light of funding and capital needs. For direct banking subsidiaries, the primary source of funding is domestic retail deposits. Additional funding support is available to selected banking subsidiaries through the issuance of bank notes. Subsidiary funding is also available through lines of credit between banking subsidiaries and the bank and between nonbanking subsidiaries and the parent company. BAC's liquid assets consist of cash and short-term borrowings due from banks, interest-bearing deposits in banks, federal funds sold, securities purchased under resale agreements, trading account assets and available-for-sale securities. Among funding sources are core deposits, capital market funds and purchased money-market liabilities. Core deposits include domestic interest- and noninterest-bearing retail deposits, which historically have been a relatively stable source of funds. Capital market funds include long-term debt, subordinated capital notes and common and preferred equity. Purchased money- market liabilities primarily include overseas time deposits, federal funds purchased, securities sold under repurchase agreements and other short-term borrowings. As discussed on page 26, BAC experienced a shift in its funding structure during 1994 and 1995. The credit ratings of BAC and its subsidiaries influence the cost and availability of funding sources. Liquidity Review Various factors affected BAC's liquidity during 1995 and 1994. During 1995, total loan originations and purchases exceeded principal collections, resulting in a cash outflow of $16.1 billion. Conversely, total sales, maturities, prepayments, and calls of securities exceeded total purchases, resulting in a cash inflow of $2.4 billion. In total, the above transactions resulted in a net cash outflow of $13.7 billion. In 1994, a net cash outflow of $3.3 billion resulted from these same activities, as total loan originations and purchases exceeded principal collections by $8.4 billion and total sales, maturities, prepayments, and calls of investment securities exceeded purchases by $5.1 billion. During both 1995 and 1994, BAC's liquidity was also enhanced by proceeds from sales of loans, totaling $2.0 billion and $1.5 billion, respectively. These loan sales consisted primarily of loans that were not originated or acquired with the intent to sell but were sold due to various economic factors, including significant movements in interest rates, changes in the maturity mix of BAC's assets and liabilities, liquidity demands, regulatory capital considerations, and other similar factors. In addition, in both 1995 and 1994, the parent paid dividends of $911 million and $819 million, respectively, to its preferred and common stockholders. For information concerning dividend and loan restrictions, refer to Note 24 of the Notes to Consolidated Financial Statements on pages 79-81. Operational and Settlement Risk Management Operational risk is the risk of unexpected losses attributable to human error, systems failures, fraud, or inadequate internal controls and procedures. Mitigating this risk are systems and procedures to monitor transactions and positions, documentation of transactions, regulatory compliance review, and periodic review by internal auditors. Reconciliation procedures are also in place to ensure that systems capture critical data. In addition, BAC maintains contingency systems for operations support in the event of natural disasters. Settlement risk is the exposure to loss arising when an institution either pays out funds or delivers assets before receiving assets or payment from its counterparty. BAC mitigates settlement risk through credit limits for each counterparty, and, wherever possible, the use of legally enforceable novation or settlement netting agreements. BankAmerica Corporation 1995 / 43 - -------------------------------------------------------------------------------- Capital Management Capital represents the stockholders' investment on which BAC strives to generate attractive returns. BAC's capital position continued to strengthen during 1995. At December 31, 1995, stockholders' equity totaled $20.2 billion, up $1.3 billion, or 7 percent, from year-end 1994. Common equity increased $1.8 billion during 1995, while preferred stock declined by approximately $0.5 billion. - -------------------------------------------------------------------------------- Common and Total Stockholders' Equity (Plot-point graph in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- (in billions of dollars) Total Common ----------------------- 3/31/94 16.9 13.9 6/30/94 17.1 14.1 9/30/94 18.9 15.6 12/31/94 18.9 15.8 3/31/95 19.2 16.2 6/30/95 19.6 16.9 9/30/95 19.9 17.2 12/31/95 20.2 17.6 - --------------------------------------------------------------------------------
Common equity increased $1.8 billion due to 1995 earnings net of preferred and common stock dividends. In addition, common equity increased $0.5 billion due to the following stock issuances. During the first quarter of 1995, 2.9 million shares of stock were issued in connection with the acquisition of Arbor National Holdings, Inc., and during the second quarter of 1995, 5.4 million shares of stock were issued in connection with the conversion of 99 percent of BAC's 6 1/2% Cumulative Convertible Preferred Stock, Series G to common stock. Also, valuation adjustments to net unrealized gain (loss) on available-for-sale securities resulted in a $327 million increase in common equity. These increases in common equity were offset by the common stock repurchases discussed as follows. In connection with its previously announced stock repurchase program, the parent repurchased 16.6 million shares of its common stock during 1995 at an average per-share price of $53.83, which reduced common equity by $894 million. These shares were repurchased on the open market over 113 trading days and represented approximately 10 percent of the total volume of BAC common stock traded on those days. For additional information regarding the stock repurchase plan, refer to Note 13 of the Notes to Consolidated Financial Statements on page 63. The decline in the parent's preferred stock resulted from the redemption of all outstanding shares of the 11% Cumulative Fixed Preferred Stock, Series I, on September 30, 1995, and the conversion of the 6 1/2% Cumulative Convertible Preferred Stock, Series G and redemption of the Adjustable Rate Preferred Stock, Series 1 during the second quarter of 1995. For additional information regarding these preferred stock transactions, refer to Note 15 of the Notes to Consolidated Financial Statements on pages 64-65. - -------------------------------------------------------------------------------- Dividends Declared per Common Share (Plot-point graph in non-EDGAR version)
- -------------------------------------------------------------------------------- 1991 1992 1993 1994 1995 ---------------------------------------- Dividends Declared per Common Share $1.20 $1.30 $1.40 $1.60 $1.84 - --------------------------------------------------------------------------------
The common stock repurchases and preferred stock redemptions described above reflect BAC's strong capital position and commitment to return excess capital to its shareholders. Supported by the growth of the capital base, on February 5, 1996, BAC's Board of Directors declared an increase in the quarterly dividend on common stock from $0.46 per share to $0.54 per share. The dividend is payable on March 12, 1996 to shareholders of record on February 20, 1996. In addition, the Board authorized the redemption of all outstanding shares of the parent's 11% Cumulative Fixed Preferred Stock, Series J. This redemption will occur on March 31, 1996. 44 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Risk-Based Capital, Risk-Weighted Assets, and Risk-Based Capital Ratios
- ---------------------------------------------------------------------------------------------------------------------------- December 31 --------------------------------------------- (dollar amounts in millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------- Risk-Based Capital Common stockholders' equity $ 17,598 $ 16,149 $ 14,165 Perpetual preferred stock 2,623 3,068 2,979 Less: Goodwill, nongrandfathered core deposit and other identifiable intangibles, and other deductions/a/ (5,230) (5,559) (5,248) --------------------------------------------- Tier 1 capital 14,991 13,658 11,896 Eligible portion of the allowance for credit losses 2,566 2,366 1,993 Hybrid capital instruments 214 336 568 Subordinated notes and debentures 5,798 5,707 4,422 Less: Other deductions (153) (114) (37) --------------------------------------------- Tier 2 capital 8,425 8,295 6,946 --------------------------------------------- Total Risk-Based Capital $ 23,416 $ 21,953 $ 18,842 Risk-Weighted Assets Balance-sheet assets: Trading account assets $ 3,506 $ 2,773 $ 1,782 Available-for-sale and held-to-maturity securities 5,007 4,950 3,524 Loans 132,504 120,808 107,764 Other assets 16,725 15,924 12,866 --------------------------------------------- Total balance-sheet assets 157,742 144,455 125,936 Off-balance-sheet items: Unused commitments 26,268 23,211 15,740 Standby letters of credit 12,888 12,516 8,747 Foreign exchange and derivatives contracts 4,530 5,638 5,259 Other 2,567 1,990 2,208 --------------------------------------------- Total off-balance-sheet items 46,253 43,355 31,954 --------------------------------------------- Total Risk-Weighted Assets $203,995 $187,810 $157,890 Risk-Based Capital Ratios Tier 1 capital 7.35% 7.27% 7.53% Tier 2 capital 4.13 4.42 4.40 --------------------------------------------- Total Risk-Based Capital Ratio 11.48% 11.69% 11.93% Tier 1 Leverage Ratio 6.92% 6.74% 6.58% - ----------------------------------------------------------------------------------------------------------------------------
/a/ Includes nongrandfathered CDI and other identifiable intangibles acquired after February 19, 1992 of $856 million and $78 million, respectively, at December 31, 1995, $937 million and $100 million, respectively, at December 31, 1994, and $1,008 million and $71 million, respectively, at December 31, 1993. Also includes $1 million, $111 million, and $158 million at December 31, 1995, 1994, and 1993, respectively, of the excess of the net book value over 90 percent of the fair value of mortgage servicing rights and credit card intangibles. - ------------------------------------------------------------------------------- The parent and its domestic banking subsidiaries are subject to risk-based capital regulations. Bank regulatory authorities use these guidelines to evaluate capital adequacy based on an institution's asset risk profile and off- balance-sheet exposures, such as unused loan commitments, standby letters of credit, and foreign exchange and derivatives contracts. The Federal Reserve has established guidelines that certain banking organizations are required to maintain a minimum 8 percent total risk-based capital ratio (the ratio of total capital divided by risk-weighted assets), including a Tier 1 capital ratio of at least 4 percent. The risk-based capital rules have been further supplemented by the leverage ratio, defined as Tier 1 capital divided by average total assets, after certain adjustments. BankAmerica Corporation 1995 / 45 - -------------------------------------------------------------------------------- The minimum leverage ratio is 3 percent for banking organizations that do not anticipate significant growth and have well-diversified-risk (including no undue interest rate risk exposure), excellent asset quality, high liquidity, and good earnings. Other banking organizations not in this category are expected to have ratios well above the minimums, depending on their particular condition and growth plans. Higher capital ratios could also be required if warranted by the particular circumstances or risk profile of a given banking organization. In the current regulatory environment, banking companies must stay well capitalized to receive favorable regulatory treatment of acquisition and other expansion activities and favorable risk-based deposit insurance assessments. It is BAC's policy to maintain capital ratios for both the parent and its domestic banking subsidiaries above the regulatory well-capitalized levels, which are 10 percent for the total risk-based capital ratio, 6 percent for the Tier 1 capital ratio, and 5 percent for the Tier 1 leverage ratio. - -------------------------------------------------------------------------------- Risk-Based Capital Ratios (Bar chart in non-EDGAR version appears here)
- -------------------------------------------------------------------------------- 1993 1994 1995 ------------------------------ Tier 1 7.5% 7.3% 7.4% Total 11.9% 11.7% 11.5% - --------------------------------------------------------------------------------
The Federal Deposit Insurance Corporation Improvement Act of 1991 requires all federal banking agencies to incorporate interest rate risk into their risk- based capital framework. Until all final interest rate risk regulations have been issued, BAC will be unable to determine the effect of such regulations on its regulatory capital ratios or those of its subsidiary banks. At December 31, 1995, BAC's total risk-based capital ratio decreased 21 basis points from the amount reported at year-end 1994. This decline was primarily due to an increase in total risk-weighted assets, in particular, loans and off-balance-sheet credit-related financial instruments. BAC's Tier 1 leverage ratio was 6.92 percent at December 31, 1995, up from 6.74 percent at year-end 1994. On an ongoing basis, BAC evaluates and modifies its mix of capital sources, including debt, equity, and off-balance-sheet financing arrangements, taking into consideration various factors. Such factors include regulatory capital targets, as well as the cost of capital, which are influenced by prevailing interest rates and credit risk. BAC's capital mix may vary from time to time in response to changes in these factors. To determine the level of capital appropriate to BAC's various lines of business, an economic capital framework has been developed to promote the efficient deployment of capital. This framework encompasses credit, liquidity, market, country, and operating business risks, and is a key tool utilized to ensure that capital resources are allocated to businesses in proportion to the economic risks they incur and the returns they generate. 46 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Consolidated Financial Statements - -------------------------------------------------------------------------------- [Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with the Consolidated Financial Statements icon highlighted appears here] Report of Management The management of BankAmerica Corporation and its subsidiaries has responsibility for the preparation, integrity, and reliability of the financial statements and related financial information contained in this annual report. The financial statements were prepared in accordance with generally accepted accounting principles and prevailing practices of the banking industry and include necessary judgments and estimates by management. Management has established and is responsible for maintaining an internal control environment designed to provide reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets, and the prevention and detection of fraudulent financial reporting. The internal control environment includes: an effective financial accounting structure; a comprehensive internal audit function; an independent auditing and examining committee (the committee) of the Board of Directors; and extensive financial and operating policies and procedures. BAC's management also fosters an ethical climate supported by a code of conduct, appropriate levels of management authority and responsibility, an effective corporate organizational structure, and appropriate selection and training of personnel. The Board of Directors, primarily through the committee, oversees the adequacy of BAC's control environment. The committee, whose members are neither officers nor employees of BAC, meets periodically with management, internal auditors, credit examination officers, and the independent auditors to review the functioning of each and to ensure that each is properly discharging its responsibilities. BAC's financial statements are audited by Ernst & Young LLP, BAC's independent auditors, whose audit is made in accordance with generally accepted auditing standards and includes such audit procedures as they consider necessary to express the opinion in their report that follows. In addition, Ernst & Young LLP reviews BAC's quarterly financial information. A review is substantially less in scope than an audit in accordance with generally accepted auditing standards and, accordingly, Ernst & Young LLP does not express an opinion on the quarterly financial information. Ernst & Young LLP meets regularly with management as well as the committee to discuss its audit and its findings as to the integrity of the financial statements and the adequacy of the internal controls. Management recognizes that there are inherent limitations in the effectiveness of any internal control environment. However, management believes that, as of December 31, 1995, BAC's internal control environment, as described above, provided reasonable assurance as to the integrity and reliability of the financial statements and related financial information. /s/ Richard M. Rosenberg Richard M. Rosenberg Chairman of the Board /s/ David A. Coulter David A. Coulter President and Chief Executive Officer /s/ Michael E. O'Neill Michael E. O'Neill Vice Chairman and Chief Financial Officer /s/ James H. Williams James H. Williams Executive Vice President and Chief Accounting Officer January 16, 1996 BankAmerica Corporation 1995 / 47 - -------------------------------------------------------------------------------- Report of Independent Auditors Shareholders and Board of Directors BankAmerica Corporation We have audited the accompanying consolidated balance sheet of BankAmerica Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of BankAmerica Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of BankAmerica Corporation and subsidiaries as of December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP San Francisco, California January 16, 1996 48 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Consolidated Statement of Operations BankAmerica Corporation and Subsidiaries Year Ended December 31 -------------------------------------- (dollar amounts in millions, except per share data) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Interest Income Loans, including fees $12,707 $ 9,806 $ 9,463 Interest-bearing deposits in banks 466 325 194 Federal funds sold 32 55 35 Securities purchased under resale agreements 618 351 174 Trading account assets 741 473 372 Available-for-sale and held-to-maturity securities 1,276 1,374 1,389 -------------------------------------- Total interest income 15,840 12,384 11,627 Interest Expense Deposits 4,923 3,337 2,971 Federal funds purchased 131 27 16 Securities sold under repurchase agreements 581 351 158 Other short-term borrowings 630 275 201 Long-term debt 1,067 810 727 Subordinated capital notes 46 42 113 -------------------------------------- Total interest expense 7,378 4,842 4,186 -------------------------------------- Net interest income 8,462 7,542 7,441 Provision for credit losses 440 460 803 -------------------------------------- Net interest income after provision for credit losses 8,022 7,082 6,638 Noninterest Income Deposit account fees 1,303 1,201 1,198 Credit card fees 315 331 342 Trust fees 300 285 294 Other fees and commissions 1,269 1,111 1,083 Trading income 527 357 569 Net gain on available-for-sale securities 34 24 61 Net gain on sales of assets 71 126 106 Venture capital activities 337 136 129 Other income 390 564 479 -------------------------------------- Total noninterest income 4,546 4,135 4,261 Noninterest Expense Salaries 3,309 2,936 2,886 Employee benefits 718 703 573 Occupancy 738 690 684 Equipment 663 589 610 Amortization of intangibles 428 411 421 Communications 359 323 330 Regulatory fees and related expenses 176 290 309 Other expense 1,610 1,558 1,658 -------------------------------------- Total noninterest expense 8,001 7,500 7,471 -------------------------------------- Income before income taxes 4,567 3,717 3,428 Provision for income taxes 1,903 1,541 1,474 -------------------------------------- Net Income $ 2,664 $ 2,176 $ 1,954 Net income applicable to common stock $ 2,437 $ 1,928 $ 1,713 Earnings per common and common equivalent share 6.49 5.36 4.79 Earnings per common share -- assuming full dilution 6.45 5.33 4.76 Dividends declared per common share 1.84 1.60 1.40 - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 49 - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------- Consolidated Balance Sheet BankAmerica Corporation and Subsidiaries December 31 --------------------- (dollar amounts in millions) 1995 1994 - ---------------------------------------------------------------------------------------------------------------- Assets Cash and due from banks $ 14,312 $ 13,578 Interest-bearing deposits in banks 5,761 6,371 Federal funds sold 721 640 Securities purchased under resale agreements 4,962 5,259 Trading account assets 9,516 6,941 Available-for-sale securities 12,043 9,849 Held-to-maturity securities (market value: 1995 -- $4,332; 1994 -- $7,292) 4,656 8,167 Loans 155,373 140,912 Less: Allowance for credit losses 3,554 3,690 --------------------- Net loans 151,819 137,222 Customers' acceptance liability 2,295 1,069 Accrued interest receivable 1,458 1,449 Goodwill, net 4,192 4,296 Identifiable intangibles, net 1,806 2,149 Unrealized gains on off-balance-sheet instruments 7,801 6,267 Premises and equipment, net 3,985 3,955 Other assets 7,119 8,263 --------------------- Total Assets $232,446 $215,475 Liabilities and Stockholders' Equity Deposits in domestic offices: Interest-bearing $ 84,097 $ 90,374 Noninterest-bearing 36,820 34,956 Deposits in foreign offices: Interest-bearing 37,886 27,454 Noninterest-bearing 1,691 1,610 --------------------- Total deposits 160,494 154,394 Federal funds purchased 5,160 3,283 Securities sold under repurchase agreements 6,383 5,505 Other short-term borrowings 7,627 5,053 Acceptances outstanding 2,295 1,069 Accrued interest payable 848 831 Unrealized losses on off-balance-sheet instruments 8,227 6,571 Other liabilities 5,862 4,450 Long-term debt 14,723 14,823 Subordinated capital notes 605 605 --------------------- Total liabilities 212,224 196,584 Stockholders' Equity Preferred stock 2,623 3,068 Common stock, par value $1.5625 (authorized: 1995 and 1994 -- 700,000,000 shares; issued: 1995 -- 385,006,003 shares; 1994 -- 371,887,723 shares) 602 581 Additional paid-in capital 8,328 7,743 Retained earnings 9,606 7,854 Net unrealized gain (loss) on available-for-sale securities 1 (326) Common stock in treasury, at cost (1995 -- 17,558,801 shares; 1994 -- 705,719 shares) (938) (29) --------------------- Total stockholders' equity 20,222 18,891 --------------------- Total Liabilities and Stockholders' Equity $232,446 $215,475 - ----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. - ------------------------------------------------------------------------------- 50 / BankAmerica Corporation 1995 - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- Consolidated Statement of Cash Flows BankAmerica Corporation and Subsidiaries Year Ended December 31 ---------------------------------------- (in millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 2,664 $ 2,176 $ 1,954 Adjustments to net income to arrive at net cash provided by operating activities: Provision for credit losses 440 460 803 Net gain on sales of assets and subsidiaries and operations (96) (211) (106) Net amortization of loan fees and discounts (101) (102) (132) Depreciation and amortization of premises and equipment 552 489 461 Amortization of intangibles 428 411 421 Provision for deferred income taxes 268 713 964 Change in assets and liabilities net of effects from acquisitions and pending dispositions: (Increase) decrease in accrued interest receivable (9) (325) 45 Increase (decrease) in accrued interest payable 17 421 (18) Increase in trading account assets (2,685) (35) (3,888) Increase in current income taxes payable 265 64 436 Deferred fees received from lending activities 142 121 176 Net cash provided (used) by loans held for sale (880) 436 (250) Other, net 1,730 (598) (444) ---------------------------------------- Net cash provided by operating activities 2,735 4,020 422 Cash Flows from Investing Activities Activity in available-for-sale securities: Sales proceeds 2,509 3,019 2,018 Maturities, prepayments, and calls 5,722 6,481 6,526 Purchases (7,416) (5,815) (4,694) Activity in held-to-maturity securities: Maturities, prepayments, and calls 2,514 2,763 5,296 Purchases (976) (1,319) (7,052) Proceeds from sales of loans 1,982 1,516 2,327 Purchases of loans (1,711) (758) (705) Purchases of premises and equipment (649) (617) (791) Proceeds from sales of other real estate owned 525 587 552 Net cash provided (used) by: Loan originations and principal collections (14,429) (7,602) (1,839) Interest-bearing deposits in banks 472 (2,576) (806) Federal funds sold (81) 1,941 (562) Securities purchased under resale agreements 297 (1,108) (723) Net cash provided by acquisitions -- 700 106 Proceeds from liquidations of assets identified for disposition 55 300 1,750 Other, net 83 (151) 283 ---------------------------------------- Net cash provided (used) by investing activities (11,103) (2,639) 1,686 Cash Flows from Financing Activities Proceeds from issuance of long-term debt 2,588 3,400 3,150 Principal payments and retirements of long-term debt and subordinated capital notes (2,652) (3,263) (5,387) Proceeds from issuance of common stock 151 52 268 Preferred stock repurchased (206) (324) -- Treasury stock purchased (926) (503) -- Common stock dividends (684) (571) (497) Preferred stock dividends (227) (248) (241) Net cash provided (used) by: Deposits 6,100 598 (4,588) Federal funds purchased 1,877 2,677 (197) Securities sold under repurchase agreements 878 756 3,303 Other short-term borrowings 2,282 (708) 1,435 Other, net (87) (162) (706) ---------------------------------------- Net cash provided (used) by financing activities 9,094 1,704 (3,460) Effect of exchange rate changes on cash and due from banks 8 11 (14) ---------------------------------------- Net increase (decrease) in cash and due from banks 734 3,096 (1,366) Cash and due from banks at beginning of year 13,578 10,482 11,848 ---------------------------------------- Cash and Due from Banks at End of Year $14,312 $13,578 $10,482 - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. - ------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 51 - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- Consolidated Statement of Changes in Stockholders' Equity BankAmerica Corporation and Subsidiaries Year Ended December 31 ---------------------------------------- (in millions) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Preferred Stock Balance, beginning of year $ 3,068 $ 2,979 $ 2,979 Preferred stock issued -- 389 -- Preferred stock repurchased (197) (300) -- Convertible preferred stock converted to common stock (248) -- -- ---------------------------------------- Balance, end of year 2,623 3,068 2,979 Common Stock Balance, beginning of year 581 560 545 Common stock issued 21 21 15 ---------------------------------------- Balance, end of year 602 581 560 Additional Paid-In Capital Balance, beginning of year 7,743 7,118 6,690 Common stock issued 594 623 428 Preferred stock issued -- 26 -- Preferred stock repurchased (9) (24) -- ---------------------------------------- Balance, end of year 8,328 7,743 7,118 Retained Earnings Balance, beginning of year 7,854 6,502 5,283 Net income 2,664 2,176 1,954 Common stock dividends (684) (571) (497) Preferred stock dividends (227) (248) (241) Foreign currency translation adjustments, net of related income taxes (1) (5) 3 ---------------------------------------- Balance, end of year 9,606 7,854 6,502 Net Unrealized Gain (Loss) on Available-for-Sale Securities Balance, beginning of year (326) -- -- Effect of adoption of SFAS No. 115, net of related income taxes -- (15) -- Valuation adjustments, net of related income taxes 327 (311) -- ---------------------------------------- Balance, end of year 1 (326) -- Common Stock in Treasury, at Cost Balance, beginning of year (29) (15) (9) Treasury stock purchased (926) (503) -- Treasury stock issued 29 489 -- Other (12) -- (6) ---------------------------------------- Balance, end of year (938) (29) (15) ---------------------------------------- Total Stockholders' Equity $20,222 $18,891 $17,144 - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 52 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements 1. Significant Accounting Policies The consolidated financial statements of BankAmerica Corporation and subsidiaries (BAC) are prepared in conformity with generally accepted accounting principles and prevailing practices of the banking industry. The statements also reflect specialized industry accounting practices of certain nonbanking subsidiaries that may differ from those used by banking subsidiaries. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements. Financial Statement Presentation The consolidated financial statements of BAC include the accounts of BankAmerica Corporation (the parent) and companies in which more than 50 percent of the voting stock is owned directly or indirectly by the parent, including Bank of America NT&SA (the bank), Bank of America Illinois, Seattle-First National Bank (SFNB), and other banking and nonbanking subsidiaries. The revenues, expenses, assets, and liabilities of the subsidiaries are included in the respective line items in the consolidated financial statements after elimination of intercompany accounts and transactions. BAC's results of operations reflect the effects of the merger with Continental Bank Corporation (Continental) subsequent to its consummation on August 31, 1994. The consolidated statement of cash flows explains the change in cash and due from banks as disclosed in the consolidated balance sheet. The cash flows from hedging transactions are classified in the same category as the cash flows from the items being hedged. Certain amounts in prior periods have been reclassified to conform to the current presentation. Use of Estimates in the Preparation of Financial Statements The preparation of the consolidated financial statements of BAC requires management to make estimates and assumptions that affect reported amounts. These estimates are based on information available as of the date of the financial statements. Therefore, actual results could differ from those estimates. Trading Account Assets Trading account assets, which are generally held for the short term in anticipation of market gains and for resale, are carried at their fair value. Realized and unrealized gains and losses on trading account assets are included in trading income. Available-for-Sale and Held-to-Maturity Securities BAC's securities portfolios include U.S. Treasury and other government agency securities, mortgage-backed securities, state, county, municipal, and foreign government securities, equity securities and corporate debt securities. Effective January 1, 1994, BAC adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," (SFAS No. 115). SFAS No. 115 permits debt securities for which BAC has the positive intent and ability to hold to maturity to be classified as held-to-maturity and reported at amortized cost. Debt securities that BAC may not hold to maturity and marketable equity securities are classified as available-for-sale securities if they are not considered to be part of trading- related activities. Available-for-sale securities are reported at their fair values, with unrealized gains and losses reported on a net-of-tax basis as a separate component of stockholders' equity. Prior to the adoption of SFAS No. 115, available-for-sale securities were carried at the lower of amortized cost or market value. Prior period amounts have not been restated since SFAS No. 115 does not allow retroactive application. Dividend and interest income, including amortization of premiums and accretion of discounts, for both securities portfolios are included in interest income. Realized gains and losses generated from sales of available-for-sale securities are recorded in net gain on available-for-sale securities and are computed using the specific identification method. Any decision to sell available-for-sale securities would be based on various factors, including movements in interest rates, changes in the maturity mix of BAC's assets and liabilities, liquidity demands, regulatory capital considerations, and other similar factors. Loans Loans are generally carried at the principal amount outstanding net of unearned discounts. Interest income on discounted loans is generally recognized using methods that approximate the interest method, which provides a level rate of return over a loan's term. Loans, in addition to those originated or acquired with the intent to sell, may be sold prior to maturity due to various economic factors, including significant movements in interest rates, changes in the maturity mix of BAC's assets and liabilities, liquidity demands, regulatory capital considerations, and other similar factors. These loans are recorded at the lower of cost or fair value when they are identified as being held for sale. The fair value of loans being held for sale represents the cash price anticipated to be received in a current sale. BankAmerica Corporation 1995 / 53 - -------------------------------------------------------------------------------- Loans are generally placed on nonaccrual status when full payment of principal or interest is in doubt, or when they are past due 90 days as to either principal or interest. The past due period for nonaccrual status is 180 days for residential real estate loans and certain consumer loans that are collateralized by junior mortgages on residential real estate. Senior management may grant a waiver from nonaccrual status if a past due loan is well secured and in the process of collection. A nonaccrual loan may be restored to accrual status when all principal and interest amounts contractually due, including arrearages, are reasonably assured of repayment within a reasonable period, and there is a sustained period of payment performance by the borrower in accordance with the contractual terms of the loan. When a loan is placed on nonaccrual status, interest accrued but not received is reversed against interest income. If management determines that ultimate collectibility of principal is in doubt, cash receipts on nonaccrual loans are applied to reduce the principal balance. BAC provides equipment financing to its customers through a variety of lease arrangements. Direct financing leases are carried at the aggregate of lease payments receivable plus estimated residual value less unearned income. Unearned income on direct financing leases is amortized over the lease terms by methods that approximate the interest method. Leveraged leases, which are a form of financing lease, are carried net of nonrecourse debt. Unearned income on leveraged leases is amortized over the lease terms by methods that approximate the interest method. Allowance for Credit Losses The allowance for credit losses is a reserve for estimated credit losses and other credit-related charges. Actual credit losses and other charges, net of recoveries, are deducted from the allowance for credit losses. Other charges to the allowance include amounts related to loans and loans of subsidiaries and operations that were transferred to other assets. In addition, the difference between the carrying value of restructuring country assets sold or swapped and the fair value of assets received is charged to the allowance. A provision for credit losses, which is a charge against earnings, is added to the allowance based on a quarterly assessment of the portfolio. While management has attributed reserves to various portfolio segments, the allowance is general in nature and is available for the credit portfolio in its entirety. Effective January 1, 1995, BAC adopted Statement of Financial Accounting Standards No. 114 , "Accounting by Creditors for Impairment of a Loan," as amended (SFAS No. 114), which requires loans to be measured for impairment using one of three methods when it is probable that all amounts, including principal and interest, will not be collected in accordance with the contractual terms of the loan agreement. The amount of impairment and any subsequent changes are recorded through the provision for credit losses as an adjustment to the allowance for credit losses. SFAS No. 114 applies to all loans, whether collateralized or uncollateralized, except for large groups of smaller-balance, homogeneous loans that are collectively evaluated for impairment (domestic consumer nonaccrual loans), loans that are measured at fair value or at the lower of cost or fair value, leases, and debt securities. In addition, BAC excludes loans to foreign governments and official institutions from the scope of SFAS No. 114, as these loans are collectively evaluated and reserves are established based upon allocated transfer risk reserve factors. Finally, loans restructured prior to the effective date of SFAS No. 114 that are performing in accordance with their restructured terms are not evaluated for impairment under SFAS No. 114. As required by SFAS No. 114, BAC generally measures impairment based upon the present value of a loan's expected future cash flows, except where foreclosure or liquidation is probable or when the primary source of repayment is provided by real estate collateral. In these circumstances, impairment is measured based upon the fair value of the collateral less estimated selling and disposal costs. The present value of a loan's expected future cash flows is calculated using the loan's effective interest rate based on the original contractual terms. In addition, when quoted market prices are available, impairment is based on the loan's observable market value less estimated selling and disposal costs. Generally, BAC evaluates a loan for impairment in accordance with SFAS No. 114 when it is placed on nonaccrual status and a portion is internally risk rated as substandard or doubtful. Substantially all of BAC's impaired loans are on nonaccrual status. The adoption of SFAS No. 114 had no impact on the overall allowance for credit losses and did not affect BAC's charge-off or income recognition policies. Premises and Equipment Premises, equipment, and leasehold improvements are carried at cost, less accumulated depreciation and amortization computed on a straight-line basis over the estimated useful lives of the assets or the terms of the leases. Net gains and losses on disposal or retirement of premises and equipment are included in net gain on sales of assets. 54 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Other Real Estate Owned Other real estate owned (OREO), which is recorded in other assets, includes properties acquired through foreclosure or in full or partial satisfaction of the related loan, as well as properties that are nonperforming acquisition, development, and construction arrangements. OREO also includes loans where BAC has obtained physical possession of the related collateral. OREO is carried at the lower of fair value, net of estimated selling and disposal costs, or cost. Fair value adjustments are made at the time that real estate is acquired through foreclosure or when full or partial satisfaction of the related loan is received. These fair value adjustments are treated as credit losses. Changes in estimated selling and disposal costs, routine holding costs, subsequent declines in fair values, and net gains or losses on disposal of properties classified as OREO are included in other expense as incurred. Goodwill and Identifiable Intangibles Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets associated with BAC's merger and acquisition transactions. Goodwill is amortized on a straight-line basis over 25 years. Core deposit intangibles (CDI) represent the intangible value of depositor relationships resulting from deposit liabilities assumed in acquisitions and are amortized using an accelerated method based on the expected runoff of the related deposits. Other identifiable intangibles consist primarily of credit card intangibles (CCI), and, prior to the adoption of SFAS No. 122 as discussed below, purchased mortgage servicing rights (PMSR). CCI represents the intangible value of credit card customer relationships resulting from customer balances acquired. PMSR represented the intangible value of purchased rights to service mortgage loans. Other identifiable intangibles are amortized using accelerated methods over their estimated periods of benefit. Goodwill and identifiable intangibles are assessed quarterly for other- than-temporary impairment. Should such an assessment indicate that the value of goodwill may be impaired, an evaluation of the recoverability would be performed prior to any writedown of the assets. If the net book value of identifiable intangibles were to exceed their respective undiscounted future net cash flows, identifiable intangibles would be written down to their respective undiscounted future net cash flows. Mortgage Servicing Rights Effective October 1, 1995, BAC adopted Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS No. 122), which amended Statement of Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking Activities." SFAS No. 122 requires that mortgage servicing rights (MSR) be capitalized when acquired either through the purchase or origination of mortgage loans that are subsequently sold or securitized with the servicing rights retained and when the relative fair values of the loans and the related MSR can be estimated. Prior to the adoption of SFAS No. 122, BAC capitalized only PMSR. SFAS No. 122 requires an enterprise, on a periodic basis, to assess the capitalized MSR for impairment based on the fair value of those rights. For this analysis, SFAS No. 122 requires an entity to stratify its MSR based on one or more predominant risk characteristics and any resulting impairment is to be recognized through a valuation allowance for each impaired stratum. For purposes of measuring impairment, BAC stratifies its MSR by loan type, investor type, and interest rate for those rights acquired after the adoption of SFAS No. 122 and by acquisition date for those rights acquired prior to its adoption. The MSR are included in other assets and are amortized as an offset to other fees and commissions in proportion to and over the period of estimated net servicing income not to exceed 15 years. The adoption of SFAS No. 122 did not have a material effect on BAC's financial position or results of operations. Investments in Affiliates, Joint Ventures, and Other Entities Investments in affiliates, joint ventures, and other entities are recorded in other assets. Investments in affiliates, which are generally 20-to-50-percent- owned companies, and joint ventures are generally accounted for by the equity method. BAC's share of net income or loss from these investments is recorded in other income. Gains or losses resulting from issuances of stock by an equity affiliate that change BAC's percentage of ownership are recognized at the issue date and are recorded in other income. Dividends are recorded as a reduction of the carrying value of the investment when received. Investments in other entities (less-than-20-percent-owned companies) are generally carried at cost less writedowns for declines in value judged to be other than temporary. These valuation losses are recorded in other income when incurred. Dividends are recorded in other income when received. Offsetting of Amounts Related to Certain Contracts Unrealized gains on forward, swap, option, and other conditional or exchange contracts are recorded as assets and unrealized losses on these contracts are recorded as liabilities for trading instruments. However, unrealized gains and losses with the same counterparty may be netted when contracts are executed under legally enforceable master netting agreements. BAC nets unrealized gains and losses on these contracts to the extent allowed. Foreign Exchange and Derivatives Contracts BAC uses foreign exchange and derivatives contracts in both its trading and asset and liability management activities. BankAmerica Corporation 1995 / 55 - -------------------------------------------------------------------------------- Trading Activities Interest rate derivative contracts, primarily swaps, and foreign exchange contracts, which include spot, futures, forward, swap, and option positions used in BAC's trading activities are carried at market value. The resulting realized and unrealized gains and losses are recognized in trading income. Asset and Liability Management Activities BAC uses various types of derivative contracts to manage interest rate and foreign currency exposures. When these instruments meet certain criteria, they qualify for hedge accounting treatment and are accounted for either on a deferral, accrual, or mark-to-market basis, depending on the nature of BAC's hedge strategy and the method used to account for the hedged item. Examples of hedge criteria include demonstrating how the hedge will reduce risk, identifying the specific asset, liability, or firm commitment being hedged, and citing the time horizon being hedged. On an ongoing basis, hedge effectiveness tests (e.g., correlation tests) must be performed to determine if an instrument meets the objectives of the hedge strategy and for hedge accounting to continue. Under deferral and accrual accounting, if at any time the derivative contract no longer qualifies for hedge accounting treatment, it must be marked to market on a prospective basis. Any deferred gain or loss (or unrealized gain or loss) is amortized over the original hedge period. Similarly, gains and losses on terminated hedging instruments are accounted for in this manner. If the item being hedged is sold, hedge accounting is terminated. Any deferred or unrealized amounts are treated as part of the carrying value of the item being hedged and, therefore, considered in calculating the gain or loss on the sold item. If the related derivative contract is not terminated, it must be marked to market on a prospective basis. Deferral Accounting - BAC accounts for derivative financial instruments on a deferral basis when the market value of the hedging instrument fulfills the objectives of the hedge strategy, and the carrying value of the hedged item is other than fair value. Interest Rate Contracts - Under deferral accounting, for hedges of existing assets or liabilities, realized and unrealized gains and losses on the hedging instrument are recorded as an adjustment to the carrying value of the hedged item and amortized to the interest income or expense account related to the hedged item. BAC accounts for futures and forward rate agreements on a deferral basis. Deferred gains and losses are reported as adjustments to the carrying values of loans, deposits, and long-term debt. The amortization of these deferred gains and losses is reported in the corresponding interest income and interest expense accounts. Initial margin deposits for exchange-traded instruments are reported in other assets. Fees and commissions received or paid are deferred and recognized as an adjustment to the carrying value of the hedged item, consistent with the recognition of gains and losses on the hedging instrument. Foreign Exchange Contracts - Realized and unrealized gains and losses on instruments that hedge firm commitments are deferred and included in the measurement of the subsequent transaction; however, losses are deferred only to the extent of expected gains on the future commitment. Fees and commissions received or paid related to firm commitments are included in the measurement of the transaction when it occurs. Accrual Accounting - BAC accounts for derivative financial instruments on an accrual basis when the cash flows generated from the hedging instrument fulfill the objectives of the hedge strategy. Under accrual accounting, interest income or expense on the hedging instrument is accrued and recorded as an adjustment to the interest income or expense related to the hedged item. BAC accounts for certain interest rate swaps and purchased interest rate option contracts (caps and floors) on an accrual basis. Interest income or expense on derivative financial instruments accounted for using accrual accounting are reported in interest income-loans, interest expense-deposits, and interest expense-long-term debt. Initial margin deposits for exchange-traded instruments are reported in other assets. Fees and commissions received or paid on interest rate swaps are deferred and amortized as an adjustment to the interest income or expense related to the hedged item over the term of the swap. Premiums paid for interest rate options are deferred as a prepaid expense and are amortized to interest income or expense over the term of the cap or floor. Mark-to-Market Accounting - BAC accounts for derivative financial instruments on a mark-to-market basis when the market value of the hedging instrument fulfills the objectives of the hedge strategy, and the carrying value of the hedged item is fair value. Under mark-to-market accounting, realized and unrealized gains and losses on the hedging instrument are reflected in the line items being hedged and recognized when they occur in conjunction with the gains and losses on the hedged item. BAC accounts for certain interest rate swaps designated as hedges of available-for-sale securities on a mark-to-market basis. The accrual of interest payable and interest receivable on these interest rate swaps are reported in interest income-available-for-sale securities. Changes in the market values of these interest rate swaps, exclusive of net interest accruals, are reported in stockholders' equity on a net-of-tax basis. 56 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Foreign Currency Translation Assets, liabilities, and operations of foreign branches and subsidiaries are recorded based on the functional currency of each entity. For the majority of the foreign operations, the functional currency is the local currency, in which case the assets, liabilities, and operations are translated, for consolidation purposes, at current exchange rates from the local currency to the reporting currency, the U.S. dollar. The resulting gains or losses are reported as a component of retained earnings within stockholders' equity on a net-of-tax basis. In certain other instances, including hyperinflationary economies, the functional currency used to measure the financial statements of a foreign entity is the U.S. dollar. In these instances, the resulting gains and losses are included in trading income, except for those of units in hyperinflationary economies, which are included in other income. Provision for Income Taxes The parent files a consolidated U.S. federal income tax return and consolidated or combined returns for certain states, including California. State, local, and foreign income tax returns are filed according to the taxable activity of each unit. The liability method of accounting is used for income taxes. Under the liability method, deferred tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial reporting and tax reporting bases of assets and liabilities, as well as for operating losses and tax credit carryforwards, using enacted tax laws and rates. Deferred tax expense represents the net change in the deferred tax asset or liability balance during the year. This amount, together with income taxes currently payable or refundable for the current year, represents the total income tax expense for the year. 2. Nature of Operations BAC, through its banking and other subsidiaries, provides banking and other financial services throughout the United States and in selected international markets to consumers and business customers, including corporations, governments, and other institutions. BAC manages its operations through five major business sectors -- Consumer Banking, U.S. Corporate and International Banking, Commercial Real Estate, Middle Market Banking, and Private Banking and Investment Services, ranked, for the purpose of the following discussion, in order of their contribution to net income. Consumer Banking provides a full array of deposit and loan products to individuals and small businesses through branches, ATMs, phones, and other delivery channels throughout ten western states and through in-store ATMs in the Chicago metropolitan area. It also provides credit card, home mortgage, manufactured housing financing, and consumer finance products throughout the United States, and a range of consumer banking products and services in Hong Kong, India, Taiwan, Singapore, and the Philippines. U.S. Corporate and International Banking provides capital-raising services, trade finance, cash management, investment banking, capital markets products, and financial advisory services to large public-and private-sector institutions that are part of the global economy, through offices in 37 countries in North and South America, Asia, Europe, Africa, and the Middle East. The Commercial Real Estate group provides credit and other financial services to a variety of real estate market segments, including developers, investors, pension fund advisors, real estate investment trusts, and property managers. Local clients are served through offices across California and in ten other states. National clients, such as publicly traded corporations and private entities, are served through offices in California and Chicago. Middle-Market Banking provides a full range of financial products and services to companies with annual revenues between $5 million and $250 million. BAC serves middle-market customers throughout the West and in the Midwest. The Private Bank provides a broad range of banking, personal trust, and investment services to high-net-worth clients worldwide who require specialized personal services. Investment Services encompasses BAC's investment management, brokerage, and mutual fund activities. The two businesses use BAC's domestic network of branches and other delivery points, securities brokers, international offices, and correspondent banking relationships throughout the world to address the wealth management needs of their customers. 3. Merger with Continental Bank Corporation On August 31, 1994, Continental was merged with and into the parent, and Continental's principal subsidiary, Continental Bank, was renamed Bank of America Illinois. Each outstanding share of Continental's common stock was converted into either 0.7993 of a share of the parent's common stock or $38.297 in cash. In connection with the Continental merger, the parent issued 21.5 million shares of common stock valued at $985 million on January 27, 1994, the day preceding the announcement of the merger. The 21.5 million shares issued included 11.8 million shares of treasury stock purchased in anticipation of the merger at an average per-share price of $42.43. The aggregate amount of cash paid to Continental common stockholders was approximately $950 million. In addition, each outstanding share of Continental's Adjustable Rate Preferred Stock, Series 1 and Adjustable Rate BankAmerica Corporation 1995 / 57 - -------------------------------------------------------------------------------- Cumulative Preferred Stock, Series 2 was converted upon consummation of the Continental merger, into one share of the parent's Adjustable Rate Preferred Stock, Series 1 (Preferred Stock, Series 1) and Adjustable Rate Cumulative Preferred Stock, Series 2 (Preferred Stock, Series 2), respectively, having substantially the same terms. The parent's preferred stock issued in connection with the Continental merger was valued at $415 million, based on market factors as of January 27, 1994. On December 5, 1994, the Preferred Stock, Series 2 was redeemed by the parent. On May 31, 1995, the parent redeemed its Preferred Stock, Series 1. Refer to Note 15 of the Notes to Consolidated Financial Statements on pages 64 and 65 for further information on these redemptions. Continental was a Delaware corporation organized in 1968 and was registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, and the Illinois Bank Holding Company Act of 1957. Continental provided an extensive range of commercial banking and financial services, primarily in the Midwest, but also throughout the United States and in various overseas markets. The Continental merger was recorded by the parent during the third quarter of 1994 using the purchase method of accounting in accordance with Accounting Principles Board Opinion (APB) No. 16, "Business Combinations." Under this method of accounting, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values at consummation. Merger-related expenses of $50 million were accrued during 1994 to reflect management's best estimate of separation and benefits costs related to pre- merger BAC employees, employment assistance costs for separated employees of pre-merger BAC, and other expenses of pre-merger BAC associated with the Continental merger. Unaudited Pro Forma Combined Summary of Operations The following table presents an unaudited pro forma combined summary of operations of BAC and Continental for the years ended December 31, 1994 and 1993. The Unaudited Pro Forma Combined Summary of Operations is presented as if the Continental merger had been effective January 1, 1993. This information combines the historical results of operations of BAC and Continental after giving effect to amortization of purchase accounting adjustments. This summary excludes an $80 million cumulative effect of accounting change for income taxes recognized by Continental for the year ended December 31, 1993. The Unaudited Pro Forma Combined Summary of Operations is based on BAC's historical results of operations for the year ended December 31, 1994, which included com- - -------------------------------------------------------------------------------- Unaudited Pro Forma Combined Summary of Operations
- ----------------------------------------------------------------------------------------- Year Ended December 31 ------------------------ (dollar amount in millions, except per share data) 1994 1993 - ----------------------------------------------------------------------------------------- Summary of Operations Interest income $13,152 $12,755 Interest expense 5,298 4,803 ------------------------ Net interest income 7,854 7,952 Provision for credit losses 520 984 ------------------------ Net interest income after provision for credit losses 7,334 6,968 Noninterest income 4,485 4,913 Noninterest expense 7,951/a/ 8,178 ------------------------ Income before income taxes 3,868 3,703 Provision for income taxes 1,606 1,587 ------------------------ Net Income $ 2,262 $ 2,116 Earnings per common and common equivalent share $ 5.32 $ 4.84 Earnings per common and common equivalent share-assuming full dilution 5.29 4.81 - -----------------------------------------------------------------------------------------
/a/ Merger-related expenses, as described above, of $50 million have been eliminated from the combined historical results of operations, as these expenses do not represent ongoing expenses of BAC. - -------------------------------------------------------------------------------- bined operations from the Continental merger date forward. Accordingly, BAC's earnings for the period September 1, 1994 through December 31, 1994 included revenues and expenses related to former Continental operations, as well as the amortization of purchase accounting adjustments, such as fair value adjustments, goodwill, and identifiable intangibles. The combined historical results of operations of BAC and Continental were adjusted to reflect the amortization of the fair value adjustments and other purchase accounting adjustments recorded in connection with the Continental merger, including those related to available-for-sale securities, loans, goodwill, identifiable intangibles, deposits, and long-term debt. Amortization was calculated based on the methods and periods of benefit determined appropriate by management. The historical income statement information for the year ended December 31, 1993 was adjusted to include amortization for the full period. The Unaudited Pro Forma Combined Summary of Operations is intended for informational purposes only and is not necessarily indicative of the future results of operations of BAC, or of the results of operations of BAC that would have occurred had the Continental merger been in effect for the full years presented. Primary and fully diluted pro forma combined earnings per common share for the years ended December 31, 1994 and 1993 were calculated based on pro forma combined net income, 58 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- less the sum of actual preferred dividends paid by BAC and Continental during each of the years. Actual average common and common equivalent shares outstanding and average common shares outstanding assuming full dilution for the quarter ended December 31, 1994 were used to approximate the same information for the full year ended December 31, 1994 as if the Continental merger had taken place on January 1, 1993. The share amounts used to calculate primary and fully diluted pro forma combined earnings per common share for the year ended December 31, 1993 were determined as follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (in millions) Primary Fully Diluted - -------------------------------------------------------------------------------- Actual average number of common and common equivalent shares outstanding for BAC for the year ended December 31, 1993 358 363 Common shares issued in connection with the Continental merger 22 22 Continental's common stock equivalents for the year ended December 31, 1993 1 1 ------------------------- 381 386 - --------------------------------------------------------------------------------
4. Supplemental Disclosure of Cash Flow Information During the years ended December 31, 1995, 1994, and 1993, BAC made interest payments on deposits and other interest-bearing liabilities of $7,361 million, $4,422 million, and $4,185 million, respectively, and made net income tax payments of $1,342 million, $785 million, and $156 million, respectively. During the years ended December 31, 1995, 1994, and 1993, there were foreclosures of loans with carrying values of $520 million, $493 million, and $752 million, respectively. Loans made to facilitate the sale of OREO totaled $8 million, $29 million, and $27 million during the years ended December 31, 1995, 1994, and 1993, respectively. During the year ended December 31, 1993, BAC securitized residential first mortgages of $132 million, and transferred them to available-for-sale securities. No residential first mortgages were securitized and transferred to available-for-sale securities during 1994 or 1995. 5. Restrictions on Cash and Due from Banks BAC's banking subsidiaries are required to maintain reserves with the Federal Reserve Bank. Reserve requirements are based on a percentage of deposit liabilities. The average reserves required for 1995 and 1994 were $3,851 million and $4,204 million, respectively. 6. Available-For-Sale and Held-to-Maturity Securities The following is a summary of available-for-sale and held-to-maturity securities:
- ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- Available-for-Sale Securities ----------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (in millions) Cost Gains Losses Value - ----------------------------------------------------------------------------------------- December 31, 1995 U.S. Treasury and other government agency securities $ 1,775 $ 36 $ 1 $ 1,810 Mortgage-backed securities 6,671 98 20 6,749 Foreign governments/a/ 2,970 18 265 2,045 Equity securities 183 114 -- 297 Corporate and other debt securities/a/ 443 21 -- 1,142 ---------------------------------------------------- $12,042 $287 $286 $12,043 December 31, 1994 U.S. Treasury and other government agency securities $ 2,275 $ 35 $ 88 $ 2,222 Mortgage-backed securities 5,537 15 279 5,273 Foreign governments/a/ 1,747 234 503 1,478 Equity securities 186 62 20 228 Corporate and other debt securities/a/ 648 9 9 648 ---------------------------------------------------- $10,393 $355 $899 $ 9,849 Held-to-Maturity Securities ---------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (in millions) Cost Gains Losses Value - ----------------------------------------------------------------------------------------- December 31, 1995 U.S. Treasury and other government agency securities $ 66 $-- $ -- $ 66 Mortgage-backed securities 2,481 48 2 2,527 State, county, and municipal securities 467 16 4 479 Foreign governments/a/ 1,182 -- 377 805 Corporate and other debt securities/a/ 460 15 20 455 ---------------------------------------------------- $4,656 $79 $403 $4,332 December 31, 1994 U.S. Treasury and other government agency securities $ 431 $ 1 $ 3 $ 429 Mortgage-backed securities 4,753 19 333 4,439 State, county, and municipal securities 478 4 17 465 Foreign governments/a/ 2,181 2 541 1,642 Corporate and other debt securities/a/ 324 2 9 317 ---------------------------------------------------- $8,167 $28 $903 $7,292 - ----------------------------------------------------------------------------------------
/a/ Securities for which no market values were available are stated at cost or appraised value as deemed appropriate by management. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 59 - -------------------------------------------------------------------------------- During the fourth quarter of 1995, the Financial Accounting Standards Board allowed financial statement preparers a one-time opportunity to reassess the classifications of securities accounted for under SFAS No. 115. As a result of this reassessment, BAC reclassified $2.1 billion of held-to-maturity securities to available-for-sale securities. In connection with this reclassification, gross unrealized gains of $28 million and gross unrealized losses of $42 million were recorded in available-for-sale securities and in stockholders' equity (on a net-of-tax basis). During 1994, as a result of the Continental acquisition, $2.5 billion of BAC's held-to-maturity securities were transferred to available-for-sale securities to enable BAC to maintain its pre-merger interest rate risk position. As a result of this transfer, gross unrealized losses of $145 million and gross unrealized gains of $22 million were recorded in available-for-sale securities and in stockholders' equity (on a net-of-tax basis). During the year ended December 31, 1995, BAC sold available-for-sale securities for aggregate proceeds of $2,509 million, resulting in gross realized gains of $268 million and gross realized losses of $234 million. During the year ended December 31, 1994, BAC sold available-for-sale securities for aggregate proceeds of $3,019 million, resulting in gross realized gains of $94 million and gross realized losses of $70 million. During the year ended December 31, 1993, BAC sold available-for-sale securities for aggregate proceeds of $2,018 million, resulting in gross realized gains of $61 million and no gross realized losses. The following is a summary of the contractual maturities of available-for- sale debt securities at December 31, 1995. These amounts exclude equity securities, which have no contractual maturities:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Amortized Fair (in millions) Cost Value - -------------------------------------------------------------------------------- Due in one year or less $ 1,734 $ 1,737 Due after one year through five years 2,001 2,031 Due after five years through ten years 584 532 Due after ten years 7,540 7,446 --------------------------------- $11,859 $11,746 - --------------------------------------------------------------------------------
The following is a summary of the contractual maturities of held-to- maturity securities at December 31, 1995:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Amortized Fair (in millions) Cost Value - -------------------------------------------------------------------------------- Due in one year or less $ 319 $ 317 Due after one year through five years 394 403 Due after five years through ten years 336 349 Due after ten years 3,607 3,263 --------------------------------- $4,656 $4,332 - --------------------------------------------------------------------------------
Issuers may have the right to call or prepay obligations with or without call or prepayment penalties. This right may cause actual maturities to differ from the contractual maturities summarized in the previous tables. Assets, primarily trading, available-for-sale, and held-to-maturity securities, with carrying values of $10,461 million and $11,116 million at December 31, 1995 and 1994, respectively, were pledged to collateralize U.S. government and public deposits, trust and other deposits, and repurchase agreements. During the year ended December 31, 1995, trading income included a net unrealized holding gain on trading securities of $37 million. During the year ended December 31, 1994, trading income included a net unrealized holding loss on trading securities of $25 million. These amounts exclude the net unrealized trading results of the parent's securities broker and dealer subsidiaries. In connection with the January 1, 1994 adoption of SFAS No. 115, $5.6 billion of held-to-maturity securities with a fair value of $5.7 billion were transferred to available-for-sale securities. In addition, debt restructuring par bonds and other instruments were transferred during the first quarter of 1994 from loans to available-for-sale and held-to-maturity securities with carrying values of $1.3 billion and $1.2 billion, respectively, and fair values of $1.0 billion each immediately prior to the transfer. 7. Other Debt Restructurings Not included in restructured loans as described in Note 8 of the Notes to Consolidated Financial Statements on pages 60 and 61 were other debt restructurings totaling $1,657 million and $2,230 million at December 31, 1995 and 1994, respectively, with countries experiencing liquidity problems. These amounts include securities and loans received in connection with formal debt restructurings. Beginning in the first quarter 60 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- of 1994, the majority of these instruments were classified as either available- for-sale or held-to-maturity securities. Prior to January 1, 1994, these instruments were classified as loans. Included in other debt restructurings at December 31, 1995 and 1994, were $1,416 million and $1,624 million, respectively, of par bonds issued by the governments of Mexico and Venezuela in 1990, and Uruguay in 1991. The face values of these par bonds at December 31, 1995 and 1994 were $1,632 million and $2,129 million, respectively. The majority of the Mexican par bonds have a fixed annual interest rate of 6.25 percent, and the Venezuelan and Uruguayan par bonds each have fixed annual interest rates of 6.75 percent. The principal of these par bonds is collateralized by zero-coupon U.S. Treasury securities, which at maturity, will have redemption values equal to the face values of the par bonds. The market value of the par bonds totaled $1,074 million at December 31, 1995. The fair value of the U.S. Treasury securities collateralizing the principal of the par bonds totaled $395 million at December 31, 1995. Also included in other debt restructurings at December 31, 1994, were bonds issued by the government of Brazil with a face value of $611 million. These bonds had a carrying value and fair value of $358 million. The majority of these bonds were obtained on April 15, 1994 when BAC exchanged then-existing Brazilian medium- and long-term loans with an aggregate carrying value of $139 million and an aggregate face value of $692 million plus past due accrued interest for various bonds with a face value of $727 million. At December 31, 1994, Brazilian bonds with face values totaling $247 million were collateralized by zero-coupon U.S. Treasury securities, which at maturity, will have equivalent redemption values. At December 31, 1994, the collateral had a fair value of approximately $27 million. During 1995, these bonds were sold. Included in the aggregate other debt restructurings discussed above were $241 million and $248 million at December 31, 1995 and 1994, respectively, related to other restructuring transactions with borrowers in Venezuela, Poland, the Philippines, and Mexico. Interest income foregone on total other debt restructurings was not significant in 1995 or 1994. 8. Loans Loans are presented net of unearned income of $1,068 million and $777 million at December 31, 1995 and 1994, respectively. The following is a summary of loans:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 --------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Domestic Consumer: Residential first mortgages $ 36,572 $ 33,818 Residential junior mortgages 13,777 13,589 Other installment 13,834 10,598 Credit card 9,139 8,020 Other individual lines of credit 1,847 1,736 Other 319 403 --------------------- 75,488 68,164 Commercial: Commercial and industrial 32,745 28,814 Loans secured by real estate 10,975 10,277 Construction and development loans secured by real estate 3,153 3,616 Financial institutions 2,834 2,872 Lease financing 1,927 1,814 Agricultural 1,737 1,840 Loans for purchasing or carrying securities 1,458 1,529 Other 1,574 1,623 --------------------- 56,403 52,385 --------------------- 131,891 120,549 Foreign Commercial and industrial 15,003 13,496 Banks and other financial institutions 3,386 2,516 Governments and official institutions 1,020 896 Other 4,073 3,455 --------------------- 23,482 20,363 --------------------- $155,373 $140,912 - --------------------------------------------------------------------------------
BankAmerica Corporation 1995 / 61 - -------------------------------------------------------------------------------- The following is a summary of loans considered to be impaired in accordance with SFAS No. 114 and the related interest income:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (in millions) December 31, 1995 - -------------------------------------------------------------------------------- Recorded investment in impaired loans not requiring an allowance for credit losses as determined in accordance with SFAS No. 114/a/ $ 610 Recorded investment in impaired loans requiring an allowance for credit losses as determined in accordance with SFAS No. 114 763 ------------ Total recorded investment in impaired loans/b/ $1,373 Year Ended December 31, 1995 - -------------------------------------------------------------------------------- Average recorded investment in impaired loans $1,361 Interest income recognized/c/ 80 - --------------------------------------------------------------------------------
/a/ These loans do not require an allowance for credit losses as measured in accordance with SFAS No. 114 since the values of the impaired loans equal or exceed the recorded investments in the loans. /b/ These amounts were evaluated for impairment using the following measurement methods: $741 million was evaluated using the present value of the loan's expected future cash flows method and $632 million was evaluated using the fair value of the collateral. /c/ All interest income recognized was recorded using the cash method of accounting. - -------------------------------------------------------------------------------- Restructured loans, excluding the other debt restructurings described in Note 7 of the Notes to Consolidated Financial Statements on pages 59 and 60, were $113 million and $97 million at December 31, 1995 and 1994, respectively. Interest income foregone on these loans was not significant in 1995 or 1994. Previously restructured loans of $37 million and $104 million were on nonaccrual status at December 31, 1995 and 1994, respectively. 9. Allowance for Credit Losses The following is a summary of changes in the allowance for credit losses. This reconciliation reflects activity related to all loans. The allowance for credit losses on impaired loans as measured in accordance with SFAS No. 114 was $274 million at December 31, 1995.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 --------------------------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Balance, beginning of year $3,690 $3,508 $3,921 Credit losses 1,011 988 1,599 Credit loss recoveries 422 518 484 --------------------------------------------- Net credit losses 589 470 1,115 Provision for credit losses 440 460 803 Allowance related to mergers and acquisitions/a/ 3 241 12 Other net additions (deductions) 10 (49) (113)/b/ --------------------------------------------- Balance, End of Year $3,554 $3,690 $3,508 - --------------------------------------------------------------------------------
/a/ Represents the addition of consummation date allowances for credit losses of Arbor National Holdings, Inc. in 1995, Continental and Liberty Bank of $238 million and $3 million, respectively, in 1994, and First Gibraltar in 1993. /b/ Due to the transfer of certain assets net of their related allowance to other assets, the allowance for credit losses was reduced by $128 million. The amount includes $88 million of regulatory-related allocated transfer risk reserve. - -------------------------------------------------------------------------------- 10. Premises and Equipment The following is a summary of premises and equipment:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ---------------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Premises, including capitalized leases $2,919 $2,800 Equipment and furniture, including capitalized leases 2,939 2,732 Leasehold improvements 863 795 Land 452 465 ---------------------------- 7,173 6,792 Less: Accumulated depreciation and amortization 3,188 2,837 ---------------------------- $3,985 $3,955 - --------------------------------------------------------------------------------
Depreciation and amortization expense for the years ended December 31, 1995, 1994, and 1993 was $552 million, $489 million, and $461 million, respectively. 62 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- 11. Long-Term Debt BAC's fixed-rate long-term debt of $8,182 million at December 31, 1995 matures through 2015. At December 31, 1995 and 1994, the interest rates on fixed-rate long-term debt ranged from 4.55% to 11.50% and from 4.55% to 14.25%, respectively. These obligations were denominated primarily in U.S. dollars. BAC has entered into off-balance-sheet financial instruments, primarily interest rate swaps, with notional amounts of approximately $3 billion at December 31, 1995, to change its interest rate exposure from fixed to floating rate. At December 31, 1995 and 1994, the weighted average interest rates on fixed-rate long-term debt, including the effects of interest rate swaps, were 7.69% and 8.00%, respectively. BAC's floating-rate long-term debt of $6,541 million at December 31, 1995 matures through 2004. The majority of the floating rates are based on three- and six-month London Interbank Offer Rate (LIBOR). At December 31, 1995 and 1994, the interest rates on floating-rate long-term debt ranged from 5.37% to 7.80% and from 4.79% to 7.17%, respectively. These obligations were denominated primarily in U.S. dollars. BAC has entered into off-balance-sheet financial instruments, primarily futures, with notional amounts of approximately $4 billion at December 31, 1995, to reduce the interest rate risk by shortening the repricing profile on floating-rate debt that reprices within one year. At December 31, 1995 and 1994, the weighted average interest rates on floating-rate long-term debt were 6.10% and 6.27%, respectively. The effect of futures on floating rate long-term debt interest rates was not material. At December 31, 1995 and 1994, $37 million and $93 million, respectively, of subsidiary long-term debt was guaranteed by the parent. At December 31, 1995 and 1994, $4,304 million and $3,801 million, respectively, of long-term debt was redeemable at par at the option of the parent on dates ranging from March 15, 1996 through June 21, 2000. At December 31, 1995, BAC had $2.0 billion available under a long-term line of credit that expires in 1999. The following is a summary of long-term debt (original maturities of more than one year)/a/:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ---------------------------------------------------- 1995 1994 ---------------------------------------------------- Various Various Fixed-Rate Floating-Rate Debt Debt (in millions) Obligations Obligations Total Total - -------------------------------------------------------------------------------- The parent Senior Debt: Due in 1995 $ -- $ -- $ -- $ 1,769 Due in 1996 801 211 1,012 1,489 Due in 1997 1,019 945 1,964 2,100 Due in 1998 268 1,190 1,458 1,369 Due in 1999 215 1,490 1,705 1,704 Due in 2000 16 1,415 1,431 166 Thereafter 308 325 633 158 ---------------------------------------------------- 2,627 5,576 8,203 8,755 Subordinated Debt: Due in 1998 52 70 122 122 Due in 2000 409 -- 409 411 Thereafter 4,585 378 4,963 4,741 ---------------------------------------------------- 5,046 448 5,494 5,274 ---------------------------------------------------- Total parent 7,673 6,024 13,697 14,029 Subsidiaries Senior Debt: Due in 1995 -- -- -- 92 Due in 1996 3 367 370 75 Due in 1997 23 66 89 89 Due in 1998 1 6 7 1 Due in 1999 -- 39 39 39 Due in 2000 -- 39 39 -- Thereafter 20 -- 20 27 ---------------------------------------------------- 47 517 564 323 Subordinated Debt: Due in 1995 -- -- -- 9 Due in 1996 10 -- 10 9 Due in 1997 10 -- 10 10 Due in 1998 11 -- 11 11 Due in 1999 12 -- 12 12 Due in 2000 13 -- 13 13 Thereafter 406 -- 406 407 ---------------------------------------------------- 462 -- 462 471 ---------------------------------------------------- Total subsidiaries 509 517 1,026 794 ---------------------------------------------------- $8,182 $6,541 $14,723 $14,823 - --------------------------------------------------------------------------------
/a/ Maturity distribution is based upon contractual maturities or earlier dates due to call notices issued. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 63 - -------------------------------------------------------------------------------- 12. Subordinated Capital Notes The following is a summary of subordinated capital notes recorded by the parent/a/:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ------------------------ (in millions) 1995 1994 - -------------------------------------------------------------------------------- Floating Rate Notes due 1996 $248 $246 9.75% Notes Due 1999 258 261 Auction Rate Notes due 1999 99 98 ------------------------ $605 $605 - --------------------------------------------------------------------------------
/a/ These notes are subordinate to senior indebtedness of the parent and qualify as Tier 2 risk-based capital under Federal Reserve Board guidelines for assessing capital adequacy. - -------------------------------------------------------------------------------- The Floating Rate Notes have interest rates that approximate LIBOR and are subject to a minimum interest rate of 5.25%. Effective May 18, 1993, the Auction Rate Notes bear interest as follows: $68 million bears interest at a fixed rate of 4.99% per annum, while the remaining $31 million bears interest at a floating rate of 0.50% over LIBOR per annum through May 17, 1996. Thereafter, the Auction Rate Notes bear interest, at the election of the holders, as to the final three-year period at either a fixed rate determined by auction or a floating rate of 0.50% over LIBOR per annum. At the option of the parent, the Floating Rate Notes and the Auction Rate Notes may be exchanged for common stock, perpetual preferred stock, or other capital securities acceptable to the Federal Reserve Board having a market price equal to the principal amount of the notes or, under certain circumstances, may be redeemed in whole or in part for cash. As of December 31, 1995, proceeds from issuances of common and preferred stock of $600 million have been dedicated to fully retire or redeem subordinated capital notes. 13. Stock Repurchase Program During the first quarter of 1995, BAC's Board of Directors authorized a stock repurchase program. This program enables the parent to buy back approximately $1.9 billion of its common stock, $800 million of which may be repurchased in one or more transactions by the end of 1996. During each quarter of 1995, 1996, and 1997, the parent may also purchase additional amounts of common stock up to the level of amortization of goodwill and core deposit intangibles for that quarter (currently approximately $85 million per quarter) plus any unused amounts from the previous four quarters. During the year ended December 31, 1995, the parent repurchased 16.6 million shares of its common stock in connection with this program at an average per-share price of $53.83, which reduced stockholders' equity by $894 million. In addition, this program authorized the parent to buy back or redeem approximately $500 million of its preferred stock by the end of 1996. During the fourth quarter of 1995, BAC's Board of Directors modified the stock repurchase program by authorizing a $250 million increase in the total amount of BAC's outstanding preferred stock that may be repurchased or redeemed through the end of 1996. During the year ended December 31, 1995, the parent repurchased and redeemed preferred stock in connection with this program, reducing stockholders' equity by $206 million. 64 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- 14. Preferred Share Purchase Rights and Common Stock Warrants On April 11, 1988, the Board of Directors of the parent declared a dividend of one preferred share purchase right (a Right) for each outstanding share of the parent's common stock as of April 22, 1988 (the Rights Agreement). While the Rights Agreement is in effect, every share of common stock issued before the rights become effective also represents a right. Each Right entitles the holder to buy from the parent, until the earlier of April 22, 1998 or the redemption of the Rights, one one-hundredth of a share of Cumulative Participating Preferred Stock, Series E, at an exercise price of $50.00 per Right (subject to adjustment). The Rights will not be exercisable or transferable apart from the parent's common stock until certain events occur pertaining to a person or group acquiring or announcing the intention to acquire 20 percent or more of the parent's outstanding common stock. Under specified circumstances, all of which relate to a potential acquisition of the parent, a Right may: (i) become a right to purchase shares of an acquiring company at half of the then-market price, (ii) become a right to purchase the parent's common stock at half of the then- market price or (iii) be exchanged by the parent for one share of common stock or one one-hundredth of a share of Preferred Stock, Series E, or an equivalent preferred share. The Board of Directors may redeem the Rights at a price of $0.001 per Right (rounded as to each holder to the nearest $0.01) at any time prior to the acquisition by a person or group of 20 percent or more of the outstanding common stock of the parent. Under other specified conditions, the Rights may be automatically redeemed. The Rights are excluded from the computation of earnings per common share. At December 31, 1995 and 1994, common stock warrants outstanding totaled 99,053 and 449,506, respectively. These warrants give the holder the right to purchase shares of common stock of the parent at a price of $17.50 per share, subject to adjustment in certain events, until expiration on October 22, 1997. 15. Preferred Stock The parent is authorized to issue, in one or more series, 70,000,000 shares of preferred stock. The parent's outstanding preferred shares are nonvoting except in certain limited circumstances. Dividends are cumulative and are payable quarterly on February 28, May 31, August 31, and November 30, except for the 11% Preferred Stock, Series J, whose dividends are payable quarterly on March 31, June 30, September 30, and December 31. The shares are redeemable at the option of the parent during the redemption period and at the redemption price per share noted in the following table plus accrued and unpaid dividends to the redemption date. Holders of the preferred shares have dividend and liquidation preferences senior to those of holders of the parent's common stock. On September 30, 1995, the parent redeemed all 200,000 outstanding shares of its 11% Preferred Stock, Series I. On May 31, 1995, the parent redeemed all 1,788,000 shares of its Adjustable Rate Preferred Stock, Series 1. During May 1995, the parent redeemed or converted all of the outstanding shares of its 6 1/2% Cumulative Convertible Preferred Stock, Series G. The terms of these redemptions are summarized in the table on the next page. BankAmerica Corporation 1995 / 65 - -------------------------------------------------------------------------------- The following is a summary of preferred stock:
- ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Shares Dividend Shares Outstanding at Stated Value Per Share Redemption Price Preferred Stock Series Issued December 31, 1995 Per Share Per Annum Redemption Period Per Share - ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Adjustable: Series A 5,178,000 5,178,000 $50.00 $3.25/a/ On or after 11/30/87 $50.00 Series B 3,546,100 3,546,100 100.00 6.00/b/ On or after 2/28/88 100.00 Series 1 1,788,000 -- 50.00 3.75/c/ Redeemed 5/31/95 50.00 Series 2 3,000,000/d/ -- 100.00 9.00/e/ Redeemed 12/05/94 108.00 Cumulative Fixed: 9 5/8% Series F 7,250,000 7,250,000 25.00 2.41 On or after 4/16/96 25.00 9% Series H 11,250,000 11,250,000 25.00 2.25 On or after 1/15/97 25.00 11% Series I 200,000/f/ -- 500.00 55.00 Redeemed 9/30/95 527.50 11% Series J 400,000/f/ 400,000/f/ 500.00 55.00 On or after 3/31/96/g/ /g/ 8 3/8% Series K 14,600,000 14,600,000 25.00 2.09 On or after 2/15/97 25.00 8.16% Series L 800,000/f/ 798,020/f/ 500.00 40.80 On or after 7/13/97 500.00 7 7/8% Series M 700,000/f/ 696,847/f/ 500.00 39.38 On or after 9/30/97 500.00 8 1/2% Series N 475,000/f/ 469,273/f/ 500.00 42.50 On or after 12/15/97 500.00 Cumulative Convertible Fixed: 6 1/2% Series G/h/ 5,000,000 -- 50.00 3.25 Redeemed or converted/i/ 51.95 - -----------------------------------------------------------------------------------------------------------------------------------
/a/ For the Cumulative Adjustable Preferred Stock, Series A, the dividend is adjusted quarterly, and is 2.0% lower than the highest of three U.S. Treasury rates, but is no lower than 6.5% and no greater than 14.5% per annum. /b/ For the Cumulative Adjustable Preferred Stock, Series B, the dividend is adjusted quarterly, and is 4.0% lower than the highest of three U.S. Treasury rates, but is no lower than 6.0% and no greater than 12.0% per annum. /c/ For the Adjustable Rate Preferred Stock, Series 1, the dividend was adjustable quarterly, and was 1.0% lower than the highest of three U.S. Treasury rates, but was no lower than 7.5% and no greater than 13.5% per annum. /d/ 3,000,000 shares, represented by 12,000,000 depositary shares, each corresponding to a one-fourth interest in a share of Preferred Stock, were issued and redeemed in 1994. /e/ For the Adjustable Rate Cumulative Preferred Stock, Series 2, the dividend was adjustable quarterly, and was 1.1% higher than the highest of three U.S. Treasury rates, but was no lower than 9% and no greater than 15.75% per annum. /f/ Represented by depositary shares, each corresponding to a one-twentieth interest in a share of Preferred Stock. /g/ The preferred shares may be redeemed on or after March 31, 1996 and prior to March 31, 1997 at $527.50 per share (equivalent to $26.375 per depositary share), and thereafter at prices declining to $500.00 per share (equivalent to $25.00 per depositary share) on March 31, 2001 and thereafter. /h/ The shares were convertible into common stock at any time, unless they had been previously redeemed, at a conversion price of $45.60 per common share, subject to adjustment under certain conditions. /i/ On May 31, 1995, the parent redeemed all of the then-unconverted outstanding shares of its 6 1/2% Cumulative Convertible Preferred Stock, Series G. On or prior to the redemption date, 4,966,246 shares of the 4,998,357 outstanding shares were converted to 5,445,439 shares of common stock. The remaining 32,111 shares were redeemed by the parent on May 31, 1995. - -------------------------------------------------------------------------------- 16. Lease Commitments BAC leases certain premises and equipment under noncancelable agreements expiring between the years 1996 and 2069. The following is a summary of future minimum rental commitments for noncancelable leases at December 31, 1995, which have not been reduced by minimum sublease rental income of $13 million for capital leases and $64 million for operating leases:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capital Operating (in millions) Leases Leases - -------------------------------------------------------------------------------- 1996 $ 23 $ 293 1997 23 253 1998 23 237 1999 23 215 2000 20 212 Thereafter 51 1,417 ------------------------- Total minimum lease payments $163 $2,627 Amount representing interest (42) -------- Present Value of Net Minimum Lease Payments $121 - --------------------------------------------------------------------------------
Total rental expense was $359 million in 1995, $327 million in 1994, and $336 million in 1993. 66 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- 17. Income Taxes The significant components of the provision for income taxes are as follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 -------------------------------- (in millions) 1995 1994 1993 - ------------------------------------------------------------------------------- Provision for (Benefit from) Income Taxes Current: Federal $1,091 $ 559 $ 269 State and local 305 140 93 Foreign 239 129 148 ---------------------------- 1,635 828 510 Deferred: Federal 268 567 754 State and local 29 137 212 Foreign (29) 9 (2) ---------------------------- 268 713 964 ---------------------------- $1,903 $1,541 $1,474 - --------------------------------------------------------------------------------
The significant components of deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 --------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Deferred Income Tax Assets Allowance for credit losses $ 1,554 $ 1,570 Accrued expenses 155 255 Other real estate owned 52 88 Tax carryovers/a/ 180 359 Other 510 379 Valuation allowance for deferred income tax assets/a/ (124) (124) ------------------- Total deferred income tax assets 2,327 2,527 Deferred Income Tax Liabilities Lease financing (1,365) (1,229) Identifiable intangible assets (575) (607) Securities valuation (425) (352) Employee benefit plans (59) (90) Accumulated tax depreciation in excess of book depreciation (237) (209) Deferred gains and installment sales (155) (128) Other (134) (46) ------------------- Total deferred income tax liabilities (2,950) (2,661) ------------------- Net Deferred Income Tax Liabilities $ (623) $ (134) - --------------------------------------------------------------------------------
/a/ The valuation allowance for deferred income tax assets relates primarily to net operating loss carryovers of foreign subsidiaries and pre-acquisition tax carryovers associated with the Security Pacific Corporation and Continental mergers. Utilization of these carryovers is subject to various limitations. The valuation allowance was established because BAC may not realize all of the tax benefit of these carryovers as a result of the limitations. If BAC determines that it will realize the pre-acquisition carryover tax benefits in the future, the corresponding reduction in the valuation allowance will decrease goodwill instead of tax expense. - -------------------------------------------------------------------------------- Management believes that BAC will fully realize its total deferred income tax assets as of December 31, 1995 based upon BAC's recoverable taxes from prior carryback years, its total deferred income tax liabilities, and its current level of operating income. The reconciliation of the provision for income taxes computed at the U.S. statutory income tax rate to pre-tax income is as follows:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 --------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- Federal statutory income tax rate 35% 35% 35% State and local income taxes, net of federal tax effect 5 5 6 Effect of purchase accounting for the Security Pacific Corporation merger 1 2 3 Other, net 1 (1) (1) --------------------------- Effective Tax Rate 42% 41% 43% - --------------------------------------------------------------------------------
BAC's effective tax rate in 1995 was essentially unchanged from 1994. BAC's effective tax rate in 1994 decreased from 1993 primarily due to a reduction in the state effective tax rate and the effective tax rate applied to leveraged lease income. The valuation allowance for deferred income tax assets was $124 million at December 31, 1995 and 1994. The recognition of deferred tax assets subject to the valuation allowance would result in a reduction to goodwill of $92 million. In 1995, deferred tax liabilities of $219 million relating to net unrealized gains on available-for-sale securities was charged directly to stockholders' equity. In 1994, deferred tax benefits of $218 million relating to net unrealized losses on available-for-sale securities was recorded in stockholders' equity. At December 31, 1995, federal income taxes had not been provided on $440 million of undistributed earnings of foreign subsidiaries earned prior to 1987 that have been reinvested for an indefinite period. If the undistributed earnings were distributed, credits for foreign taxes paid on such earnings and for the related foreign withholding taxes payable upon remittance, would be available to offset $90 million of the $190 million of the resulting tax expense. Subsequent to 1986, federal taxes are provided on earnings of foreign subsidiaries as a result of a tax law change. BAC provided tax expense of $13 million, $9 million, and $25 million on net securities gains in 1995, 1994, and 1993, respectively. BankAmerica Corporation 1995 / 67 - -------------------------------------------------------------------------------- 18. Employee Benefit Plans Defined Benefit Plans During 1995, the majority of salaried U.S. employees within BAC were covered under either the BankAmeraccount Plan or the Seafirst Corporation Retirement Plan. The BankAmeraccount Plan is a defined benefit cash balance plan while the Seafirst Plan was a defined benefit final average pay plan. Effective December 31, 1995, the Seafirst Plan was merged into the BankAmeraccount Plan. However, until April 1, 1996, the Seafirst Plan benefits will continue to apply to the employees formerly covered by the plan. Benefits are based on length of service and level of compensation and, in the case of the BankAmeraccount Plan, a specified interest rate. Contributions are made by the employers and are based on actuarial computations of the amount sufficient to fund the current service cost plus amortization of the unfunded actuarial accrued liability. Contributions are determined in accordance with Internal Revenue Service funding requirements and are invested in diversified portfolios. In connection with the Continental acquisition, BAC acquired the Continental Employees Pension Plan, which was merged into the BankAmeraccount Plan effective January 1, 1995. BAC maintains certain nonqualified, nonfunded employee defined benefit retirement plans. The related retirement benefits are paid from BAC's assets. Certain non-U.S. employees of BAC are covered by noncontributory defined benefit pension plans that the employers fund based primarily on local laws. The assumptions used in computing the present value of the accumulated benefit obligation, the projected benefit obligation, and net pension expense for the non-U.S. plans are substantially consistent with those assumptions used for the U.S. plans, given local conditions. The following is a reconciliation between the funded status of all defined benefit plans and amounts included in BAC's consolidated balance sheet:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 -------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Prepaid Pension Cost Plan assets at fair value, primarily listed stocks and bonds $3,137 $2,492 Less: Actuarial present value of projected benefit obligation 2,938 2,403 ----------------- Plan assets in excess of projected benefit obligation/a/ 199 89 Unrecognized net loss 341 280 Unrecognized prior service cost 46 53 Unrecognized net transition obligation 19 27 Additional minimum liability (5) (6) ----------------- Prepaid Pension Cost $ 600 $ 443 Actuarial Present Value of Benefit Obligation Vested benefit obligation $2,613 $2,165 Accumulated benefit obligation 2,808 2,284 - --------------------------------------------------------------------------------
/a/ Certain defined benefit plans not covered by the Pension Benefit Guaranty Corporation (PBGC) had an accumulated benefit obligation of $193 million and $172 million and plan assets of $79 million and $68 million at December 31, 1995 and 1994, respectively. The estimated vested benefit obligation for PBGC covered plans using a 4.75% interest rate and the Group Annuity Mortality 83 table as of December 31, 1995 is $2,883 million as compared with assets of $3,058 million. - -------------------------------------------------------------------------------- The following is a summary of the components of net pension expense:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 ----------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Service cost--benefits earned during the year $ 98 $ 78 $ 83 Interest cost on projected benefit obligation 200 175 170 Net amortization and deferral 399 (202) 60 Effect of actual return on plan assets (631) 16 (264) ---------------------------- Net Pension Expense $ 66 $ 67 $ 49 - --------------------------------------------------------------------------------
A summary of the assumptions used in computing the present value of the accumulated benefit obligation, the present value of projected benefit obligation, and the net pension expense for the U.S. plans follows on the next page. The discount rate used in determining benefit obligations at year end reflects the approximate yield on high quality fixed-income securities taking into account the duration of the projected benefit obligation. The discount rate used in determining net pension expense is based on assumptions used for the previous year-end measurement of the benefit obligation. 68 / BankAmerica Corporation 1995 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------- Discount rate in determining expense 8.50% 7.25% 8.75% Discount rate in determining benefit obligations at year end 6.50 8.50 7.25 Rate of increase in future compensation levels for determining expense/a/ 5.50 4.00 4.00 Rate of increase in future compensation levels for determining benefit obligations at year end/a/ 5.00 5.50 4.00 Expected long-term rate of return on assets 9.75 8.50 9.75 Account growth interest rate in determining expense 6.75 5.00 5.75 Account growth interest rate in determining benefit obligations at year end 6.00 6.75 5.00 -------------------------------------------------------------------------------
/a/ Rates are attributable to the Seafirst Corporation Retirement Plan since this is the only U.S. defined benefit final average pay plan as of January 1, 1995. - -------------------------------------------------------------------------------- Defined Contribution Plans During 1995, the majority of salaried U.S. employees within BAC were eligible to participate in either the BankAmerishare Plan or the Seafirst Corporation Employee Matched Savings Plan. These plans provided tax-deferred investment opportunities to salaried employees who have completed a required length of service. Employees may contribute to the plans up to certain limits prescribed by the Internal Revenue Service. A portion of these contributions is matched by the employers. Contributions are invested at the direction of the participant. In connection with the Continental acquisition, BAC acquired the Continental Employee Savings Incentive Plan and the Continental Employee Stock Ownership Plan, which were merged into the BankAmerishare Plan effective January 1, 1995. Effective April 1, 1996, the Seafirst Corporation Employee Matched Savings Plan will be merged into and replaced by the BankAmerishare Plan. BAC maintains certain nonqualified defined contribution retirement plans. The related retirement benefits are paid from BAC's assets. In addition, certain non-U.S. employees of BAC are covered under defined contribution pension plans that are separately administered in accordance with local laws. Aggregate contributions by the employers for all defined contribution plans were $93 million, $86 million, and $75 million in 1995, 1994, and 1993, respectively. Certain employer and employee contributions to the plans are used to purchase the parent's common stock at prices that approximate market values. Contributions, including dividends, to the plans were used to purchase 295,945 shares for $16 million in 1995, 539,910 shares for $23 million in 1994, and 784,344 shares for $37 million in 1993. Sales by the plans of the parent's common stock were 843,588 shares for $45 million in 1995, 220,468 shares for $10 million in 1994, and 637,000 shares for $29 million in 1993. The plans held 15,994,153 shares, 16,611,787 shares, and 15,375,896 shares of the parent's common stock at December 31, 1995, 1994, and 1993, respectively. Amendments to the BankAmeraccount Plan and the BankAmerishare Plan Effective January 1, 1996, the BankAmeraccount Plan and the BankAmerishare Plan were amended to provide an enhanced level of benefits to employees. The name of the BankAmeraccount Plan was changed to BankAmerica Pension Plan while the name of the BankAmerishare Plan was changed to BankAmerica 401(k) Investment Plan. Management estimates that these amendments could increase BAC's benefit expense in future periods by approximately $45 million to $55 million per year. Management Stock Plans The parent offers shares of its common stock to certain key employees under management stock plans. Under the plans, three kinds of options are outstanding: Nonqualified Stock Options, Performance Stock Options, and Incentive Stock Options. The shares under option generally become exercisable not earlier than six months and not later than ten years after the date the option was granted. Options awarded before August 5, 1991 held by principal officers of the parent, subject to certain restrictions, also constitute stock appreciation rights equal to the number of shares covered by the options. These stock appreciation rights are exercisable for the difference between the option price and the current market price of the stock at the time of exercise. The difference can be received in cash or shares. Stock appreciation rights are exercisable under the same terms as the related stock options. The following is a summary of changes in shares under option:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 --------------------------------- 1995 1994 - -------------------------------------------------------------------------------- Balance, beginning of year 17,356,127 10,449,395 Issued in connection with the Continental merger -- 4,766,781 Granted 5,144,845 3,904,968 Exercised (4,081,083) (1,342,334) Canceled (294,215) (422,683) -------------------------------- Balance, End of Year 18,125,674 17,356,127 - --------------------------------------------------------------------------------
Options to purchase 9,565,742 and 10,511,439 shares were exercisable at December 31, 1995 and 1994, respectively. Expiration dates ranged from January 3, 1996 to December 4, 2005 for options outstanding at December 31, 1995. BankAmerica Corporation 1995 / 69 - -------------------------------------------------------------------------------- The following is a summary of option prices per share:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1995 1994 - -------------------------------------------------------------------------------- Range of prices of shares under option at December 31 $8.63 to $66.43 $8.63 to $61.00 Weighted average price of shares under option at December 31 $42.87 $36.87 Range of prices of shares exercised during year $8.63 to $61.00 $8.69 to $47.73 - --------------------------------------------------------------------------------
Also under the plans, the parent awards restricted stock to certain key employees. Generally, the restricted stock awarded under the plans is not released until the employee has completed a continuous service requirement specified in the award agreement. During 1995 and 1994, the parent awarded 639,424 shares and 942,138 shares, respectively, under the plans. In addition, during 1994, 417,000 shares of restricted stock were awarded under a performance share program. These shares would vest in three equal installments, provided the price of BAC common stock attained certain targets. During 1995, 278,000 of these shares vested as two of the price targets were met. If the remaining target stock price is not reached, but BAC attains a certain ranking among a comparison group of bank holding companies with respect to total shareholder return at the end of a three-year performance period, the remaining units will nevertheless vest unless the Executive Personnel and Compensation Committee (EPCC) of the Board of Directors determines that all or part of the units shall not vest. In 1995, an additional 12,000 shares of restricted stock were awarded under the performance share program, all of which are subject to the same vesting requirements as the third installment of the 1994 awards. Both stock options and restricted stock are granted by the EPCC. Shares available for grant, as either stock options or restricted stock, were 884,312 and 856,531 at December 31, 1995 and 1994, respectively. Shares subject to options that are canceled, except for those converted in connection with the Security Pacific Corporation and Continental mergers, become available for future grants. Postretirement Health Care and Life Insurance Benefits BAC provides certain defined health care and life insurance benefits under plans for retired U.S. employees. Retiree health care benefits are offered under self- insured arrangements, as well as through various health maintenance organizations. BAC contributes a fixed dollar amount to the plans, which is periodically reviewed and evaluated. The retirees' share is the remainder of the cost for the given coverage. BAC's policy is to fund the cost of medical benefits in amounts determined at the discretion of management. Employer contributions are invested in diversified portfolios, including fixed income and equity investments. The assumed discount rates used to measure the accumulated postretirement benefit obligation were 6.50 percent and 8.50 percent at December 31, 1995 and 1994, respectively. The expected long-term rates of return on plan assets used in computing the net periodic postretirement cost were 9.75 percent, 8.50 percent, and 9.75 percent for the years ended December 31, 1995, 1994, and 1993, respectively. The expected long-term rate of return on plan assets used in computing the net periodic postretirement cost for 1996 will be approximately 8.00 percent. This change is not expected to have a material effect on BAC's results of operations. The following is a reconciliation between the funded status of all postretirement benefit plans other than pensions and the amounts included in BAC's consolidated balance sheet:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $513 $470 Fully eligible active plan participants 21 26 Other active plan participants 97 91 ----------------- Total accumulated postretirement benefit obligation 631 587 Less: Plan assets at fair value, primarily listed stocks and bonds 104 62 ----------------- Accumulated postretirement benefit obligation in excess of plan assets 527 525 Less: Unrecognized net transition obligation 451 478 Unrecognized net gain (5) (56) Unrecognized prior service cost (benefit) (23) 5 ----------------- Accrued Postretirement Benefit Cost $104 $ 98 - --------------------------------------------------------------------------------
The unrecognized net transition obligation is being amortized on a straight-line basis over twenty years. The following is a summary of the components of net periodic postretirement cost:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 ----------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Service cost--benefits earned during the year $ 6 $ 8 Interest cost on accumulated postretirement benefit obligation 49 48 Net amortization and deferral 37 24 Effect of actual return on plan assets (17) -- ----------------- Net Periodic Postretirement Cost $ 75 $ 80 - --------------------------------------------------------------------------------
70 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- 19. Earnings per Common Share Earnings per common and common equivalent share are computed by dividing net income applicable to common stock by the total of the average number of common shares outstanding and the additional dilutive effect of stock options and warrants outstanding during the respective period. The dilutive effect of stock options and warrants is computed using the average market price of the parent's common stock for the period. Earnings per common share, assuming full dilution, are computed based on the average number of common shares outstanding during the period, and the additional dilutive effect of stock options and warrants outstanding during the period. The dilutive effect of outstanding stock options and warrants is computed using the greater of the closing market price or the average market price of the parent's common stock for the period. Earnings per common share, assuming full dilution, also includes the dilution which would result if the parent's Convertible Preferred Stock outstanding during the period had been converted at the beginning of the period. Net income applicable to common stock is adjusted for dividends declared during the period on the Convertible Preferred Stock. Earnings per common share have been computed based on the following:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Year Ended December 31 --------------------------------------- (dollar amounts in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Net income applicable to common stock $2,437 $1,928 $1,713 Average number of common shares outstanding 370,981,593 357,312,433 355,106,722 Average number of common and common equivalent shares outstanding 375,555,919 359,793,169 357,679,670 Average number of common shares outstanding-- assuming full dilution 378,103,241 365,273,824 363,243,993 - --------------------------------------------------------------------------------
20. Off-Balance-Sheet Transactions In the ordinary course of business, BAC enters into various types of transactions that involve credit-related financial instruments and foreign exchange and derivatives contracts that contain off-balance-sheet risk. Credit- related financial instruments are typically customer-driven while foreign exchange and derivatives contracts are entered into both on behalf of customers and for BAC's own account in managing interest rate and foreign exchange risk. In its effort to manage credit risk associated with foreign exchange and derivatives contracts, BAC ensures that its off-balance-sheet portfolio is well diversified, both in terms of instrument type and industry and customer concentration. In addition, credit risk is managed through BAC's credit approval process. It is also BAC's policy to execute legally enforceable master netting agreements with its foreign exchange and derivative customers, which provide for the netting of BAC's current positive and negative closeout exposures associated with all individual transactions of those counterparties in the event of default. To further mitigate off-balance-sheet credit exposures, BAC obtains collateral where determined appropriate. Credit-Related Financial Instruments Credit-related financial instruments include commitments to extend credit, standby letters of credit, financial guarantees, and commercial letters of credit. Fees received from credit-related financial instruments are recognized over the terms of the contracts and are included in other fees and commissions in noninterest income. Unfunded credit commitments at December 31, 1995 and 1994 totaled $149,453 million and $131,070 million, respectively, of which $8,294 million and $7,108 million related to foreign-based customers and $141,159 million and $123,962 million related to domestic-based customers. The unfunded credit commitments to domestic-based customers at December 31, 1995 and 1994 included $34,465 million and $28,058 million, respectively, of unutilized credit card lines. At both December 31, 1995 and 1994, no domestic or foreign industry nor any individual foreign country comprised more than ten percent of total unfunded noncredit- card-related commitments. For a summary of funded loan outstandings by type at December 31, 1995 and 1994, refer to Note 8 of the Notes to Consolidated Financial Statements on pages 60 and 61. A summary of the contractual amounts of each significant class of credit- related financial instruments outstanding appears on the next page. The contractual amounts of these instruments are not recorded as assets or liabilities on the balance sheet. These amounts represent the amounts at risk should the contract be fully drawn upon, the client default, and the value of any existing collateral become worthless. BankAmerica Corporation 1995 / 71 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ------------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Commitments to extend credit: Unutilized credit card lines $34,465 $28,058 Other commitments to extend credit 94,524 82,929 Standby letters of credit and financial guarantees (net of participations sold: 1995--$2,383; 1994--$2,402) 16,336 15,870 Commercial letters of credit 4,128 4,213 - --------------------------------------------------------------------------------
Commitments to Extend Credit Unutilized credit card lines are commitments to extend credit. These lines generally are not secured and may be canceled by BAC after thirty-days written notice to the customer. Many credit card customers are not expected to fully draw down their total lines of credit and, therefore, the total contractual amount of these lines does not necessarily represent future cash requirements. Other commitments to extend credit represent agreements to extend credit to a customer for which BAC may have received fees. These commitments have specified interest rates and generally have fixed expiration dates and may be terminated by BAC if certain conditions of the contract are violated. Although they are currently subject to drawdown, many of these commitments are expected to expire or terminate without being funded. Of total other commitments to extend credit at December 31, 1995, $38,098 million will expire in less than one year, $51,920 million from one to five years, and $4,506 million after five years. Generally, other commitments are not secured, but, when required, collateral may include cash, securities, and real estate. Standby Letters of Credit and Financial Guarantees Standby letters of credit are performance assurances made on behalf of customers who have a contractual obligation to produce or deliver goods or services or otherwise perform. Credit risk arises in these transactions from the possibility that a customer may not be able to repay BAC upon default of performance if the standby letter of credit has been drawn upon. At December 31, 1995 and 1994, standby letters of credit totaled $7,228 million and $6,312 million, respectively. Of the December 31, 1995 balance, $4,719 million will expire in less than one year, $2,080 million from one to five years, and $429 million after five years. BAC issues financial guarantees assuring performance of customer financial obligations under money market instruments, such as commercial paper and state, county, and municipal securities. At December 31, 1995 and 1994, financial guarantees totaled $9,108 million and $9,558 million, respectively. Of the December 31, 1995 balance, $5,532 million will expire in less than one year, $2,707 million from one to five years, and $869 million after five years. Fees received for standby letters of credit and financial guarantees are recognized over the lives of the contracts and are included in other fees and commissions in noninterest income. Generally, standby letters of credit and financial guarantees are not secured, but, when required, collateral may include cash and securities. Commercial Letters of Credit Commercial letters of credit ensure payment by a bank to a third party for a customer's foreign or domestic trade transactions, generally to finance a commercial contract for the shipment of goods. BAC's credit risk in these transactions is limited since the contracts are collateralized by the merchandise being shipped and are generally of short duration. Foreign Exchange and Derivatives Contracts Foreign exchange and derivatives contracts include futures, forwards, swaps, and option contracts, and are principally linked to interest rates, foreign exchange rates, security prices, or commodity or equity indices. For most contracts, notional amounts are used solely to determine cash flows to be exchanged. However, certain foreign exchange contracts are designed for principal amounts to be exchanged on a common settlement date. The notional or contract amounts associated with foreign exchange and derivative financial instruments are not recorded as assets or liabilities on the balance sheet and do not represent the potential for gain or loss associated with such transactions. Foreign exchange and derivatives contracts that do not qualify as hedges for BAC's own assets and liabilities are marked to market, and the unrealized gains and unrealized losses are recorded on the consolidated balance sheet on a gross basis unless right of set-off criteria are met. Unrealized gains and losses on contracts executed with the same counterparty may be netted when contracts have been executed under legally enforceable master netting agreements. The accounting for gains and losses on foreign exchange and derivatives contracts that qualify as accounting hedges differs based on the type of contract and the nature of the hedge strategy. For further information regarding BAC's accounting treatment for foreign exchange and derivatives contracts, refer to Note 1 of the Notes to the Consolidated Financial Statements on pages 52-56. 72 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Notional, Credit Risk, and Credit Exposure Amounts for Derivative Financial Instruments Held or Issued for Trading Purposes
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1995 December 31, 1994 --------------------------------------------------------------------------------------------- Notional Credit Credit Notional Credit Credit (in millions) Amount Risk/a/ Exposure/b/ Amount Risk/a/ Exposure/b/ - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate contracts Interest rate swaps $ 418,240 $ 8,647 $2,787/c/ $ 348,515 $ 4,971 $1,960/c/ Futures and forward rate contracts: Commitments to purchase 160,126 9 9 95,010 192 192 Commitments to sell 190,538 381 381 116,408 35 35 Written options 35,217 --/d/ --/d/ 35,909 --/d/ --/d/ Purchased options 45,351 494 390 44,779 441 279 -------------------------------------------------------------------------------------------- Total interest rate contracts 849,472 9,531 3,567 640,621 5,639 2,466 Foreign exchange contracts Spot, forward, and futures contracts 592,441 8,781 2,553 630,867 6,623 2,234 Written options 21,095 --/d/ --/d/ 19,617 --/d/ --/d/ Purchased options 20,244 395 268 18,861 267 208 Currency swaps 23,085 1,517 1,403 21,943 1,595 1,353 -------------------------------------------------------------------------------------------- Total foreign exchange contracts 656,865 10,693 4,224 691,288 8,485 3,795 Stock index options and commodity contracts 878 12 10 825 9 6 -------------------------------------------------------------------------------------------- Total $1,507,215/e/ $20,236 $7,801 $1,332,734/f/ $14,133 $6,267 - -----------------------------------------------------------------------------------------------------------------------------------
Notional and Credit Risk Amounts for Derivative Financial Instruments Held or Issued for Asset and Liability Management Purposes
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1995 December 31, 1994 -------------------------------------------------------------------------------- Notional Credit Notional Credit (in millions) Amount Risk/a/ Amount Risk/a/ - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate contracts Interest rate swaps $33,543 $155 $32,864 $120 Futures and forward rate contracts 28,702 -- 28,773 -- Purchased options 9,200 60 4,510 43 ---------------------------------------------------------------------------- Total interest rate contracts 71,445 215 66,147 163 Foreign exchange contracts Spot, forward, and futures contracts 1,900 -- 1,383 -- Currency swaps 430 61 443 129 ---------------------------------------------------------------------------- Total foreign exchange contracts 2,330 61 1,826 129 ---------------------------------------------------------------------------- Total $73,775/e/ $276 $67,973/f/ $292 - ------------------------------------------------------------------------------------------------------------------------------------
/a/ Excluding the effects of legally enforceable master netting agreements. /b/ Including the effects of legally enforceable master netting agreements. /c/ Including the effects of cross product netting of certain interest rate derivatives and currency swaps. /d/ Interest rate and foreign exchange options written have no credit risk or credit exposure. /e/ Interest rate swaps and interest rate options in both the trading and asset and liability management portfolios include $14.2 billion and $0.7 billion, respectively, of intercompany hedging-related contracts. Foreign exchange contracts in both the trading and asset and liability management portfolios include $1.9 billion of intercompany hedging-related contracts. /f/ Interest rate swaps and interest rate options in both the trading and asset and liability management portfolios include $9.8 billion and $0.1 billion, respectively, of intercompany hedging-related contracts. Foreign exchange contracts in both the trading and asset and liability management portfolios include $1.5 billion of intercompany hedging-related contracts. - -------------------------------------------------------------------------------- The table above summarizes the notional amounts, credit risk, and credit exposure for each significant class of foreign exchange and derivative contract outstanding in BAC's trading portfolio and the notional amounts and credit risk for each significant class of foreign exchange and derivative contract outstanding in BAC's asset and liability management portfolio. Credit risk represents BAC's potential loss on these transactions if all counterparties failed to perform according to the terms of the contract and the value of any existing collateral became worthless, based on then-current currency exchange and interest rates at each respective date. Credit exposure represents the potential loss to which BAC is exposed, after taking into consideration legally enforceable master netting agreements. Historically, losses associated with counterparty nonperformance on derivative and foreign exchange instruments have been immaterial. BankAmerica Corporation 1995 / 73 - -------------------------------------------------------------------------------- The following table summarizes the average and year-end fair values of each significant class of foreign exchange and derivative contract outstanding in BAC's trading portfolio and the year-end fair values for each significant class of foreign exchange and derivative contract outstanding in BAC's asset and liability management portfolio. Fair value amounts consist of unrealized gains and losses, accrued interest receivable and payable, and premiums paid or received, and take into account master netting agreements. The fair value amounts for the trading portfolio are disaggregated by gross unrealized gains (assets) and gross unrealized losses (liabilities), while the fair value amounts for the asset and liability management portfolio are shown on a net basis. Fair value amounts were generally calculated using discounted cash flow models based on current market yields for similar instruments and the maturity of each instrument. - -------------------------------------------------------------------------------- Fair Values of Derivative Financial Instruments Held or Issued for Trading Purposes
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1995 December 31, 1994 ------------------------------------------------------------------------------------------------- Average Fair Value Period End Period End (in millions) For The Year Ended/ab/ Fair Value/b/ Fair Value/b/ - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate contracts Interest rate swaps: Assets $2,522 $2,787 $1,960 Liabilities (2,258) (2,605) (1,588) Futures and forward rate contracts: Assets 319 390 227 Liabilities (291) (373) (189) Written options (222) (237) (299) Purchased options 263 390 279 ----------------------------------------------------------------------- Total interest rate contracts 333 352 390 Foreign exchange contracts Spot, forward, and futures contracts: Assets 3,979 2,553 2,234 Liabilities (4,429) (3,048) (2,766) Written options (431) (355) (228) Purchased options 403 268 208 Currency swaps: Assets 1,762 1,403 1,353 Liabilities (2,062) (1,600) (1,494) ----------------------------------------------------------------------- Total foreign exchange contracts (778) (779) (693) Stock index options and commodity contracts Assets 13 10 6 Liabilities (8) (9) (7) ----------------------------------------------------------------------- Total stock index options and commodity contracts 5 1 (1) ----------------------------------------------------------------------- Total $ (440) $ (426) $ (304) - -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Fair Values of Derivative Financial Instruments Held or Issued for Asset and Liability Management Purposes
- ------------------------------------------------------------------------------------------------------------------------------------ December 31 ------------------------------------ (in millions) 1995/b/ 1994/b/ - ------------------------------------------------------------------------------------------------------------------------------------ Interest rate contracts Interest rate swaps $ 33 $(693) Futures and forward rate contracts 56 (42) Purchased options 3 39 ------------------------------- Total interest rate contracts 92 (696) Foreign exchange contracts Spot, forward, and futures contracts -- -- Currency swaps 47 129 ------------------------------- Total foreign exchange contracts 47 129 ------------------------------ Total $139 $(567) - ------------------------------------------------------------------------------------------------------------------------------------
/a/ Average fair value amounts are calculated based on monthly balances. /b/ For a description of fair value methodologies, refer to Note 21 in the Notes to the Consolidated Financial Statements on pages 77-79. - -------------------------------------------------------------------------------- 74 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Foreign Exchange Contracts Foreign exchange contracts, which include spot, forward and futures contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price, on an agreed-upon settlement date. Foreign exchange option contracts are similar to interest rate option contracts, except that they are based on currencies, rather than interest rates. Exposure to loss on these contracts will increase or decrease over their respective lives as currency exchange rates fluctuate. For exchange-traded foreign exchange contracts, BAC's exposure to off-balance-sheet credit risk is limited, as these transactions are executed on organized exchanges that assume the obligations of counterparties and generally require security deposits and daily settlement of margins. Interest Rate and Currency Swaps Interest rate swaps represent contractual agreements between two parties to exchange interest payments in the same currency, each of which is computed on a different basis, on a specified notional amount. Most interest rate swaps involve the net exchange of payments calculated as the difference between fixed and floating rate interest payments. Currency swaps, in their simplest form, represent contractual agreements that involve the exchange of both periodic and final amounts in two different currencies. Exposure to loss on both types of swap contracts will increase or decrease over their respective lives as a function of maturity dates, interest and foreign exchange rates, and timing of payments. Interest Rate Futures, Forward, and Option Contracts Interest rate futures are exchange-traded instruments and represent commitments to purchase or sell a designated security or money market instrument at a specified future date and price. Interest rate forward agreements are over-the-counter products and represent contracts where two parties agree on an interest rate for one party to pay the other for a specific period in the future. Interest rate options, which primarily consist of caps and floors, are interest rate protection instruments that involve the payment from the seller to the buyer of an interest rate differential in exchange for a premium paid by the buyer. This differential represents the difference between current interest rates and an agreed-upon rate applied to a notional amount. Exposure to loss on all interest rate contracts will increase or decrease over their respective lives as interest rates fluctuate. For interest rate futures and exchange-traded option contracts, BAC's exposure to off-balance-sheet credit risk is limited, as these transactions are executed on organized exchanges that assume the obligations of counterparties and generally require security deposits and daily settlement of margins. Trading Activities Trading income represents the net amount earned from BAC's trading activities, which include entering into transactions to meet customer demand and taking positions for BAC's own account in a diverse range of financial instruments and markets. The profitability of these trading activities depends largely on the volume and diversity of the transactions BAC executes, the level of risk it is willing to assume, and the volatility of price and rate movements. To reflect the business purpose and use of the financial contracts into which BAC enters, trading income and the related net interest revenue or expense associated with such contracts have been allocated into three broad functional categories: interest rate trading, foreign exchange trading, and debt instruments trading. Trading-related income from interest rate instruments primarily includes the results from transactions using interest rate and currency swaps, interest rate futures, option contracts, and forward rate agreements, as well as cash instruments used in the management of this function. Foreign exchange trading-related income primarily includes the results from transactions using foreign exchange spot, forward, futures, and option contracts. Trading-related income from debt instruments primarily represents the results from trading activities in various debt securities, including U. S. government and government agency securities, foreign government securities, mortgage-backed securities, municipal bonds, and corporate debt. - -------------------------------------------------------------------------------- Trading-Related Income
- -------------------------------------------------------------------------------- Year Ended December 31 -------------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Trading income Interest rate $ 67 $ 63 Foreign exchange 303 237 Debt instruments 157 57 ---------------------- $ 527 $ 357 Other trading-related income/a/ Interest rate $ 30 $ (3) Foreign exchange 28 7 Debt instruments 152 85 ---------------------- $ 210 $ 89 - --------------------------------------------------------------------------------
/a/ Primarily includes the net interest revenue and expense associated with these contracts. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 75 - -------------------------------------------------------------------------------- Asset and Liability Management Activities BAC uses foreign exchange contracts and derivative instruments, primarily interest rate contracts, to manage interest rate risk related to specific assets and liabilities, including fixed rate and adjustable rate residential mortgages, long-term debt, and deposits. Foreign exchange contracts are used to hedge net capital exposure and foreign currency exposures. One strategy that BAC employs in managing interest rate risk is the use of interest rate swaps to modify the interest rate characteristics of designated assets and liabilities. For example, BAC may enter into an interest rate swap to alter cash flows on its long-term debt from fixed to floating rate in an effort to reduce gap mismatches. Another hedging strategy used by BAC is the purchase of options to protect against significant loss due to extreme interest rate movements. For example, BAC may purchase interest rate floors on its adjustable rate mortgage portfolio to reduce the risk of loss from a rapid or prolonged decline in interest rates. In addition, BAC uses interest rate swaps to hedge against market value fluctuations of available-for-sale securities. The above hedging strategies would be rendered ineffective if BAC disposes of the underlying product being hedged or if certain unexpected events occur. In addition, BAC may terminate its hedging-related contracts in reaction to certain events or circumstances. However, such terminations are infrequent, and the deferred gains or losses on terminated contracts recorded in BAC's consolidated balance sheet at December 31, 1995 and 1994, and the amortization of such amounts for the years ended 1995 and 1994 were not significant. The table on page 76 summarizes the expected or contractual maturities and weighted average interest rates associated with amounts to be received or paid on BAC's interest rate swaps used to manage asset and liability interest rate exposure at December 31, 1995 and 1994. These swaps have been designated as accounting hedges and are used to modify the interest rate characteristics of certain specified assets and liabilities. Approximately 80 percent of BAC's hedging-related interest rate futures and forward rate agreements outstanding at December 31, 1995 mature within one year, while approximately 90 percent of its hedging-related option contracts mature between five and ten years. Approximately 65 percent of BAC's hedging-related interest rate futures and forward rate agreements outstanding at December 31, 1994 mature within one year, while approximately 85 percent of its hedging-related option contracts mature within three years. All of BAC's hedging-related foreign exchange forward contracts outstanding at December 31, 1995 and 1994 mature within 60 days. At both December 31, 1995 and 1994, BAC's hedging-related foreign exchange forward contracts were denominated in various currencies, most notably Hong Kong dollars and Spanish pesetas. Securities Lending BAC conducts securities lending transactions primarily for institutional trust customers and, at times, indemnifies these customers against various losses. All securities lending transactions are collateralized by U.S. government or federal agency securities, cash, or letters of credit with total market value equal to or in excess of the market value of the securities lent. In the event of default by a customer combined with a decline in the value of the associated collateral, BAC may be exposed to risk of loss. During 1995, BAC made a decision to exit, and is in the process of divesting, its institutional trust and securities services business. The following summarizes indemnified securities lending transactions and the associated collateral:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ----------------------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Indemnified securities lent $207 $5,910 Associated collateral 209 6,039 - --------------------------------------------------------------------------------
76 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Asset and Liability Management Interest Rate Swaps/a/
- ----------------------------------------------------------------------------------------------------------------------- December 31, 1995 ------------------------------------------------------------------------------------ (dollar amounts in billions) 0-1 year (greater than)1-2 years (greater than)2-3 years - ----------------------------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 2.5 $ 1.6 $ 1.2 Weighted average receive rate 6.83% 6.54% 7.06% Pay fixed/b/ Notional amount $ 3.4 $ 2.4 $ 2.2 Weighted average pay rate 4.89% 6.23% 6.26% Forward receive fixed/d/ Notional amount -- $ 0.3 -- Weighted average receive rate -- 6.28% -- Forward pay fixed/d/ Notional amount -- $ 0.3 -- Weighted average pay rate -- 5.93% -- Basis swaps/e/ Notional amount -- -- -- ----------------------------------------------------------------------------------- Total Notional Amount ------------------------------------------------------------------------------------------ (dollar amounts in billions) (greater than)3-4 years (greater than)4-5 years (greater than) 5-10 years - -------------------------------------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 1.2 $ 0.5 $ 9.4 Weighted average receive rate 6.95% 6.79% 6.31% Pay fixed/b/ Notional amount $ 1.4 $ 1.1 $ 2.0 Weighted average pay rate 7.26% 7.86% 6.61% Forward receive fixed/d/ Notional amount $ 0.1 $ 0.6 $ 0.3 Weighted average receive rate 6.55% 8.06% 8.23% Forward pay fixed/d/ Notional amount $ 0.9 -- $ 0.2 Weighted average pay rate 6.42% -- 7.87% Basis swaps/e/ Notional amount -- -- $ 0.3 ------------------------------------------------------------------------- Total Notional Amount -------------------------------------------- (dollar amounts in billions) (greater than)10 years Total - ----------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 1.6 $18.0/c/ Weighted average receive rate 6.77% 6.55% Pay fixed/b/ Notional amount -- $12.5 Weighted average pay rate -- 6.18% Forward receive fixed/d/ Notional amount -- $ 1.3 Weighted average receive rate -- 7.57% Forward pay fixed/d/ Notional amount -- $ 1.4 Weighted average pay rate -- 6.60% Basis swaps/e/ Notional amount -- $ 0.3 -------------------------- Total Notional Amount $33.5
December 31, 1994 ------------------------------------------------------------------------- (dollar amounts in billions) 0-1 year (greater than)1-2 years (greater than)2-3 years - ----------------------------------------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 2.7 $ 1.8 $ 1.5 Weighted average receive rate 5.83% 7.31% 6.99% Pay fixed/b/ Notional amount $ 3.0 $ 3.6 $ 1.8 Weighted average pay rate 4.91% 5.06% 6.40% Forward receive fixed/d/ Notional amount -- -- $ 0.2 Weighted average receive rate -- -- 5.93% Forward pay fixed/d/ Notional amount -- -- $ 0.3 Weighted average pay rate -- -- 6.28% Basis swaps/e/ Notional amount $ 0.4 -- -- Total Notional Amount December 31, 1994 ------------------------------------------------------------------------------------------ (dollar amounts in billions) (greater than)3-4 years (greater than)4-5 years (greater than) 5-10 years - -------------------------------------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 1.0 $ 0.8 $ 7.5 Weighted average receive rate 7.55% 5.73% 6.30% Pay fixed/b/ Notional amount $ 0.1 $ 0.6 $ 2.8 Weighted average pay rate 7.00% 7.50% 6.84% Forward receive fixed/d/ Notional amount -- -- $ 0.7 Weighted average receive rate -- -- 6.90% Forward pay fixed/d/ Notional amount -- $ 0.2 $ 1.0 Weighted average pay rate -- 6.16% 7.60% Basis swaps/e/ Notional amount -- -- $ 0.3 Total Notional Amount ------------------------------------------- (dollar amounts in billions) (greater than)10 years Total - ---------------------------------------------------------------------------------------------------- Receive fixed/b/ Notional amount $ 2.0 $17.3/c/ Weighted average receive rate 6.79% 6.50% Pay fixed/b/ Notional amount $ 0.4 $12.3 Weighted average pay rate 7.35% 5.82% Forward receive fixed/d/ Notional amount $ 0.2 $ 1.1 Weighted average receive rate 6.66% 6.67% Forward pay fixed/d/ Notional amount -- $ 1.5 Weighted average pay rate -- 7.15% Basis swaps/e/ Notional amount -- $ 0.7 -------------------------------------------------------------- Total Notional Amount $32.9 - ----------------------------------------------------------------------------------------------------
/a/ Includes intercompany swaps. /b/ The variable rate side of substantially all receive fixed rate and pay fixed rate swaps is based on the one-, three-, or six-month LIBOR. At December 31, 1995, and 1994, the one-, three-, and six-month LIBOR rates were 5.9375 percent and 6.1250 percent, 5.6563 percent and 6.3125 percent, and 5.6563 percent and 6.8125 percent, respectively. /c/ Includes $0.4 billion and $0.6 billion of swaps with amortizing notional amounts at December 31, 1995 and 1994, respectively. /d/ Accrual of interest on forward swaps starts at a predetermined future date. The majority of the forward swaps start accruing interest one to three years after each reported year end. /e/ Basis swaps are interest rate swaps in which both amounts paid and received are based on floating rates. BAC's pay rates are primarily based on a LIBOR or Prime index and its receive rates are primarily based on LIBOR. - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 77 - -------------------------------------------------------------------------------- 21. Fair Value of Financial Instruments Management uses its best judgment in estimating the fair value of BAC's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts BAC could have realized in a sales transaction at either December 31, 1995 or 1994. The estimated fair value amounts for 1995 and 1994 have been measured as of their respective year ends, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year end. This disclosure of fair value amounts does not include the fair values of any intangibles, including core deposit intangibles, MSRs, and credit card intangibles. The following information should not be interpreted as an estimate of the fair value of the entire corporation since a fair value calculation is only required for a limited portion of BAC's assets. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between BAC's disclosures and those of other companies may not be meaningful. The following methods and assumptions were used to estimate the fair values of BAC's financial instruments at December 31, 1995 and 1994. Financial Instruments Valued at Carrying Value The respective carrying values of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and due from banks, interest-bearing deposits in banks, federal funds sold and purchased, securities purchased and sold under resale and repurchase agreements, trading account assets, customers' acceptance liability, accrued interest receivable, other short-term borrowings, acceptances outstanding, accrued interest payable, and certain other assets and liabilities that are considered financial instruments. Carrying values were assumed to approximate fair values for these financial instruments as they are short term in nature and their recorded amounts approximate fair values or are receivable or payable on demand. Available-for-Sale and Held-to-Maturity Securities Fair value amounts of available-for-sale and held-to-maturity securities were based on quoted market prices, wherever available. Where quoted market prices did not exist, fair values were estimated using book, cost, or appraised value as deemed appropriate by management. Available-for-sale securities are carried at their aggregate fair value. The aggregate fair value and aggregate carrying value of available-for-sale securities exclude the fair value of off-balance-sheet financial instruments that qualify as accounting hedges of $43 million at December 31, 1994. The notional amount of these instruments was $515 million at December 31, 1994. There were no off-balance-sheet financial instruments that qualified as accounting hedges for available-for-sale securities at December 31, 1995. Loans For purposes of these fair value calculations, the aggregate fair value of each loan portfolio, excluding nonaccrual domestic commercial and foreign loans, was adjusted by the related portion of the allowance for credit losses. The allowance for credit losses primarily represents the credit risk associated with loans that reprice within relatively short time frames. The fair values of nonaccrual domestic commercial and foreign loans were computed by deducting an estimated market discount from their carrying values to reflect the uncertainty of future cash flow amounts and timing. The aggregate fair value of loans excludes the effect of off-balance-sheet financial instruments that qualify as accounting hedges. The notional amounts of these instruments were $12,107 million and $8,484 million at December 31, 1995 and 1994, respectively, and their associated net fair values were $(42) million at December 31, 1995 and zero at December 31, 1994. At December 31, 1995 and 1994, the allowance for credit losses included $895 million and $1,194 million, respectively, that was not allocated to a specific segment of the loan portfolio. As such, these portions of the allowance for credit losses were not included in any of the carrying values or fair values of loans presented in the table on page 78 at each respective year end. The following methods and assumptions were used to calculate the fair values of loans. 78 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Residential first mortgages The fair values of residential first mortgages were calculated using pricing procedures that are similar to those used when these loans are sold in the secondary market in the normal course of business. These pricing procedures use current market rates for similar types of loans. Residential junior mortgages, consumer installment loans, credit card loans, individual lines of credit, and other consumer loans (other consumer loans) The fair values of other consumer loans were calculated using discounted cash flow models. The discount rates were based on current market interest rates for similar types of loans. Domestic commercial loans The carrying values of domestic commercial loans that reprice within relatively short time frames were assumed to approximate their fair values. The fair values of domestic commercial loans that do not reprice or mature within relatively short time frames were calculated using discounted cash flow models based on the maturity of the loans. The discount rates, which were based on market interest rates for similar types of loans, incorporated adjustments for credit risk. The fair values of commitments to extend credit were not significant at either December 31, 1995 or 1994. Foreign loans Substantially all of the foreign loans reprice within relatively short time frames. As a result, the carrying values of these foreign loans were assumed to approximate their fair values. Other Financial Instruments For non-exchange-traded equity securities, which are included in other assets, fair values were estimated using equity, cost, or appraised value as deemed appropriate by management. The carrying values of all other components of other assets that are considered financial instruments approximated their respective fair values, as they are short term in nature or are receivable or payable on demand. The following is a summary of previously described on-balance-sheet asset financial instruments whose fair values differ from their carrying values for either of the periods presented:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 ------------------------------------------------- 1995 1994 ------------------- --------------------- Carrying Fair Carrying Fair (in millions) Value Value Value Value - -------------------------------------------------------------------------------- Assets Held-to-maturity securities $ 4,656 $ 4,332 $ 8,167 $ 7,292 Loans: Domestic consumer: Residential first mortgages 36,457 37,056 33,727 32,541 Other consumer loans 36,149 36,610 32,252 32,063 Domestic commercial 53,144 53,187 49,576 49,454 Foreign 22,493 22,547 19,552 19,544 ------------------------------------------------- Total loans 148,243 149,400 135,107 133,602 Other financial instruments 3,022 3,022 2,204 2,217 - --------------------------------------------------------------------------------
Deposits The fair values of domestic and foreign demand deposits, savings deposits, and money market deposits without defined maturities were the amounts payable on demand. For substantially all domestic deposits with defined maturities, the fair values were calculated using discounted cash flow models based on market interest rates for the relevant product types and maturity dates for the state in which the deposit was held. For variable-rate deposits with fixed repricing dates, the first repricing date was considered the maturity date for purposes of the fair value calculation. For variable rate deposits where BAC has the contractual right to change rates, carrying value was assumed to approximate fair value. The discount rates used were based on rates for comparable deposits. The fair values of domestic business negotiable certificates of deposit and domestic business time deposits were calculated using a discounted cash flow model. This model was based on the maturities of the related deposits and market interest rates for similar types of deposits. The carrying values of total foreign time deposits were assumed to approximate their fair values since these deposits primarily had variable rates and repriced within relatively short time frames. BankAmerica Corporation 1995 / 79 - -------------------------------------------------------------------------------- The aggregate fair values of deposits exclude the aggregate fair values of off-balance-sheet financial instruments that qualify as accounting hedges for the bank's certificates of deposit, which were $(16) million and $(653) million, respectively, at December 31, 1995 and 1994. The notional amount of these contracts were $53,296 million and $50,959 million at December 31, 1995 and 1994, respectively. Long-term debt The fair values of BAC's long-term debt instruments were calculated based on quoted market prices. For those long-term debt issues where quoted market prices were not available, a discounted cash flow model was used. The discount rates were based on yield curves appropriate for the remaining maturities of the instruments. The fair value of long-term debt excludes the fair values of off- balance-sheet financial instruments that qualify as accounting hedges for the parent's long-term debt, which were $192 million and $43 million, respectively, at December 31, 1995 and 1994. The notional amounts of these contracts were $6,752 million and $5,225 million at December 31, 1995 and 1994, respectively. Subordinated capital notes The fair values of BAC's subordinated capital notes were calculated based on quoted market prices. The following is a summary of previously described on-balance-sheet liability financial instruments whose aggregate fair values differ from their carrying value for either of the periods presented:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31 -------------------------------------------------- 1995 1994 ---------------------- ----------------------- Carrying Fair Carrying Fair (in millions) Value Value Value Value - -------------------------------------------------------------------------------- Liabilities Deposits $160,494 $160,713 $154,394 $154,329 Long-term debt 14,723 15,422 14,823 14,762 Subordinated capital notes 605 628 605 610 - --------------------------------------------------------------------------------
Foreign exchange contracts and derivatives The following is a summary of the fair values of foreign exchange and derivatives contracts outstanding. The fair values of exchange-traded foreign exchange and derivative contracts are based on quoted market prices or dealer quotes. Fair values of non-exchange traded, or over-the-counter (OTC) foreign exchange and derivatives contracts consist of net unrealized gains and losses, accrued interest receivable or payable, and premiums paid or received. These amounts were generally calculated using discounted cash flow models based on current market yields for similar types of instruments and the maturity of each instrument. The discount rates were based on market interest rates and indices for similar foreign exchange contracts and derivatives prevalent in the market. Refer to Note 20 of the Notes to Consolidated Financial Statements on pages 70-76 for more information regarding off-balance-sheet transactions, including a summary of the fair values for each significant class of foreign exchange and derivative contract outstanding in BAC's trading and asset and liability management portfolios. - -------------------------------------------------------------------------------- Fair Values of Foreign Exchange Contracts and Derivatives
- -------------------------------------------------------------------------------- December 31 ------------------------------ (in millions) 1995 1994 - -------------------------------------------------------------------------------- Trading $(426) $(304) Asset and Liability Management 139 (567) - --------------------------------------------------------------------------------
22. Special Deposit Assessment Congress is currently considering several proposals that would impose a one-time assessment on deposits insured by the Savings Association Insurance Fund (SAIF). If imposed, this assessment would recapitalize SAIF to 1.25% of insured deposits as prescribed by the Federal Deposit Insurance Corporation Improvement Act. At this time it is not possible to predict the ultimate provisions of any final legislation or their effect on BAC. 23. Legal Contingencies Due to the nature of its business, BAC is subject to various threatened or filed legal actions. Although the amount of the ultimate exposure, if any, cannot be determined at this time, BAC, based upon the advice of counsel, does not expect the final outcome of threatened or filed suits to have a material adverse effect on its financial position. 24. BankAmerica Corporation (Parent Company Only) The amount of funds available to the parent from its subsidiaries is limited by restrictions placed on them by law and various debt covenants. 80 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Statement of Operations
- -------------------------------------------------------------------------------- Year Ended December 31 -------------------------------- (in millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Dividends from subsidiaries: Banking $2,110 $2,107 $1,088 Nonbanking 125 5 143 Interest on subordinated notes purchased from banking subsidiaries 316 184 141 Interest on advances to subsidiaries: Banking 5 8 13 Nonbanking 237 198 223 Interest on deposits in banks: Banking subsidiaries 231 86 31 Third parties -- 6 1 Interest on available-for-sale and held-to-maturity securities 87 123 179 Interest from securities purchased under resale agreements from third parties -- 4 9 Net gain on available-for-sale securities 10 21 7 Other income 27 15 3 -------------------------------- Total income 3,148 2,757 1,838 Interest on other short-term borrowings 76 28 20 Interest on long-term debt 1,007 778 703 Interest on subordinated capital notes 46 42 113 Amortization of goodwill 30 30 27 Other expense 96 157 103 -------------------------------- Total expense 1,255 1,035 966 Income before income taxes and equity in undistributed income of subsidiaries 1,893 1,722 872 Benefit from income taxes 158 172 108 Equity in undistributed income of subsidiaries 613 282 974 -------------------------------- Net Income $2,664 $2,176 $1,954 - --------------------------------------------------------------------------------
See notes following the Statement of Cash Flows on page 81. - -------------------------------------------------------------------------------- Under the U.S. National Bank Act and other federal laws, the parent's national banking subsidiaries are subject to prohibitions on the payment of dividends in certain circumstances and to restrictions on the amount that each can pay without the prior approval of the Office of the Comptroller of the Currency. Without the Comptroller's approval, dividends for a given year cannot exceed each bank's net income (as defined by national banking laws) for that year and retained net income from the preceding two years. In addition, dividends may not be paid in excess of each bank's undivided profits, subject to other applicable provisions of law. Based upon these laws, the bank could have declared dividends for 1995 of $2,466 million, SFNB could have declared dividends of $338 million, and the parent's other national banking subsidiaries could have declared dividends of $6 million. At December 31, 1995, the unutilized - -------------------------------------------------------------------------------- Balance Sheet
- -------------------------------------------------------------------------------- December 31 -------------------------- (in millions) 1995 1994 - -------------------------------------------------------------------------------- Assets Cash and short-term investments $ 3,211 $ 2,571 Available-for-sale securities 1,101 1,482 Held-to-maturity securities -- 125 Investments in subsidiaries: Banking 21,124 20,228 Nonbanking 1,530 1,276 Subordinated notes purchased from banking subsidiaries 4,580 4,525 Advances to subsidiaries: Banking 79 98 Nonbanking 3,539 3,730 Accrued interest receivable 99 63 Goodwill 643 680 Other assets 733 640 -------------------------- Total Assets $36,639 $35,418 Liabilities and Stockholders' Equity Borrowings from subsidiaries $ 141 $ 84 Other short-term borrowings 706 835 Accrued interest payable 192 193 Other liabilities 1,076 781 Long-term debt 13,697 14,029 Subordinated capital notes 605 605 -------------------------- Total liabilities 16,417 16,527 Stockholders' equity 20,222 18,891 -------------------------- Total Liabilities and Stockholders' Equity $36,639 $35,418 - --------------------------------------------------------------------------------
See notes following the Statement of Cash Flows on page 81. - -------------------------------------------------------------------------------- dividends allowed under these laws for the bank, SFNB, and other national banking subsidiaries were $866 million, $45 million, and $6 million, respectively. In addition, state-chartered member and nonmember banking subsidiaries are subject to dividend limitations imposed by applicable federal or state law. State-chartered member banking subsidiaries could have declared dividends of $61 million without approval of the Federal Reserve Board for 1995. State-chartered nonmember banking subsidiaries could have declared dividends without state approval of $158 million for 1995. At December 31, 1995, the unutilized dividends allowed under these laws for the state-chartered banking subsidiaries were $4 million and $58 million, respectively. The parent's subsidiary, Bank of America, FSB, is subject to regulatory restrictions by the Office of Thrift Supervision on its payment of dividends. Under these restrictions, Bank of America, FSB could have declared dividends without regulatory approval of $101 million for 1995. At December 31, 1995, the unutilized dividends allowed under these laws were $73 million. The depository subsidiaries are also subject to certain restrictions of the Federal Reserve Act on loans each subsidiary may extend to their parent companies. Among other things, the aggregate of such loans may not exceed 10 percent of the sum of such subsidiary's capital stock and surplus. Such loans must be secured by collateral with a value between 100 percent BankAmerica Corporation 1995 / 81 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Statement of Cash Flows
- ------------------------------------------------------------------------------------------------------------------------------------ December 31 ---------------------------------- (in millions) 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows from Operating Activities Net income $2,664 $2,176 $1,954 Adjustments to net income to arrive at net cash provided by operating activities: Provision for (benefit from) deferred income taxes (43) 215 (216) Equity in undistributed income of subsidiaries (613) (282) (974) Amortization of goodwill 30 30 27 (Increase) decrease in accrued interest receivable (36) 1 33 Increase (decrease) in accrued interest payable (1) 2 (32) Increase (decrease) in current income taxes payable 53 (165) 216 Other, net 378 13 (73) ---------------------------------- Net cash provided by operating activities 2,432 1,990 935 Cash Flows from Investing Activities Capital contributions to subsidiaries (182) (700) (935) Capital returns from subsidiaries 108 522 395 Purchase of subordinated notes from banking subsidiaries (500) (310) -- Redemption of subordinated capital notes from banking subsidiaries 400 -- -- Activity in available-for-sale securities: Sales proceeds 572 932 98 Purchases (54) (1,325) (25) Activity in held-to-maturity securities: Maturities, prepayments, and calls 125 529 281 Purchases -- -- (92) Cash used for acquisitions -- (55) -- Collections from subsidiaries 6,807 7,185 4,224 Advances to subsidiaries (6,597) (6,301) (2,472) Other, net (55) (35) 14 ---------------------------------- Net cash provided by investing activities 624 442 1,488 Cash Flows from Financing Activities Proceeds from borrowings from subsidiaries 428 386 84 Payments on borrowings from subsidiaries (360) (326) (188) Increase (decrease) in other short-term borrowings (267) 128 235 Proceeds from issuance of long-term debt 2,265 3,336 3,026 Principal payments and retirements of long-term debt and subordinated capital notes (2,591) (3,208) (5,214) Proceeds from issuance of common stock 151 52 268 Preferred stock repurchased (206) (324) -- Treasury stock purchased (926) (503) -- Common stock dividends (684) (571) (497) Preferred stock dividends (227) (248) (241) Other, net 1 (107) (57) ---------------------------------- Net cash used by financing activities (2,416) (1,385) (2,584) ---------------------------------- Net increase (decrease) in cash and short-term investments 640 1,047 (161) Cash and short-term investments at beginning of year 2,571 1,524 1,685 ---------------------------------- Cash and Short-Term Investments at End of Year $3,211 $2,571 $1,524 - ------------------------------------------------------------------------------------------------------------------------------------
General: For income and asset classification purposes, banking amounts include the amounts for all of the parent's bank, bank holding company, and savings bank subsidiaries. Certain prior-period amounts have been reclassified to conform to the current presentation. Balance Sheet: At December 31, 1995 and 1994, cash and short-term investments included $3,191 million and $2,456 million, respectively, of interest-bearing deposits with the bank. Statement of Cash Flows: The statement of cash flows illustrates the change in cash and short-term investments as disclosed in the Parent Company Only balance sheet. Short-term investments have original maturities of three months or less and are considered to be cash equivalents. During 1995, 1994, and 1993, the parent received net income tax payments representing reimbursements from subsidiaries of $168 million, $211 million, and $119 million, respectively. The parent made interest payments on interest-bearing liabilities of $1,155 million, $916 million, and $868 million in 1995, 1994, and 1993, respectively. - -------------------------------------------------------------------------------- and 130 percent of the loan, depending on the type of collateral. Under these restrictions, and assuming the parent provided the collateral required, the bank, SFNB, Bank of America Illinois, Bank of America National Association, and other depository subsidiaries could have loaned to the parent a maximum of $1,198 million, $163 million, $207 million, $95 million, and $308 million respectively, at December 31, 1995. The net assets of depository subsidiaries restricted from flowing to the parent by legal limitations were $17,576 million at December 31, 1995. 82 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- 25. Performance by Geographic Area
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended December 31 ---------------------------------------------------------------- Total Assets Net Interest and Income Before (in millions) Year at December 31 Gross Income Noninterest Income Income Taxes Net Income - ------------------------------------------------------------------------------------------------------------------------------------ Domestic 1995 $182,402 $16,105 $11,568 $4,009 $2,320 1994 171,002 13,137 10,305 3,214 1,859 1993 150,195 13,061 10,417 2,778 1,540 - ------------------------------------------------------------------------------------------------------------------------------------ Asia 1995 23,147 1,655 642 157 94 1994 18,883 1,358 682 266 165 1993 15,040 1,064 618 247 161 Europe, Middle East, and Africa 1995 20,523 1,836 515 184 119 1994 19,124 1,375 441 102 58 1993 14,702 1,233 441 217 140 Latin America and the Caribbean 1995 4,887 691 252 185 111 1994 5,470 550 185 48 37 1993 5,930 466 192 170 103 Canada 1995 1,487 99 31 32 20 1994 996 99 64 87 57 1993 1,066 64 34 16 10 - ------------------------------------------------------------------------------------------------------------------------------------ Total Foreign 1995 50,044 4,281 1,440 558 344 1994 44,473 3,382 1,372 503 317 1993 36,738 2,827 1,285 650 414 - ------------------------------------------------------------------------------------------------------------------------------------ BankAmerica Corporation 1995 232,446 20,386 13,008 4,567 2,664 1994 215,475 16,519 11,677 3,717 2,176 1993 186,933 15,888 11,702 3,428 1,954 - ------------------------------------------------------------------------------------------------------------------------------------
Since BAC's operations are highly integrated, certain asset, liability, income, and expense amounts must be allocated to arrive at total assets, gross income, net interest and noninterest income, income before income taxes, and net income. The principal allocations and underlying assumptions used in the presentation above are as follows: BAC's funds transfer pricing system allocates domestic sources of funds at U.S. market rates based on the maturities of the funds. To the extent that overseas units interact with U.S. operations, they are also included in the funds transfer pricing system. The allowance for credit losses is established by credit officers for each portfolio segment. After the allowance has been established for portfolio segments, credit management establishes an unallocated portion of the allowance for credit losses, which is attributable to factors that cannot be associated with a particular portfolio segment. The unallocated portions of the allowance and the related provisions for credit losses are assigned to the appropriate geographic areas. While management allocates reserves to various portfolio segments, the allowance is general in nature and is available for the entire portfolio. Equity is assigned on a risk-adjusted basis. Overhead is allocated based on each geographic area's equally weighted operating expenses. Each geographic area includes its respective tax liability. BAC allocates federal and state taxes at its effective tax rates. Translation losses, net of hedging, totaled $14 million, $2 million, and $4 million in 1995, 1994, and 1993, respectively. These amounts, which are reported in other noninterest income, are included in the table above. BankAmerica Corporation 1995 / 83 - -------------------------------------------------------------------------------- 26. Quarterly Results (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ 1995 Quarter Ended 1994 Quarter Ended ------------------------------------------ ----------------------------------------------- (in millions, except per share data) Dec 31 Sept 30 June 30 Mar 31 Dec 31 Sept 30 June 30 Mar 31 - ------------------------------------------------------------------------------------------------------------------------------------ Results of Operations Interest income $4,071 $4,044 $3,989 $3,736 $3,479 $3,153 $2,939 $2,813 Interest expense 1,934 1,888 1,866 1,690 1,467 1,249 1,107 1,019 -------------------------------------------------------------------------------------------- Net interest income 2,137 2,156 2,123 2,046 2,012 1,904 1,832 1,794 Provision for credit losses 130 110 100 100 100 110 125 125 Noninterest income 1,158 1,157 1,138 1,093 1,048 1,072 1,015 1,000 Noninterest expense 1,966 1,993 2,053 1,989 1,966 1,935 1,818 1,781 -------------------------------------------------------------------------------------------- Income before income taxes 1,199 1,210 1,108 1,050 994 931 904 888 Provision for income taxes 495 506 463 439 403 384 379 375 -------------------------------------------------------------------------------------------- Net Income $ 704 $ 704 $ 645 $ 611 $ 591 $ 547 $ 525 $ 513 Earnings per common and common equivalent share $ 1.74 $ 1.72 $ 1.56 $ 1.46 $ 1.41 $ 1.36 $ 1.33 $ 1.27 Earnings per common share--assuming full dilution 1.74 1.72 1.55 1.45 1.40 1.35 1.32 1.26 Stock Data Dividends per common share 0.46 0.46 0.46 0.46 0.40 0.40 0.40 0.40 Common stock price range:/a/ High 68 1/2 61 1/8 55 1/4 49 5/8 46 1/4 49 5/8 50 1/4 48 7/8 Low 57 52 1/2 48 3/8 39 1/2 38 5/8 44 38 3/8 38 3/4 Closing common stock price/a/ 64 3/4 59 7/8 52 5/8 48 1/4 39 1/2 44 1/8 45 3/4 39 3/8 - ------------------------------------------------------------------------------------------------------------------------------------
/a/ The principal market of BAC's common stock is the New York Stock Exchange; the stock is also listed on the Chicago, Pacific, London, and Tokyo Stock Exchanges. During the first quarter of 1996, BAC plans to complete its delisting process from the Tokyo Stock Exchange. Price information represents quotations as reported in the New York Stock Exchange consolidated transaction reporting system. - -------------------------------------------------------------------------------- 84 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Corporate Information - -------------------------------------------------------------------------------- [Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with the Corporate Information icon highlighted appears here] Boards of Directors/BankAmerica Corporation and Bank of America NT&SA As of February 5, 1996 Committees: Joseph F. Alibrandi Chairman of the Board Executive Whittaker Corporation Executive Personnel and Simi Valley, California Compensation (aerospace/manufacturing Nominating (Chair) and communications) - -------------------------------------------------------------------------------- Jill E. Barad President and Chief Operating Officer Public Policy Mattel, Inc. El Segundo, California (toy manufacturing) - -------------------------------------------------------------------------------- Peter B. Bedford Chairman of the Board Executive and Chief Executive Officer Executive Personnel and Bedford Property Investors, Inc. Compensation Lafayette, California Nominating (real estate investment trust) - -------------------------------------------------------------------------------- Andrew F. Brimmer President Auditing and Examining Brimmer & Company, Inc. Washington, D.C. (economic and financial consulting) - -------------------------------------------------------------------------------- Richard A. Clarke Retired Chairman of the Board Nominating and Chief Executive Officer Public Policy (Chair) Pacific Gas and Electric Company San Francisco, California (gas and electric utility) - -------------------------------------------------------------------------------- David A. Coulter President and Chief Executive Officer Executive BankAmerica Corporation/ Bank of America NT&SA - -------------------------------------------------------------------------------- Timm F. Crull Retired Chairman Executive Personnel and Nestle USA, Inc. Compensation Glendale, California Auditing and Examining (food and related products processing) Public Policy - -------------------------------------------------------------------------------- Kathleen Feldstein President Auditing and Examining Economics Studies, Inc. (Chair) Belmont, Massachusetts (economics consulting) - -------------------------------------------------------------------------------- Committees: - -------------------------------------------------------------------------------- Donald E. Guinn Chairman Emeritus Executive Pacific Telesis Group Executive Personnel and San Francisco, California Compensation (telecommunication) - -------------------------------------------------------------------------------- Philip M. Hawley Retired Chairman Executive and Chief Executive Officer Executive Personnel and Broadway Stores, Inc. Compensation (Chair) Los Angeles, California (retailing) - -------------------------------------------------------------------------------- Frank L. Hope, Jr. Consulting Architect Nominating San Diego, California Public Policy (architecture) - -------------------------------------------------------------------------------- Ignacio E. Lozano, Jr. Chairman Auditing and Examining La Opinion Los Angeles, California (newspaper publishing) - -------------------------------------------------------------------------------- Walter E. Massey President Auditing and Examining Morehouse College Atlanta, Georgia (education) - -------------------------------------------------------------------------------- John M. Richman Of Counsel Public Policy Wachtell, Lipton, Rosen and Katz Chicago, Illinois (law firm) - -------------------------------------------------------------------------------- Richard M. Rosenberg Chairman of the Board Executive (Chair) BankAmerica Corporation/ Bank of America NT&SA - -------------------------------------------------------------------------------- A. Michael Spence Dean of the Graduate School of Business Executive Personnel and Stanford University Compensation Stanford, California Public Policy (education) - -------------------------------------------------------------------------------- Honorary Directors/BankAmerica Corporation and Bank of America NT&SA (nonvoting) As of February 5, 1996 - -------------------------------------------------------------------------------- A.W. Clausen Retired Chairman and Chief Executive Officer BankAmerica Corporation/Bank of America NT&SA - -------------------------------------------------------------------------------- Rudolph A. Peterson Retired President and Chief Executive Officer BankAmerica Corporation/Bank of America NT&SA - -------------------------------------------------------------------------------- BankAmerica Corporation 1995 / 85 - -------------------------------------------------------------------------------- Principal Officers/BankAmerica Corporation Pictured, in addition to Mr. Rosenberg, are members of the Operating Policy Committee As of February 5, 1996 [PHOTO APPEARS HERE] Richard M. Rosenberg Chairman of the Board David A. Coulter [PHOTO APPEARS HERE] President and Chief Executive Officer [PHOTO APPEARS HERE] Kathleen J. Burke Vice Chairman Luke S. Helms [PHOTO APPEARS HERE] Vice Chairman Jack L. Meyers [PHOTO APPEARS HERE] Vice Chairman Michael J. Murray [PHOTO APPEARS HERE] Vice Chairman [PHOTO APPEARS HERE] Michael E. O'Neill Vice Chairman Thomas E. Peterson [PHOTO APPEARS HERE] Vice Chairman [PHOTO APPEARS HERE] Michael E. Rossi Vice Chairman [PHOTO APPEARS HERE] Martin A. Stein Vice Chairman Other Principal Officers - -------------------------------------------------------------------------------- Michael J. Halloran Executive Vice President and General Counsel - -------------------------------------------------------------------------------- Bruce W. Mitchell Executive Vice President and General Auditor - -------------------------------------------------------------------------------- Raymond R. Peters Executive Vice President and Treasurer - -------------------------------------------------------------------------------- Cheryl A. Sorokin Executive Vice President and Secretary - -------------------------------------------------------------------------------- Joseph E. Vaez Executive Vice President and Director of Credit Examination Services - -------------------------------------------------------------------------------- James H. Williams Executive Vice President and Chief Accounting Officer - -------------------------------------------------------------------------------- 86 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- Senior Management Council/Bank of America NT&SA As of February 5, 1996 - -------------------------------------------------------------------------------- David A. Coulter* President and Chief Executive Officer - -------------------------------------------------------------------------------- Kathleen J. Burke* Vice Chairman - -------------------------------------------------------------------------------- Luke S. Helms* Vice Chairman - -------------------------------------------------------------------------------- Jack L. Meyers* Vice Chairman - -------------------------------------------------------------------------------- Michael J. Murray* Vice Chairman - -------------------------------------------------------------------------------- Michael E. O'Neill* Vice Chairman and Chief Financial Officer - -------------------------------------------------------------------------------- Thomas E. Peterson* Vice Chairman - -------------------------------------------------------------------------------- Michael E. Rossi* Vice Chairman - -------------------------------------------------------------------------------- Martin A. Stein* Vice Chairman - -------------------------------------------------------------------------------- Alexander M. Anderson Group Executive Vice President -- Investment Management Services - -------------------------------------------------------------------------------- Charles Bell Group Executive Vice President -- Commercial Business - -------------------------------------------------------------------------------- Julia Chang Bloch Group Executive Vice President -- Corporate Relations - -------------------------------------------------------------------------------- Christopher Callero Group Executive Vice President -- National Consumer Assets - -------------------------------------------------------------------------------- P. Gerald Doherty Group Executive Vice President -- Global Capital Markets - -------------------------------------------------------------------------------- Kenneth G. Edwards Group Executive Vice President -- Commercial Real Estate - -------------------------------------------------------------------------------- Jeremy G. Fair Group Executive Vice President -- U.S. Corporate - -------------------------------------------------------------------------------- Christine N. Garvey Group Executive Vice President -- Corporate Real Estate/OREO - -------------------------------------------------------------------------------- Michael J. Halloran Group Executive Vice President and General Counsel - -------------------------------------------------------------------------------- James E. Hulihan, Jr. Group Executive Vice President -- Asia Retail Banking - -------------------------------------------------------------------------------- James G. Jones Group Executive Vice President -- Consumer Credit - -------------------------------------------------------------------------------- Liam E. McGee Group Executive Vice President -- California Retail - -------------------------------------------------------------------------------- Larry D. McNabb Group Executive Vice President -- Global Payment Services - -------------------------------------------------------------------------------- Bruce W. Mitchell Group Executive Vice President and General Auditor - -------------------------------------------------------------------------------- Robert P. Morrow, III Group Executive Vice President -- Asia Wholesale Banking - -------------------------------------------------------------------------------- Barbara Z. Otto Group Executive Vice President -- Latin America/Canada - -------------------------------------------------------------------------------- Raymond R. Peters Group Executive Vice President and Treasurer - -------------------------------------------------------------------------------- Barbara L. Rambo Group Executive Vice President -- Commercial Banking - -------------------------------------------------------------------------------- Daniel P. Riley Group Executive Vice President -- Support Services - -------------------------------------------------------------------------------- Arthur D. Ringwald Group Executive Vice President -- BankAmerica Mortgage - -------------------------------------------------------------------------------- Federico Sacasa Group Executive Vice President -- International Trade Banking - -------------------------------------------------------------------------------- Ralph Schauss Group Executive Vice President -- Europe, Middle East, and Africa - -------------------------------------------------------------------------------- Frank A. Somers Group Executive Vice President -- Special Assets - -------------------------------------------------------------------------------- Joseph E. Vaez Group Executive Vice President and Director Corporate Credit Examination Services - -------------------------------------------------------------------------------- James H. Williams Group Executive Vice President and Chief Accounting Officer - -------------------------------------------------------------------------------- Doyle L. Arnold Executive Vice President -- Corporate Development - -------------------------------------------------------------------------------- Jeanine Brown Executive Vice President -- Interactive Banking - -------------------------------------------------------------------------------- Paul M. Dorfman Executive Vice President -- Credit Policy - -------------------------------------------------------------------------------- Richard V. Harris Executive Vice President -- Leasing - -------------------------------------------------------------------------------- John R. Lloyd, Jr. Executive Vice President -- Institutional Trust - -------------------------------------------------------------------------------- Richard W. Madresh Executive Vice President -- Business Credit - -------------------------------------------------------------------------------- Donald A. Mullane Executive Vice President -- Corporate Community Development - -------------------------------------------------------------------------------- Cheryl A. Sorokin Executive Vice President and Secretary - -------------------------------------------------------------------------------- Lewis W. Teel Executive Vice President -- Trading Exposure Control and Compliance - -------------------------------------------------------------------------------- John W. Wheeler Executive Vice President -- Housing Services - -------------------------------------------------------------------------------- M. Faye Wilson Executive Vice President -- Consumer Finance - -------------------------------------------------------------------------------- *Member of the Managing Committee BankAmerica Corporation 1995 / 87 - -------------------------------------------------------------------------------- Chairmen/Presidents/Other Subsidiary Banks As of February 5, 1996 - -------------------------------------------------------------------------------- Bank of America Alaska, N.A. Richard W. Larson* Chairman and President - -------------------------------------------------------------------------------- Bank of America Arizona David S. Hanna Kathryn L. Munro Chairman President - -------------------------------------------------------------------------------- Bank of America Community Development Bank Donald A. Mullane R. Michael Mantle Chairman President - -------------------------------------------------------------------------------- Bank of America Idaho, N.A. Ronald A. Slocum Chairman and President - -------------------------------------------------------------------------------- Bank of America Illinois William M. Goodyear Chairman and President - -------------------------------------------------------------------------------- Bank of America National Association James G. Jones Stephen B. Galasso Chairman President - -------------------------------------------------------------------------------- Bank of America Nevada Richard A. Etter Chairman and President - -------------------------------------------------------------------------------- Bank of America New Mexico, N.A. Laura W. Fitch Chairman and President - -------------------------------------------------------------------------------- Bank of America Oregon W. Charles Armstrong Chairman and President - -------------------------------------------------------------------------------- Bank of America Texas, N.A. Ronald G. Biagi David J. Berry Chairman President - -------------------------------------------------------------------------------- Seattle-First National Bank John V. Rindlaub Joseph E. Gray Chairman President - -------------------------------------------------------------------------------- *Effective February 7, 1996 Advisor-BankAmerica Corporation As of February 5, 1996 - -------------------------------------------------------------------------------- George S. Ishiyama Senior Advisor - -------------------------------------------------------------------------------- 88 / BankAmerica Corporation 1995 - -------------------------------------------------------------------------------- BankAmerica Corporate Governance Principles The Board of Directors has adopted Corporate Governance Principles covering the Role of the Board, Board Structure, Committees, Meetings, and other issues. Below is a summary of some of the major points. Copies of the full text of the Principles can be obtained by writing to the Corporate Secretary's Office (address on inside back cover). Responsibility to Shareholders The board believes the role of the board of directors is to oversee the affairs of the corporation for the benefit of shareholders. Strategic Issues The board believes it is important to discuss long-range strategic issues as a matter of course at regular board meetings as well as at periodic, multi-day off-site meetings devoted solely to strategic issues. Operating Plan The board reviews BankAmerica's yearly operating plan and specific financial goals at the start of each year and monitors performance in comparison to plan. The board also believes it is important to establish and evaluate longer-term objectives and not to over-emphasize short-term performance. Business Ethics The board believes the long-term success of BankAmerica is dependent upon maintenance of an ethical business environment that focuses on adherence to both the letter and the spirit of regulatory and legal mandates and expects management to conduct operations in a manner supportive of the board's view. Performance of CEO The board believes that CEO performance should be evaluated annually and as a regular part of any decision with respect to CEO compensation. The board ratifies any compensation decisions for the CEO made by the Executive Personnel and Compensation Committee. Chairman of the Board The Chairman of the Board may be an officer/director or an outside director and may or may not be the same individual as the CEO, at the option of the board. The board believes it should be free to make these determinations depending on what it believes is best for the corporation in light of all the circumstances. Executive Sessions The board believes that outside directors should meet in executive session from time to time during the year and that some of the executive sessions should be with the CEO, who is an inside director, and some should be outside the presence of the CEO and any other inside directors or management officials. Outside Directors The board believes that a significant majority of the board should be outside directors: individuals who are not members of management and have not been such within the last 10 years; have no close family relationship with a member of key management; are not significant advisors or consultants to BankAmerica; do not have significant personal service contracts with BankAmerica; and do not have any other relationship with BankAmerica which, in the opinion of the board, would adversely affect their ability to exercise independent judgment as directors. Selection of Directors The board believes that directors should be nominated by a Nominating Committee of the board consisting entirely of outside directors and that an offer to join the board should be extended by the committee. The committee may consider the views of the CEO in making nominations. The board believes that directors should not represent particular constituents, but should be diverse enough to be clearly able to represent differing points of view. The board does not set specific criteria for directors, but believes that they should show evidence of leadership in their particular field, and have broad experience and the ability to exercise sound business judgment. In selecting directors, the board generally seeks a combination of active or former CEOs of major complex businesses, leading academics and entrepreneurs, including women and ethnic minority individuals. Board Effectiveness The board believes it is appropriate to periodically review its own effectiveness, including its corporate governance policies and practices, and would generally expect a review annually. The board believes that the Nominating Committee should review incumbent directors as part of the annual nomination process and in the context of the committee's overall review of the strengths and weaknesses of the board as a whole. Director Compensation The board believes that director compensation should be competitive with that paid to directors of other major financial institutions and major corporations. The board believes directors should have a financial stake in BankAmerica and in 1995 established a stock ownership guideline of three times the annual director retainer fee in stock or deferred restricted stock equivalent units, to be achieved within five years of joining the board. The board also mandates deferral of at least one-half of the retainer into deferred restricted stock equivalent units which fluctuate with the value of BankAmerica stock. Committee Assignments The board believes that the Auditing and Examining Committee, the Executive Personnel and Compensation Committee, and the Nominating Committee should be comprised solely of outside directors. Committee Agendas The board believes committee chairmen, in consultation with appropriate members of management and committee members, should determine committee agendas. - -------------------------------------------------------------------------------- Glossary of Common Banking Terms Adjustable rate mortgage (ARM) A loan secured by real estate with periodic adjustments in the interest rate, usually every six months. These mortgages often have consumer protections against rapid escalation in borrowing costs, such as a maximum amount that the interest rate can increase in any single year, or over the life of the loan. Allocated transfer risk reserve (ATRR) The portion of a bank's allowance for credit losses allocated for losses to borrowers in "value impaired" countries, as prescribed by the banking regulators. Asset-liability management The practice of balance sheet management with the objective of promoting income generation while containing market risk exposures. Bank Insurance Fund (BIF) The government guarantee program administered by the Federal Deposit Insurance Corporation, backing deposits in commercial banks up to $100,000 per account. Brady bond A dollar-denominated long-term bond collateralized by U.S. government securities received in exchange for restructuring country loans. Charge-off Loan principal that is written off as an uncollectible bad debt. Co-branded credit card A credit card jointly sponsored by a bank and a retail merchant or other entity. Core deposits Customer deposits which are considered a stable and reasonably priced source of funds for investing. Fixed rate mortgage (FRM) A loan secured by real estate with an interest rate that does not vary over the term of the loan. Hedging The financial technique utilized to offset the risk of loss from price or rate fluctuations in the market. Interest rate gap The amount by which the carrying value of interest-rate- sensitive assets for a designated maturity period differs from the carrying value of interest-rate-sensitive liabilities and equity for the same period. Liquidity The ability of an organization to meet its maturing financial obligations as they come due. Master netting agreement A written contract to settle mutual obligations with a single counterparty at the net value of all outstanding contracts, as opposed to the gross value. Risk-based capital A measure of a bank's financial strength developed by banking regulators, taking into account the risks inherent in the bank's assets as well as its off-balance-sheet exposures. Risk management The procedures necessary to manage a bank's exposure to various types of risk associated with transacting business. Savings Association Insurance Fund (SAIF) The government guarantee program administered by the Federal Deposit Insurance Corporation, backing deposits in federal savings and loan associations, federal savings banks, and certain state savings and loan associations up to $100,000 per account. Simulation A technique to test earnings performance under different interest rate and pricing scenarios. Spread The difference between the interest rate charged by a bank on an investment (i.e. a loan) and the bank's cost of funds. Transfer pricing A method by which costs are allocated to the various profit centers within an organization. Venture capital Generally, the investment in high-risk or small companies specializing in new products or technologies, often in return for an equity position. - -------------------------------------------------------------------------------- Design: Vinje Design, Inc. Illustration: Michael Kohnke Cover Photography: Geoffrey Nelson Inside Photography: Terry Huseby [RECYCLED PAPER LOGO APPEARS HERE] Printed on recycled paper. - -------------------------------------------------------------------------------- [LOGO OF BANKAMERICA APPEARS HERE] BankAmerica ------------ BULK RATE U.S. POSTAGE PAID BankAmerica Corporation ------------ Department 13018 Box 37000 San Francisco, California 94137 - -------------------------------------------------------------------------------- Connecting With BankAmerica [COMPUTER ICON OF MAILING ENVELOPE APPEARS HERE] - ---------------------------------------- By Mail - ---------------------------------------- The Annual Report of BankAmerica Corporation is designed to provide financial facts and analysis to shareholders and professional investors while satisfying various regulatory requirements. The following additional publications are available without charge by writing to: Bank of America, Corporate Public Relations #13124, P.O. Box 37000, San Francisco, CA 94137 . The BankAmerica Corporation 1995 Form 10-K, which includes additional information and financial data on the corporation . Information regarding community reinvestment and related activities . Environmental Program Progress Report . Recording for the blind of the 1995 Annual Report Requests for assistance with specific matters related to BankAmerica`s stock and registered securities can be addressed to the corporation`s Transfer Agent and Registrar: Chemical Mellon Shareholder Services, L.L.C. 85 Challenger Road Ridgefield Park, NJ 07660 or Chemical Mellon Shareholder Services, L.L.C. 50 California Street - 10th Floor San Francisco, CA 94111 - -------------------------------------------------------------------------------- [COMPUTER ICON OF TELEPHONE AND FAX MACHINE APPEARS HERE] - ---------------------------------------- By Phone - ---------------------------------------- Shareholder Assistance Line (800) 642-9880 Shareholders can call toll-free to receive assistance with specific matters related to BAC stock and registered securities, such as change of address, stock transfers and change of ownership, non-receipt of or lost stock certificates or dividend checks, Dividend Reinvestment Plan information, direct deposit of dividends, consolidation of accounts, and dividend income reporting for tax purposes. Shareholders can also call (415) 622-3530 during normal Pacific Coast business hours to receive information on corporate activities. Loan-by-Phone 1-800-The BofA. Customers can apply for loans toll-free, 24 hours a day. - -------------------------------------------------------------------------------- [COMPUTER ICON OF COMPUTER TERMINAL APPEARS HERE] - ---------------------------------------- Online - ---------------------------------------- Visit BankAmerica`s home page on the World Wide Web to view the latest information about the corporation and its products and services, or apply for a loan or credit card. [http://www.bankamerica.com] Corporate disclosure documents filed with the Securities and Exchange Commission by BankAmerica and other companies can be obtained from the SEC home page on the World Wide Web [http://www.sec.gov]. Customers can also visit BankAmerica`s site in the Personal Finance section of America Online. - -------------------------------------------------------------------------------- [COMPUTER ICON FOR PERSONAL SERVICE APPEARS HERE] - ---------------------------------------- In Person - ---------------------------------------- With more than 2,500 customer service locations in ten western states and more than 6,600 ATMs, BankAmerica provides a level of on-site customer convenience that is second to none. Consult the telephone directory for a location near you. The Annual Meeting of Shareholders will be held in San Francisco at the California Masonic Memorial Temple Auditorium, 1111 California Street, on Thursday, May 23, 1996 at 2 p.m. SEC-13 2-96 - -------------------------------------------------------------------------------- Appendix Index
BankAmerica Corporation 1995 Annual Report to Shareholders page reference Description of omitted graphics - ----------------------------- ------------------------------- 1 Photograph of Richard M. Rosenberg, Chairman of the Board and David A. Coulter, Chief Executive Officer 2 Quarterly Earnings Per Share (Plot point graph in non-EDGAR version) 2 Quarterly Return On Average Common Equity (Plot point graph in non-EDGAR version) 5 Pie Chart of Major Business Sectors with all sectors highlighted (Pie chart in non-EDGAR version) 6 Computer icons depicting the Corporation's Major Business Sectors with the Consumer banking icon highlighted 6 Pie Chart of Major Business Sectors with the Consumer Banking sector highlighted (Pie chart in non-EDGAR version) 8 Computer icons depicting the Corporation's Major Business Sectors with the U.S. Corporate and International Banking icon highlighted 8 Pie Chart of Major Business Sectors with the U.S. Corporate and International Banking sector highlighted (Pie chart in non-EDGAR version) 10 Computer icons depicting the Corporation's Major Business Sectors with the Commercial Real Estate icon highlighted 10 Pie Chart of Major Business Sectors with the Commercial Real Estate sector highlighted (Pie chart in non-EDGAR version) 12 Computer icons depicting the Corporation's Major Business Sectors with the Middle- Market Banking icon highlighted 12 Pie Chart of Major Business Sectors with the Middle-Market Banking sector highlighted (Pie chart in non-EDGAR version) 14 Computer icons depicting the Corporation's Major Business Sectors with the Private Banking and Investment Services icon highlighted 14 Pie Chart of Major Business Sectors with the Private Banking and Investment Services sector highlighted (Pie chart in non-EDGAR version)
16 Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with Financial Review icon highlighted 16 Price Range of Common Stock (Bar chart in non-EDGAR version) 18 Computer icon depicting the Consumer Banking sector 18 Computer icon depicting the U.S. Corporate and International Banking sector 19 Computer icon depicting the Commercial Real Estate sector 20 Computer icon depicting the Middle-Market Banking sector 20 Computer icon depicting the Private Banking and Investment Services sector 21 Net Interest Margin (Plot point graph in non-EDGAR version) 23 Noninterest Income (Stacked block graph in non-EDGAR version) 24 Noninterest Expense (Stacked block graph in non-EDGAR version) 24 Staff Levels (Plot point graph in non-EDGAR version) 28 Total Loan Outstandings by Geographic Area (Pie chart in non-EDGAR version) 32 Total Loan Outstandings by Type (Pie chart in non-EDGAR version) 37 Allowance for Credit Losses as a Percentage of Nonaccrual Assets (Bar chart in non-EDGAR version) 37 Nonaccrual Assets at Year End (in millions of dollars) (Bar chart in non-EDGAR version) 39 Histogram of Daily Trading-Related Revenue for 1995) (Bar chart in non-EDGAR version) 40 Net Interest Rate Risk (in billions of dollars) (Plot point graph in non-EDGAR version) 43 Common and Total Stockholders' Equity (Plot point graph in non-EDGAR version) 43 Dividends Declared per Common Shares (Plot point graph in non-EDGAR version)
45 Risk-Based Capital Ratios (Bar chart in non-EDGAR version) 46 Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with the Consolidated Financial Statements icon highlighted 84 Computer icons depicting the Financial Review, Consolidated Financial Statements, and Corporate Information sections of the Annual Report with the Corporate Information icon highlighted 85 Photograph of Richard M. Rosenberg, Chairman of the Board Photograph of David A. Carter, President and Chief Executive Officer Photograph of Kathleen J. Burke, Vice Chairman Photograph of Luke S. Helms, Vice Chairman Photograph Jack L. Meyers, Vice Chairman Photograph of Michael J. Murray, Vice Chairman Photograph of Michael E. O'Neil, Vice Chairman Photograph of Thomas E. Peterson, Vice Chairman Photograph of Michael E. Rossi, Vice Chairman Photograph of Martin A. Stein, Vice Chairman Back Cover Computer Icon for Obtaining Information by Mail Back Cover Computer Icon for Obtaining Information by Telephone Back Cover Computer Icon for Obtaining Information by Online Back Cover Computer Icon for Obtaining Information by in Person
EX-21 12 BANKAMERICA CORPORATION SUBSIDIARIES EXHIBIT 21 As of December 31, 1995 ----------------------- BANKAMERICA CORPORATION SUBSIDIARIES The following list sets forth information concerning the direct subsidiaries of BankAmerica Corporation (the Parent) and indirect subsidiaries of the Parent. Except as otherwise indicated, each subsidiary is wholly owned and does business under its own name.
Org. Jurisdiction of NO. Subsidiary Name Incorporation - ---- --------------- ------------------- 054. Appold Holdings Limited............................ Delaware 080. Appold Japan Limited............................ Hong Kong 086. Appold Leasing Limited.......................... U.K. 052. Appold Leasing, Inc. .............................. Delaware 367. BA Commercial Credit Corp. ........................ Florida 368. BA Futures, Incorporated........................... Delaware 2268. BA Futures, S.A. ............................... France 369. BA Insurance Holding Company....................... Delaware 370. BA Insurance (Cayman) Ltd. ..................... Cayman Islands 371. BancAmerica Insurance Company................... Cayman Islands 120. BA Securities, Inc. ............................... Delaware 238. BA Security Services, Inc. ........................ Delaware 240. BA Clearing Corporation......................... Delaware 242. BankAmerica State Trust Company................. California 376. BancAmerica Commercial Corporation................. Pennsylvania 016. Bank of America Alaska, N.A. ...................... U.S. 382. Bank of America Arizona............................ Arizona (dba: Bank of America) 657. Bamerilease, Inc. .............................. Arizona 121. Bank of America Community Development Bank......... California 032. Bank of America, FSB............................... U.S. (dba: Bank of America Hawaii; BankAmerica Mortgage, a division of Bank of America, FSB; BankAmerica Housing Services, a division of Bank of America, FSB; and Bank of America FSB, Community Development Division) 2202. Arbor National Holdings, Inc. .................. New York 2208. Arbor National Mortgage, Inc. ............... New York 2203. Arbor Real Estate Management, Inc. .......... New York 2206. Designated Appraisers, Inc. ................. New York 2207. Home Closing Services, Inc. ................. New York 2204. Lauren Advertising, Inc. .................... New York 2205. Roots Insurance Agency, Inc. ................ New York 641. Bank of America (Hawaii) Insurance Agency, Inc. ................................... Hawaii 631. Honfed Financial Services Corp. ................ Hawaii 636. First Collateral Services, Inc. ............. Hawaii 1410. United Mortgage Holding Company................. Minnesota 1411. United Mortgage Corporation.................. Minnesota 1413. IDL Mortgage Corporation.................. Wisconsin 1414. U.M.C. Asset Management Corporation....... Minnesota 1412. Valley Mortgage Corporation............... Minnesota
- 1 - 017. Bank of America Idaho, N.A. ....................... U.S. 2011. Bank of America Illinois........................... Illinois 2082. BA Service Corp. ............................... Delaware 2019. Bank of America Illinois Community Development Corporation......................... Delaware 2022. BankAmerica International Investment Corporation U.S. 2024. Chicago Continental Capital Market Compania de Assesoria Financiera Limitada *.. Chile 2026. CIC Trading, S.A. *.......................... Argentina 2028. C.N. Investments, Inc. ...................... Cayman Islds 2029. Continental Capital Markets Limited.......... U.K. 2030. Lease Continental PLC..................... U.K. 2032. Continental Finanziaria S.P.A. .............. Italy 2033. Continental Illinois de Mexico, S.A. de C.V. ..................................... Mexico 2037. Continental Information & Technology Services Co., S.A.*.......................... Argentina 2038. Continental International Finance Corporation II Limitada...................... Chile 2041. Continental International Securities, Limited...................................... Cayman Islds 2043. Continental Investment Company S.A. *........ Argentina 2044. Continental Servicios Corporativos S.A. de C.V. ..................................... Mexico 2045. Destco, Ltd. ................................ Cayman Islds 2098. Fundo De Conversao Capital Estrangeiro- Continental Illinois Sellas............... Brazil 2047. Invenco, Inc. ............................... Cayman Islds 2054. Ismael I, Inc. .............................. Cayman Islds 2057. Juliana, Inc. ............................... Cayman Islds 2058. Justin, Inc. ................................ Cayman Islds 2059. Justin, Inc. Chile Ltda.*................. Chile 2064. Labco I, Inc. ............................... Cayman Islds 2065. Labco I Inc. Chile Limitada *............. Chile 2067. Labco II, Inc. .............................. Cayman Islds 2106. Lawrence Holdings Ltd. ...................... Cayman Islds 2137. Lisco, Ltd. ................................. Cayman Islds 2068. M.A.S. Investments, Inc. .................... Cayman Islds 2107. Moraine Ltd. ................................ Cayman Islds 2108. North Bay Holdings Ltd. ..................... Cayman Islds 2077. Valores Mercantiles Banconti, C.A. .......... Venezuela 2109. Summit Inc. ................................. Cayman Islds 2034. Continental Illinois Servicos Ltda. ...... Brazil 2035. Continental Banco S.A. (50%; other 50% owned by non-BankAmerica entity)... Brazil 2036. Continental Distribudora de Titulos E Valores Mobiliaros, S.A. ......... Brazil 2075. Tanco I, Inc. ............................... Cayman Islds 2078. Venco, B.V. ................................. Cayman Islds 2079. Continental Bank Participacoes Ltda. ..... Brazil 2144. Continental Fundo de Renda Fixa........... Brazil 2014. C.I.N.B. Nominees (London) Limited.............. U.K. 2015. Continental Bank International.................. U.S. 2017. Continental Bank New York Trust Company......... New York 2018. Continental Brokerage Services Inc. ............ Delaware 2020. Continental Illinois Property Corporation No. 3........................................... Delaware 2021. Continental Illinois Venture Corporation........ Delaware 2081. Continental Partners Group, Inc. ............... Delaware 2090. Moorpark Holding, Inc. ......................... Delaware 2091. PDE, Inc. ...................................... Cayman Islds 2115. Penguin Holding, Inc. .......................... Delaware
2093. Rose Holding, Inc. ............................. Delaware 2119. VT, Inc. ....................................... Alabama 044. Bank of America National Association............... U.S. 386. Bank of America New Mexico, N.A. .................. U.S. 385. Bank of America NT&SA.............................. U.S. (dba: Security Pacific National Bank) 517. 693327 Ontario Limited (51.69%) (BofA Canada holds 10.22%; remainder owned by non-BankAmerica entity)......................... Canada 361. BA Credit Corporation........................... Delaware 2275. BA Interactive Services Holding Company, Inc. .. Delaware 2276. MECA Software, L.L.C. ....................... Delaware (50%; other 50% owned by non-BankAmerica entity) 282. BA Investment Services, Inc. ................... Delaware 264. BA Properties, Inc. ............................ Delaware 436. BA Properties III, Inc. ........................ Delaware 535. BANAM Broadcasting, Inc. ....................... Delaware 2265. BA Series 1995-1, Inc. ......................... Delaware 266. BancAmerica Auto Finance Corp. ................. Delaware (dba: Security Pacific Auto Finance) 437. Bank of America Colombia*....................... Colombia 526. Bank of America (Jersey) Limited................ Channel Islds 514. Bank of America Canada.......................... Canada 515. Bank of America Canada Leasing Corporation... Canada 516. Bank of America Canada Securities Corporation Canada 440. Bank of America S.A.*........................... Spain 441. BankAmerica Gestion SGIIC, S.A. ............. Spain (99.6%; other 0.04% owned by non-BankAmerica entity) 360. BankAmerica Business Credit, Inc. .............. Delaware 438. BankAmerica International....................... U.S. 443. Societe Anonyme Immobiliere du 28 Place Vendome...................................... France 444. BankAmerica International Financial Corporation..................................... U.S. 2270. Arrendadora BankAmerica, S.A.*............... Mexico 445. BA Asia Limited.............................. Hong Kong 506. BA Australia Limited......................... Australia 509. BA Staff Limited.......................... Australia 707. BA Staff Superannuation Limited........... Australia 446. BA Finance (Hong Kong) Limited............... Hong Kong 448. BA Finance (Switzerland) Ltd. ............... Switzerland 2271. BA Forex (Philippines) Inc. ................. Philippines 450. BA Holding Company S.A. ..................... Luxembourg 470. Bank of America International Limited*.... U.K. 473. BA Netting Limited..................... U.K. 476. Fenchurch Steamship Corporation........ Liberia 451. BankAmerica International Trustee (B.V.I.) Limited................................... U.S. Virgin Islds 459. BankAmerica Financial Services Ltd. ... U.S. Virgin Islds 452. BankAmerica Trust and Banking Corporation (Bahamas) Limited......................... Bahamas 453. Trunoms, Limited....................... Bahamas 454. Wolnoms, Limited....................... Bahamas 455. BankAmerica Trust and Banking Corporation (Cayman) Limited.......................... Cayman Islds 1360. BankAmerica Fund Management Limited.... Cayman Islds 456. Harbour Nominees Ltd. ................. Cayman Islds 457. BankAmerica Trust Company (Hong Kong) Limited................................... Hong Kong 458. BATCO Nominees Limited*................ Hong Kong
461. Fiduciary Services Limited.......... Hong Kong 460. ITG Secretaries Limited*............ Hong Kong 462. Renfrew Services Limited*........... Hong Kong 467. BankAmerica Trust Company (Jersey) Limited................................... Channel Islds 468. BankAmerica Properties (Jersey) Limited................................ Channel Islds 469. Unihouse Nominees Limited.............. Channel Islds 449. BA Swallow Business Systems Limited.......... U.K. 479. BamerInvest C.A. ............................ Venezuela 2140. Bank of America Malaysia Berhad.............. Malaysia 316. BA Nominees (Asing) Sdn. Bdh. ............ Malaysia 2269. Bank of America Mexico S.A.*................. Mexico 481. BankAmerica Representacao e Servicos Limitada..................................... Brazil 1003. BankAmerica Singapore Limited................ Singapore 628. Bunga Orkid, Ltd. ........................... Bermuda 490. Chile Cellulose Investment Company........... Delaware 491. Companhia Internacional de Participacoes E Empreedimentos............................... Brazil 492. Multi Banco S.A. ......................... Brazil 494. Multi-Distribuidora Internacional de Titulos e Valores Ltda. ............... Brazil 495. Multi-Leasing International Arrendamento Mercantil S.A. ........... Brazil 604. Debt Recovery (Hong Kong) Limited*........... Hong Kong 293. Fundo 2000 de Conversao - Capital Estrangeiro.................................. Brazil 497. Hedges, S.A. ................................ Argentina 232. Inchroy Credit Corporation Limited (50%; other 50% owned by non-BankAmerica entity) .. Hong Kong 498. Inversiones of America Corredores de Bolsa Limitada*.................................... Chile 499. Inversiones y Negocios Fiduciarios S.A. ..... Argentina 301. InvestAmerica S.A.*.......................... Chile 668. Orion Eight, Inc. ........................... Delaware 671. Delta FSC Eight, Inc. .................... U.S. Virgin Islds 669. Orion Nine, Inc. ............................ Delaware 672. Delta FSC Nine, Inc. ..................... U.S. Virgin Islds 670. Orion Ten, Inc. ............................. Delaware 673. Delta FSC Ten, Inc. ...................... U.S. Virgin Islds 300. SP Chile Energia S.A *....................... Chile 233. SPC Credit Limited........................... Hong Kong 302. Security Pacific Do Brazil S/C Ltda. ........ Brazil 304. SP Inversiones y Servicios S.A*.............. Chile 306. Security Pacific Overseas Investment Corporation.................................. Delaware 339. Appold Limited............................ U.K. 308. Bank of America (Asia) Limited*........... Hong Kong 312. Bank of America (Macau) Limited........ Macau 314. Canton Pacific Finance Ltd. ........... Hong Kong 309. The Bank of Canton (Nominees) Limited.. Hong Kong 323. Security Pacific Australian Assets Limited................................... Australia 336. Security Pacific Financing Services Ltd. ..................................... U.K. 337. Security Pacific Hong Kong Holdings Limited................................... Hong Kong 501. Titulos Rioplatenses S.A.*................... Uruguay 313. BankAmerica Nominees (1993) Pte. Ltd. .......... Singapore 502. BankAmerica Nominees (Hong Kong) Ltd. .......... Hong Kong 503. BankAmerica Nominees Limited (London)........... U.K. 504. BankAmerica Nominees (Singapore) Pte. Ltd. ..... Singapore 250. BankAmerica Ventures............................ California
278. BofA Capital Management, Inc. .................. Delaware (dba: Intercash Capital Advisors and Pacific Century Advisors) 533. Electronic Payments Exchange, Inc.*............. Delaware 249. Equitable Deed Company.......................... California (dba: Continental Auxiliary Company) 534. Golden Gate Participacoes Ltd. ................. Brazil 252. Grant County Power Company...................... Delaware 536. Lease Holding VI, Inc. ......................... Delaware 540. NADRE II, Inc. ................................. Delaware 541. NAGSA II, Inc. ................................. Delaware 259. PNB Securities Corporation...................... California 258. Pacific Southwest Realty Company................ Delaware 265. Security Pacific Asia Limited................... Singapore 347. Security Pacific Equipment Leasing, Inc. ....... Delaware 428. BA Leasing & Capital Corporation............. Delaware 1324. BA FSC Holdings, Inc. .................... Delaware 348. Aerocrane Leasing Ltd. ................ U.S. Virgin Islds 1323. BA Swiss FSC Holdings, Inc. ........... Delaware 551. Samedan Leasing Ltd. ............... U.S. Virgin Islds Canae, Inc. ........................... Delaware Canae FSC, Inc. .................... U.S. Virgin Islds 2211. Epidaurus, Inc. ....................... Delaware 2212. Epidaurus FSC, Inc. ................ U.S. Virgin Islds 349. First Executive Sands Leasing Corp. ... California 350. First Executive Leasing Ltd. ....... U.S Virgin Islds 1406. Knossus, Inc. ......................... Delaware 1409. Knossus FSC, Inc. .................. U.S. Virgin Islds 549. Marco Polo Leasing Ltd. ............... U.S. Virgin Islds 2213. Mycenae, Inc. ......................... Delaware 2214. Mycenae FSC, Inc. .................. Delaware 1436. Nauplia, Inc. ......................... Delaware 1438. Nauplia FSC, Inc. .................. U.S. Virgin Islds Patras, Inc. .......................... Delaware Patras FSC, Inc. ................... U.S. Virgin Islds 1407. Phaestos, Inc. ........................ Delaware 1408. Phaestos FSC, Inc. ................. U.S. Virgin Islds (50%; other 50% owned by non-BankAmerica entity) 550. Raffles Leasing Ltd. .................. U.S. Virgin Islds 1437. Sounion, Inc. ......................... Delaware 1439. Sounion FSC, Inc. .................. U.S. Virgin Islds 552. Tanah Merah Leasing Ltd. .............. U.S. Virgin Islds 1419. Tiryns, Inc. .......................... Delaware 1420. Tiryns FSC, Inc. ................... U.S. Virgin Islds (50%; other 50% owned by non-BankAmerica entity) 433. Transit Holding, Inc. .................... Delaware 434. Asset Holding Co. Inc. ................ Delaware 546. Balmoral Leasing Ltd. ....................... U.S. Virgin Islds 354. SPAA Leasing Corporation..................... Delaware 358. Security Pacific Financial Services of California, Inc. ............................... Delaware 542. Special Asset Holding Co. ...................... Delaware 543. Film Asset Holding Co. ...................... Delaware (50%; other 50% owned by non-BankAmerica entity) 537. Wilco One, Inc. ................................ Delaware 363. Zedd Investments, Inc. ......................... Delaware 364. Zentac Productions, Inc. ....................... Delaware
387. Bank of America Oregon............................. Oregon (dba: Security Pacific Bank Oregon and Oregon Bank) 031. OBTASCO, Inc. .................................. Oregon 389. Bank of America Texas, N.A. ....................... U.S. 2008. Bank of America Trust Company of Florida, National Association........................................ U.S. 139. BankAmerica Financial, Inc. ....................... Delaware 104. Argentina Investment Holding Limited............ Argentina 2001. BankAmerica Capital Corporation................. Delaware 098. Security Pacific Investors, Inc. ............ Delaware 182. BankAmerica Insurance Group, Inc. .............. Delaware 190. BA Insurance Agency, Inc. ................... Delaware 184. General Fidelity Insurance Company........... California 185. General Fidelity Life Insurance Company...... California 043. Security Pacific Southwest Insurance Agency, Inc. ................................ Arizona 109. Brazilian Financial Services, Inc. ............. Delaware 110. BFS Participacoes, Ltda. .................... Brazil 112. Brazilian Tourism Holdings, Inc. ............... Delaware 397. Overseas Lending Corporation.................... Delaware 193. Security Pacific Automotive Financial Services Corp. .......................................... Delaware (dba: Security Pacific Auto Finance) 143. Security Pacific Business Credit Inc. .......... Delaware 145. Security Pacific Finance System Incorporated.... Delaware 151. BA Financial Management Services, Inc. ...... Delaware 146. Dealers Credit, Inc. ........................ Delaware 147. First Fenwick Mortgage Corporation........... Virginia 148. Security Pacific Consumer Discount Company... Pennsylvania (dba: Security Pacific Financial Services of Pennsylvania Inc.) 149. Security Pacific Finance Credit Corp. ....... Delaware 152. Security Pacific Financial Services Inc. .... Delaware 163. Security Pacific Executive/Professional Services Inc. ............................ Colorado 165. Security Pacific Financial Services of Minnesota Inc. ........................... Minnesota 166. The Midwestern Agency Corporation, Inc. .. Iowa 154. Security Pacific Financial Services of Nevada Inc. .............................. Nevada 156. Security Pacific Financial Services of West Virginia Inc. ....................... West Virginia 160. SPF Advertising Agency, Inc. ............. Kansas 161. Security Pacific Financial Services of Des Moines Inc. ............................. Iowa 168. Security Pacific Housing Services, Inc. ........ Delaware 169. Security Pacific Acceptance Corp. ........... Delaware 170. Security Pacific Acceptance Corp. II......... Delaware 172. Security Pacific Leasing Corporation............ Delaware 173. MCOG Leasing Corp. .......................... California Sardonyx Shipping Pte Ltd ................... Singapore (50%; other 50% owned by non-BankAmerica entity) 200. Securilease BV............................... Netherlands 174. Security Pacific Capital Leasing Corporation.................................. Delaware 194. Security Pacific EuroFinance Holdings, Inc. ........................................ Delaware 195. Security Pacific Equipment Finance (Europe) Inc. ............................ Delaware 224. Security Pacific Lease Finance (Europe) Inc. ..................................... Delaware 218. Security Pacific International Leasfinance, Inc. ........................................ Delaware 177. White Sands Leasing Corporation.............. Delaware
178. Pasir Mas Ltd. ........................... U.S. Virgin Islds 179. Windmill Sands Leasing Corporation........... Delaware 180. Windmill Leasing, Ltd. ................... U.S. Virgin Islds 400. Western America Financial, Inc. ................ Delaware 2003. BankAmerica Investment Corporation................. Delaware 118. BankAmerica National Trust Company................. U.S. 2010. BankAmerica Realty Finance, Inc. .................. Delaware 380. BankAmerica Realty Services, Inc. ................. Delaware 2005. Continental Illinois Energy Development Corporation Delaware 2007. Continental Illinois Service Corporation........... Delaware 2110. LaSalle Street Natural Resources Corporation....... Delaware 390. Nevada First Development Corporation............... Nevada 554. Bank of America Nevada.......................... Nevada 029. Orbanco Real Estate Services, Co. ................. Oregon 009. Rainier Bancorporation............................. Washington 372. Real Estate Collateral Management Company.......... Delaware 401. Seafirst Corporation............................... Washington 012. Rainier Mortgage Company........................ Washington 015. Seafirst Community Service Corporation.......... Washington 408. Seattle-First National Bank..................... U.S. 020. Centrum Properties Corporation............... Washington 658. DAS Holdings, Inc. .......................... Arizona 011. Rainier Credit Company....................... Washington 416. Seafirst America Corporation................. Washington Seafirst Asset Holding Co. .................. Delaware 411. Seafirst Auto Leasing, Inc. ................. Washington 404. Seafirst Insurance Corporation............... Washington 027. Seafirst Investment Services, Inc. .......... Washington 413. Seafirst Leasing Company..................... Washington 045. Seafirst Merchant Services, Inc. ............ Delaware 420. Seafirst Properties Corporation.............. Washington 421. Seafirst Services Corporation................ Washington 023. Security Pacific Premises Bellevue, Inc. .... Washington 425. Yakima Properties, Incorporated.............. Washington 132. Security-First Company............................. California 133. Security-First CMO-I Corporation................ California 042. Security Pacific Southwest Financial Services, Inc. Arizona 192. SP International Holdings, Inc. ................... Delaware 199. Security Pacific EuroFinance, Inc. ............. Delaware 235. Sec Pac Spain S.A. .......................... Spain 1400. Society Nouvelle Dolomites Francaises*....... France
* Aggregate 100% ownership is held by more than one BankAmerica legal entity; for purposes of this listing, the entity is shown in relationship to the majority holder. EX-23 13 CONSENT OF INDEPENDENT AUDITORS Exhibit 23 ---------- CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement numbers 33-55225 on Form S-8 filed August 25, 1994; 33-54385 on Form S-3 filed June 30, 1994, as amended by Pre-Effective Amendment No. 1 filed August 17, 1994; 33-61483 on Form S-8 filed August 1, 1995; 33-53919 on Form S-8 filed June 1, 1994; 33-60648 on Form S-8 filed April 2, 1993; 33-59892 on Form S-3 filed March 23, 1993, as amended by Pre-Effective Amendment No. 1 filed May 14, 1993 (to which the prospectus in 33-54385 also applies); 33-51064 on Form S-3 filed August 20, 1992, as amended by Pre-Effective Amendment No. 1 filed October 23, 1992 (to which the prospectus in 33-54385 also applies); 33-50124 on Form S-8 filed July 29, 1992; 33-65326 on Form S-8 filed July 1, 1993; 33-43862 on Form S-3 filed November 12, 1991, as amended by Pre-Effective Amendment No. 1 filed January 17, 1992 (to which the prospectus in 33-54385 also applies); 33-36718 on Form S-3 filed September 7, 1990, as amended by Pre-Effective Amendment No. 1 filed November 28, 1990 (to which the prospectus in 33-54385 also applies); 33-26755 on Form S-3 filed January 27, 1989, as amended by Pre- Effective Amendment No. 1 filed February 16, 1989 and Post-Effective Amendment No. 1 filed November 3, 1992; 33-23192 on Form S-3 filed July 21, 1988, as amended by Pre-Effective Amendment No. 1 filed September 13, 1988 (to which the prospectus in 33-54385 also applies); 33-11516 on Form S-3 filed January 26, 1987, as amended by Amendment No. 1 filed March 12, 1987 and Amendment No. 2 filed April 3, 1987 (to which the prospectus in 33-36718 also applies); 2-93664 on Form S-3 filed on October 9, 1984, as amended by Amendment No. 1 filed November 23, 1984; 33-28252 on Form S-8 filed April 19, 1989, as amended by Post-Effective Amendment No. 1 filed August 15, 1989 and Post-Effective Amendment No.2 filed February 22, 1990; 33-13368 on Form S-8 (to which the prospectus in 33-28252 also applies); 33-29646 on Form S-8 filed June 30, 1989, as amended by Post-Effective Amendment No. 1 filed August 3, 1990; and 2-82873, 2-71577, 2-64201, 2-58595, 2-57423, 2-53068, 2-47747, 2-32651 and 33-14135 on Form S-8 (to all of which the prospectus in 33-29646 also applies), of BankAmerica Corporation and related prospectuses of our report dated January 16, 1996, with respect to the consolidated financial statements of BankAmerica Corporation incorporated by reference in this Annual Report on Form 10-K for the year ended December 31, 1995. /s/ ERNST & YOUNG LLP -------------------------------- Ernst & Young LLP San Francisco, California March 15, 1996 4017499 EX-24 14 POWERS OF ATTORNEY Exhibit 24 Powers of Attorney Follow EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 6, 1996 /s/ Joseph F. Alibrandi ------------------------------ Joseph F. Alibrandi [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 6, 1996 /s/ Jill E. Barad ------------------------------ Jill E. Barad [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 6, 1996 /s/ Peter B. Bedford ------------------------------ Peter B. Bedford [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 5, 1996 /s/ Andrew F. Brimmer ------------------------------ Andrew F. Brimmer [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 2, 1996 /s/ Richard A. Clarke ----------------------------- Richard A. Clarke [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 5, 1996 /s/ Timm F. Crull ------------------------------- Timm F. Crull [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 3, 1996 /s/ Kathleen Feldstein ------------------------------ Kathleen Feldstein [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 2, 1996 /s/ Donald E. Guinn ------------------------------ Donald E. Guinn [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 5, 1996 /s/ Philip M. Hawley ------------------------------ Philip M. Hawley [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 5, 1996 /s/ Frank L. Hope, Jr. ------------------------------ Frank L. Hope, Jr. [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 4, 1996 /s/ Ignacio E. Lozano, Jr. ------------------------------ Ignacio E. Lozano, Jr. [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 6, 1996 /s/ Walter E. Massey ------------------------------- Walter E. Massey [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 3, 1996 /s/ John M. Richman ------------------------------ John M. Richman [BAC-Form 10-K: Director] 4011513 EXHIBIT 24 POWER OF ATTORNEY ----------------- I hereby appoint MICHAEL J. HALLORAN, JEFFREY R. LAPIC, and CHERYL SOROKIN, and each of them, my attorneys-in-fact, each with full power of substitution, to sign for me as a Director of BankAmerica Corporation and file with the Securities and Exchange Commission the Corporation's Form 10-K annual report for 1995, and any amendments. Dated: February 4, 1996 /s/ A. Michael Spence ------------------------------ A. Michael Spence [BAC-Form 10-K: Director] 4011513 EX-27 15 FINANCIAL DATA SCHEDULE
9 THIS FINANCIAL DATA SCHEDULE ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 CONTAINS SUMMARY FINANCIAL INFORMATION WHICH IS INCORPORATED BY REFERENCE FROM THE 1995 ANNUAL REPORT TO SHAREHOLDERS AND EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS, AVERAGE BALANCES, INTEREST, AND AVERAGE RATES, NONPERFORMING ASSETS, ANNUAL CREDIT LOSS EXPERIENCE, AND COMPOSITION OF ALLOWANCE FOR CREDIT LOSSES, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT AND FORM 10-K FILING. Any item provided in the schedule, in accordance with the rules governing the schedule, will be subject to liability under the federal securities laws, except to the extent that the financial statements and other information from which the data were extracted violate the federal securities laws. Also, pursuant to Item 601(c)(1)(iv) of Regulation S-K promulgated by the Securities and Exchange Commission (SEC), the schedule shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933, Section 18 of the Exchange Act of 1934 and Section 323 of the Trust Indenture Act or otherwise be subject to the liabilities of such sections, nor shall it be deemed a part of any registration statement to which it relates. 1,000,000 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 14,312 5,761 5,683 9,516 12,043 4,656 4,337 155,373 3,554 232,446 160,494 19,170 17,232 15,328 602 0 2,623 16,997 232,446 12,707 1,276 1,857 15,840 4,923 7,378 8,462 440 34 8,001 4,567 4,567 0 0 2,664 6.49 6.45 4.51 1,888 411 113 0 3,690 1,011 422 3,554 2,231 428 895 INCLUDES SUBORDINATED CAPITAL NOTES OF $605 MILLION. INCLUDES INTEREST INCOME OR TRADING ACCOUNTS ASSETS OF $741 MILLION.
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