Bank of America 2003 Annual Report Download

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2003 ANNUAL REPORT
2003: Our best year. We served our 28,000,000 customers better
than ever before. Investors entrusted us with
$474,000,000,000 of their assets. We served 25,000 midsized companies—
more than any other bank. 2,000,000 small businesses made us the nation’s
number-one small business bank. Customers opened 1,240,000
net new checking accounts. We made loans to more than 1,000,000 homeowners.
We helped more than 452,000 low- and moderate-income families obtain
affordable new homes. We delivered more than $300,000,000,000 in investment
banking solutions for our clients. And we continue to raise the bar.

Table of contents

  • Page 1
    ...,000,000 of their assets. We served 25,000 midsized companies- more than any other bank. 2,000,000 small businesses made us the nation's number-one small business bank. Customers opened 1,240,000 net new checking accounts. We made loans to more than 1,000,000 homeowners. We helped more than 452...

  • Page 2
    ...our customers unmatched convenience and expertise, high service quality, innovation and a variety of financial Equity Investments $(249) At Year End Total assets Total loans and leases Total deposits Total shareholders' equity Common shareholders' equity Book value per common share Market price per...

  • Page 3
    ... leads to increased revenue that also can be directed to growth opportunities. We are investing in these opportunities aggressively in all our businesses, from Consumer and Commercial Banking, to Asset Management, to Global Corporate and Investment Banking. an effort to protect our customers and...

  • Page 4
    ..., as revenue grew 11% driven by record mortgage originations, strong growth in credit and debit cards and a 10% increase in average deposits. Global Corporate and Investment Banking earnings reached $2 billion for the first time, up 29% from 2002, as market-based and investment banking activity...

  • Page 5
    Raising the Bar for Consumers In 2003, customers opened 1,240, 000 net new checking accounts We have found that customers who say they are delighted with their banking experience are four times as likely to use more products, three times as likely to recommend the bank to others and far more ...

  • Page 6
    ... direct deposit, free unlimited check writing, ATM access and online banking; Flexible loan underwriting guidelines that take into account multiple incomes in households applying for home mortgages; Accepting "Matricula Consular" cards as identification and using our banking centers for financial...

  • Page 7
    ... Checking , a flexible account with no minimum balance requirement and a fee waiver for students who set up a monthly direct deposit or whose parents bank with us. Students also told us that "stuff happens," so we took CampusEdge a step further by including a special card, good for a one-time...

  • Page 8
    ...whole new delivery process that can eliminate most of the paperwork and cut waiting time from days, and sometimes even weeks, to just minutes. As a result, Bank of America in 2003 made mortgage loans and home equity loans to more than 1 million families. For customers with qualified credit histories...

  • Page 9
    ... plan for themselves and their families. So we created an innovative new business model that combines all of Bank of America's considerable resources, including banking, credit, investment and trust and wealth transfer services, delivered by expert client management teams. With offices in 39 markets...

  • Page 10
    ...We are maintaining our position as America's number-one small business bank. SBA loans doubled in 2003 and net new small business checking accounts increased fivefold. More than 90% of our small business customers say they are "highly satisfied" with our call center service. BANK OF AMERICA 2003 17

  • Page 11
    ... banking services. For example, a banker specializing in higher education issues can help university officials project their student housing needs 10 years out, then guide the university through the complex process of issuing tax-exempt bonds to build the needed dorms. By cross-selling a full suite...

  • Page 12
    ...they turn to Bank of America. Facing limited opportunities to raise capital at home, and desiring access to long-term debt, growing companies in Australia and New Zealand have sometimes tapped the U.S. private placement market for hundreds of millions of dollars at a time. Banc of America Securities...

  • Page 13
    ... units. In addition, Bank of America Foundation grants to Westside and other Baltimore neighborhoods help fund social services, cultural programs, education, health care and job-training programs, enabling us to fulfill our pledge to bring higher standards to our efforts to help build neighborhoods...

  • Page 14
    ... percent of consumer households that hold checking accounts use online banking. Active bill pay customers increased 84 percent to 3.2 million in 2003. Active bill pay users paid $47.3 billion of bills in 2003 compared to $26.2 billion in 2002. First mortgage originations increased $43.1 billion to...

  • Page 15
    ..., larger trading-related contributions, higher mortgage warehouse and core deposit funding levels. Partially offsetting these increases was the impact of lower interest rates and reductions in the large corporate, foreign and exited consumer loan businesses portfolios. The net interest yield on...

  • Page 16
    ... bal Co rpo rate and Inve stme nt Banking trading-related activities and loans that we originated and sold into revolving credit card and commercial securitizations. Noninterest income, rather than net interest income and provision for credit losses, is recorded for assets that have been securitized...

  • Page 17
    ... our trading activities. Trading-related revenue is derived from foreign exchange spot, forward and cross-currency contracts, fixed income and equity securities, and derivative contracts in interest rates, equities, credit, commodities and mortgage banking certificates. Complex Accounting Estimates...

  • Page 18
    ... (benefit) Net income (loss) Shareholder value added Net interest yield (fully taxable-equivalent basis) Return on average equity Efficiency ratio (fully taxable-equivalent basis) Average: Total loans and leases Total assets Total deposits Common equity/Allocated equity(2) Year end: Total loans and...

  • Page 19
    ... as checking accounts, money market savings accounts, time deposits and IRAs, debit card products and credit products such as home equity, mortgage and personal auto loans. It also provides treasury management, credit services, community investment, e-commerce and brokerage services to nearly two...

  • Page 20
    ... debt and equity securities research, loan syndications, mergers and acquisitions advisory services and private placements. In addition, Glo bal Inve stme nt Banking provides risk management solutions for our global customer base using interest rate, equity, credit and commodity derivatives, foreign...

  • Page 21
    ...our outstanding loans and leases, trading account assets, derivative assets and unfunded lending commitments that include loan commitments, letters of credit and financial guarantees. Market risk is the potential loss due to adverse changes in the market value or yield of a position. Market value is...

  • Page 22
    ... 6 Average Balance Sheet (Dollars in millions) Deposits by type 2003 2002 Assets Time deposits placed and other short-term investments Federal funds sold and securities purchased under agreements to resell Trading account assets Debt securities Loans and leases Other assets Total assets $ 9,056...

  • Page 23
    ... receive fees for the services we provide to the entities, and we manage any credit or market risk on commitments or derivatives through normal underwriting and risk management processes. Derivative activity related to these entities is included in Note 6 of the consolidated financial statements. At...

  • Page 24
    ... and the allowance for credit losses. In making Commercial - domestic Commercial - foreign Commercial real estate - domestic Commercial real estate - foreign Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer Total consumer...

  • Page 25
    ... assets: New nonaccrual loans and foreclosed properties Advances on loans Total commercial additions Reductions in nonperforming assets: Paydowns, payoffs and sales Returns to performing status Charge-offs (1) Transfers to assets held for sale Total commercial reductions Total commercial net...

  • Page 26
    ...real estate - domestic Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Other consumer domestic Foreign consumer Total consumer Total recoveries of loans and leases previously charged off Net charge-offs Provision for loan and lease losses...

  • Page 27
    ..., trading account assets and liabilities, and derivatives. Market-sensitive assets and liabilities are generated through loans and deposits associated with our traditional banking business, our customer and proprietary trading operations, our ALM process, credit risk management, and mortgage banking...

  • Page 28
    ... rate and foreign exchange derivative contracts are utilized in our ALM process and serve as an efficient, low-cost tool to mitigate our risk. We use derivatives to hedge or offset the changes in cash flows or market values of our balance sheet. See Note 6 of the consolidated financial statements...

  • Page 29
    ... assess the risks, develop a consolidated corporate view and communicate that view to the line of business level. To help assess and manage corporate-wide risks, we also utilize specialized support groups, such as Legal, Information Security, Business Recovery, Supply Chain Management, Finance...

  • Page 30
    ... to exiting the subprime real estate lending business were partially offset by increases in held consumer credit card and commercial - foreign net charge-offs of $422 million and $313 million, respectively. Nonperforming assets were $5.3 billion, or 1.53 percent of loans, leases and foreclosed...

  • Page 31
    ... Trading account assets Debt securities Loans and leases (1): Commercial - domestic Commercial - foreign Commercial real estate - domestic Commercial real estate - foreign Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer...

  • Page 32
    ...resell Trading account assets Debt securities Loans and leases: Commercial - domestic Commercial - foreign Commercial real estate - domestic Commercial real estate - foreign Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer...

  • Page 33
    ... Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer Total consumer Total(1) (1) By Property Type Residential Office buildings Apartments Shopping centers/retail Industrial/warehouse Land and land development Multiple use...

  • Page 34
    ... Assets(1) December 31 (Dollars in millions) (Dollars in millions) Loans and Loan Commitments 2003 2002 2001 2000 1999 Other Financing (2) Derivative Assets Nonperforming loans Commercial Commercial Commercial Commercial - domestic - foreign real estate - domestic real estate - foreign...

  • Page 35
    ...the Corporation's foreign offices as follows: loans, accrued interest receivable, acceptances, time deposits placed, trading account assets, securities, derivative assets, other interest-earning investments and other monetary assets. Amounts also include unused commitments, SBLCs, commercial letters...

  • Page 36
    ... Return on average common shareholders' equity Total equity to total assets (period end) Total average equity to total average assets Dividend payout Per common share data Earnings Diluted earnings Dividends paid Book value Average balance sheet Total loans and leases Total assets Total deposits...

  • Page 37
    ... Trading account assets Debt securities Loans and leases (1): Commercial - domestic Commercial - foreign Commercial real estate - domestic Commercial real estate - foreign Total commercial Residential mortgage Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer...

  • Page 38
    ... results of their work, the adequacy of internal accounting controls and the quality of financial reporting. To the Board of Directors and Shareholders of Bank of America Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of...

  • Page 39
    ... and brokerage services Mortgage banking income Investment banking income Equity investment gains (losses) Card income Trading account profits Other income(1) Total noninterest income Total revenue Provision for credit losses Gains on sales of debt securities Liabilities Deposits in domestic...

  • Page 40
    ...Balance, December 31, 2002 Net income Net unrealized losses on available-for-sale debt and marketable equity securities Net unrealized gains on foreign currency translation adjustments Net unrealized losses on derivatives Cash dividends paid: Common Preferred Common stock issued under employee plans...

  • Page 41
    ... in other assets and the Corporation's proportionate share of income or loss is included in other income. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions...

  • Page 42
    ... hedging activities as either fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The Corporation manages interest rate and foreign currency exchange rate sensitivity predominantly through the use of derivatives. Fair value hedges are used to limit the Corporation...

  • Page 43
    ... at estimated fair value with the corresponding adjustment reported in trading account profits. The Corporation values the Certificates using an option-adjusted spread model which requires several key components including, but not limited to, proprietary prepayment models and term structure modeling...

  • Page 44
    ... functional currency used to measure the financial statements of a foreign entity is the U.S. dollar. In these instances, the resulting realized gains or losses are included in income. Note 4 Securities The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale debt...

  • Page 45
    ... gains and losses on sales of debt securities for 2003, 2002 and 2001 were: (Dollars in millions) Note 5 Trading Account Assets and Liabilities The Corporation engages in a variety of trading-related activities that are either for clients or its own account. The fair values of the components...

  • Page 46
    ... Note 7 Outstanding Loans and Leases Outstanding loans and leases at December 31, 2003 and 2002 were: December 31 (Dollars in millions) 2003 2002 Fair Value and Cash Flow Hedges The Corporation uses various types of interest rate and foreign currency exchange rate derivative contracts to protect...

  • Page 47
    ... to exit the subprime real estate lending business, the Corporation securitized $17.5 billion of subprime real estate loans in two bond-insured transactions and retained all of the related AAA-rated securities in the available-for-sale portfolio. During 2002, the Corporation re-securitized and sold...

  • Page 48
    ... Home equity lines Direct/Indirect consumer Consumer finance Credit card Foreign consumer Total consumer Total managed loans and leases Loans in revolving securitizations Total held loans and leases Year Ended December 31, 2003 Average Loans and Leases Outstanding Loans and Leases Net Losses...

  • Page 49
    ... InterBank Offered Rates (LIBOR). Bank of America Corporation and Bank of America, N.A. maintain various domestic and international debt programs to offer both senior and subordinated notes. The notes may be denominated in U.S. dollars or foreign currencies. Foreign currency contracts are used to...

  • Page 50
    ...of the credit card lines. Other Guarantees The Corporation sells products that offer book value protection primarily to plan sponsors of ERISA-governed pension plans such as 401(k) plans, 457 plans, etc. The book value protection is provided on portfolios of intermediate/short-term investment grade...

  • Page 51
    ... to the mutual fund business, including all systems relating to sales, clearing, and derivative and brokerage operations. The Corporation is developing new policies to eliminate all lending, derivatives, brokerage services or any other services relating to mutual fund trading activity by clients...

  • Page 52
    ... 16, 2001, a class was certified consisting of more than one million California residents who have, had or will have, at any time after August 13, 1994, a deposit account with Bank of America, N.A. into which payments of public benefits are or have been directly deposited by the government. The case...

  • Page 53
    ...Pension Plans and the Post Retirement Health and Life Plans. The Pension Plan has a balance guarantee feature, applied at the time a benefit payment is made from the plan, that protects participant balances transferred and certain compensation credits from future market downturns. The Corporation is...

  • Page 54
    ...2004. The expected return on plan assets is calculated using the calculated market-related value for the Pension Plan and the fair value for the Postretirement Health and Life Plans. The asset valuation method for the Pension Plan recognizes 60 percent of the market gains or losses in the first year...

  • Page 55
    ... building blocks used to arrive at the long-term return assumption would include an implied return from equity securities of 9.0 percent, debt securities of 6.5 percent, and real estate of 9.0 percent for all pension plans and postretirement health and life plans. The Pension Plan asset allocation...

  • Page 56
    ... Equity Program, ten-year options to purchase shares of the Corporation's common stock were granted to certain key employees in 1997 and 1998 in the form of market price options and premium price options. All options issued under this plan to certain persons who were employees as of the merger...

  • Page 57
    ... rpo rate and Inve stme nt Banking provides capital raising solutions, advisory services, derivatives capabilities, equity and debt sales and trading for our corporate, commercial and institutional clients as well as traditional bank deposit and loan products, cash management and payment services to...

  • Page 58
    ... $ 386,330 (Dollars in millions) Asset Management(1) 2003 2002 2001 Global Corporate and Investment Banking(1) 2003 2002 2001 Net interest income (fully taxable-equivalent basis) Noninterest income(2) Total revenue Provision for credit losses Losses on sales of debt securities Amortization of...

  • Page 59
    ... activities Net increase (decrease) in commercial paper and other short-term borrowings Proceeds from issuance of long-term debt Retirement of long-term debt Proceeds from issuance of common stock Common stock repurchased Cash dividends paid Other financing activities, net Net cash used in financing...

  • Page 60
    ...nt Mo re ho us e Co lle ge Educ atio n Atlanta, GA (the Co rpo ratio n) are lo c ate d in the Bank o f Ame ric a Co rpo rate Ce nte r, Charlo tte , NC 2 8...manage r, at 1 .8 0 0 .5 2 1 .3 9 8 4 . Fo r inquirie s c o nc e rning divide nd c he c ks , the Share s Dire c t divide nd re inve s tme nt plan...

  • Page 61
    ©2004 Bank of Am erica Corporation 00-04-1227B 3/ 2004 Recycled Paper