Bank of America Summary Annual Report 2005 How We Grow A key part of how we grow at Bank of America is our associates’ commitment to customer satisfaction and sales at our more than 5,800 banking centers nationwide, including the Clark © 2006 Bank of America Corporation & Madison Banking Center in 00-04-1354B 3/2006 the heart of Chicago’s fi nancial district, managed by Sandy Pierce and her team. s 2005 Summary Annual Report Recycled Paper 1 Bank of America 2005 A key part of how we grow at Bank of America is our associates’ commitment to customer satisfaction and sales at our more than 5,800 banking centers nationwide, including the Clark & Madison Banking Center in the heart of Chicago’s fi nancial district, managed by Sandy Pierce and her team. 1 Bank of America 2005 662058ba_1-72058ba_1-7 1 33/15/06/15/06 55:49:08:49:08 PPMM Contents Letter to Shareholders ..........................................3 Working Together ..................................................23 2005 Financial Overview .....................................8 Investing in Our Communities ....................26 How We Grow ...............................................................9 Our Businesses ........................................................30 Operating Excellence ...........................................10 Executive Officers and Directors ................31 Innovation ....................................................................16 Corporate Information .......................................32 Recognizing Opportunities ............................20 Bank of America Corporation Bank of America Corporation is a publicly traded (NYSE: BAC) company headquartered in Charlotte, NC, that operates in 29 states, the District of Columbia and 43 foreign countries. The corporation provides a diversified range of banking and nonbanking financial services and products domestically and internationally through four business segments: Global Consumer and Small Business Banking, Global Business and Financial Services, Global Capital Markets and Investment Banking, and Global Wealth and Investment Management. Financial Highlights 2005 Revenue* (in millions) (Dollars in millions, except per share information) Global Business Year Ended Dec. 31 and Financial Services $11,160 For the year 2005 2004 19% Global Wealth Global Capital Revenue* $56,923 $49,682 and Investment Markets and Management Net income 16,465 13,947 Investment Banking $7,393 Shareholder value added 6,594 5,718 $9,009 13% 16% Earnings per common share 4.10 3.71 All Other** Diluted earnings per common share 4.04 3.64 $485 1% Dividends paid per common share 1.90 1.70 Return on average assets 1.30% 1.34% Return on average common Global Consumer and Small Business Banking shareholders’ equity 16.51% 16.47% $28,876 Efficiency ratio* 50.38% 54.37% 51% Average common shares issued 2005 Net Income and outstanding (in millions) 4,009 3,759 (in millions) Global Business and Financial Services At year end 2005 2004 $4,562 28% Total assets $ 1,291,803 $1,110,432 Global Wealth Total loans and leases 573,791 521,813 and Investment Management Total deposits 634,670 618,570 $2,388 Global Capital 14% Total shareholders’ equity 101,533 100,235 Markets and Book value per common share 25.32 24.70 Investment Banking All Other** $1,736 $623 Market price per share 11% 4% of common stock 46.15 46.99 Common shares issued and Global Consumer and outstanding (in millions) 4,000 4,047 Small Business Banking $7,156 43% *Fully taxable-equivalent basis **All Other consists primarily of Equity Investments, the residual impact of the allowance for credit losses process, Merger and Restructuring Charges, intersegment eliminations, and the results of certain consumer finance and commercial lending businesses that are being liquidated. All Other also includes certain amounts associated with the Asset and Liability Management process, including the impact of funds transfer pricing allocation methodologies, amounts associated with the change in the value of derivatives used as economic hedges of interest rate and foreign exchange rate fluctuations that do not qualify for SFAS 133 hedge accounting treatment, and Gains on Sales of Debt Securities. 2 Bank of America 2005 KENNETH D. LEWIS CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT To our shareholders: n 2005, your company demonstrated its ability to grow in a number of ways. We accelerated growth by attracting, retaining and deepening more customer relationships in the markets we serve. We launched a number of initiatives that will I create value by integrating our capabilities across the company. We completed our FleetBoston Financial merger transition in the Northeast, exceeding what we promised in almost every category. We became the fi rst U.S. bank to invest directly in a major Chinese bank. And, our acquisition of MBNA Corp. closed on Jan. 1, 2006, making Bank of America the top provider of debit and credit cards in the United States. Our view is that there are many paths to growth, and the best companies pursue multiple strategies as market conditions change and opportunities arise. I will discuss our most important paths to growth in this letter. I invite you to read more about the work we’re doing Bank of America 2005 3 662058ba_1-72058ba_1-7 3 33/15/06/15/06 5:49:225:49:22 PMPM From left, Brian T. Moynihan, president, Global Wealth and Investment Management; Liam E. McGee, president, Global Consumer and Small Business Banking; and R. Eugene Taylor, president, Global Corporate and Investment Banking, at the Bank of America Corporate Center in Charlotte. for customers and shareholders in the articles that follow. which include our dividend, were in line with our peers, First, a review of our key 2005 fi nancial accomplishments. our stock price fell slightly this year as other stocks in our Strong fi nancial performance. In 2005, we again set industry remained fl at. I believe the two factors that weighed new records for revenue on a fully taxable-equivalent basis, most heavily on our stock were the impact of the yield curve, $56.9 billion, and net income, $16.5 billion, representing which affects all banks, and our acquisition strategy, which growth of 15 percent and 18 percent, respectively, over last has created uncertainty for some investors. year. Diluted earnings per share increased to $4.04, an On the fi rst point, the yield curve is cyclical. It will steepen 11 percent rise over 2004. Return on average common share- again, and net interest yields will rise accordingly. In the holders’ equity rose to 16.51 percent from 16.47 percent. meantime, we have one of the best teams in the business at Our greatest fi nancial challenge in 2005 was the con- managing interest rate risk, and I believe we will continue tinuing fl attening of the yield curve, which is the difference to perform well relative to our peers regardless of the interest between long- and short-term interest rates. As that differ- rate environment. ence shrank, banks, which tend to price deposits based on The second point raises questions about acquisition short-term rates, were adversely affected. In essence, profi t selection, price and risk. We look at companies that can margins were compressed. We expect the yield curve to strengthen our position in a given market, which can be remain relatively fl at in 2006, providing an opportunity for defi ned by customers, geography or product. We look to well-managed banks to differentiate themselves. acquire products, technologies, skills or capabilities that Our strong performance has enabled us to continue our will enhance our value proposition with both customers and record of returning capital to shareholders. 2005 was our 28th shareholders. Of the many opportunities we have evaluated consecutive year of raising our quarterly dividend, which in- over the past several years, we believe that both Fleet and creased by 11 percent to $0.50. Over that time, our dividend has MBNA met our standards. increased at a compound annual growth rate of 13 percent. Regarding price, we start with a sound financial As I have always said, the bottom line on our performance analysis, requiring that identifi able cost savings and is our stock price. While our total shareholder returns, projected revenue gains will offset the proposed premium. 4 Bank of America 2005 662058ba_1-72058ba_1-7 4 33/15/06/15/06 55:49:34:49:34 PPMM $56.9 $16.5 $4.04 34.03% 32.59% $49.7 $13.9 $3.64 $3.55 29.20% $38.5 $10.8 ’03 ’04 ’05 ’03 ’04 ’05 ’03 ’04 ’05 ’03 ’04 ’05 Revenue Net Income Earnings per Return on Average (Fully taxable-equivalent basis) (in billions) Common Share Tangible Common (in billions) (Diluted) Shareholders’ Equity (Fully taxable-equivalent basis) We also consider our long-term view of the changing I have not. marketplace; the competitive landscape; whether the Bank of America has the vision, the skills and the company represents a good fit with our business model, financial wherewithal to pursue growth opportunities when brand and culture; and the benefits that we believe will and where we find them. That fact does not lessen our accrue to our customers and shareholders over time. commitment to attracting, retaining and deepening our It is in the context of all these criteria that we make an customer relationships. In fact, I believe there are three acquisition decision, and our track record over the past five characteristics that give us a particular advantage with years demonstrates both selectiveness and discipline in our customers and prospects: operational excellence, scale and decision-making process. scope, and innovation. While all acquisitions include elements of risk, our Achieving operational excellence has been a top priority company has demonstrated our ability to execute effective, for years, and it is most evident in our pursuit of process efficient and profitable merger transitions. We proved this excellence through our use of Six Sigma tools. Since we point in the Fleet transition, which we executed on time adopted Six Sigma as a core operating discipline four years and with greater expense savings and revenue gains than ago, we have achieved billions of dollars in savings and rev- we originally forecast.