Bank of America | Annual Report (2005) | Financial Review

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Balance Sheet Overview

At December 31, 2005, Total Assets were $1.3 trillion, an increase of $181.4 billion, or 16 percent, from December 31, 2004. Average Total Assets in 2005 increased $225.3 billion, or 22 percent, from 2004. Growth in Total Assets (both period end and average balances) in 2005 was attributable to increases in various line items primarily driven by an increase in trading-related activity due to the strategic growth initiative, growth in the ALM portfolio and growth in Loans and Leases. Average Total Assets also increased due to the impact of the FleetBoston Merger.

At December 31, 2005, Total Liabilities were $1.2 trillion, an increase of $180.1 billion, or 18 percent, from December 31, 2004. Average Total Liabilities in 2005 increased $210.2 billion, or 22 percent, from 2004. Growth in Total Liabilities (both period end and average balances) in 2005 was primarily due to increases in trading-related liabilities due to the strategic growth initiative, increase in wholesale funding and organic growth in core deposits. Average Total Liabilities also increased due to the impact of the FleetBoston Merger.

Federal Funds Sold and Securities Purchased under Agreements to Resell

The Federal Funds Sold and Securities Purchased under Agreements to Resell average balance increased $40.2 billion to $169.1 billion in 2005 from activities in the trading businesses as a result of expanded trading activities related to the strategic initiative and to meet a variety of customers’ needs.

Trading Account Assets

Our Trading Account Assets consist primarily of fixed income securities (including government and corporate debt), equity and convertible instruments. The average balance increased $28.9 billion to $133.5 billion in 2005, which was due to growth in client-driven market-making activities in interest rate, credit and equity products, and an increase in proprietary trading activities. For additional information, see Market Risk Management.

Securities

AFS Securities include fixed income securities such as mortgage-backed securities, foreign debt, asset-backed securities, municipal debt, equity instruments, U.S. Government agencies and corporate debt. We use the AFS portfolio primarily to manage interest rate risk, liquidity risk and regulatory capital, and to take advantage of market conditions that create more economically attractive returns on these investments. The average balance in the AFS portfolio grew by $70.0 billion from 2004 primarily due to the reinvestment of available liquidity and as part of our ALM strategy. For additional information, see Market Risk Management.

Loans and Leases, Net of Allowance for Loan and Lease Losses

Average Loans and Leases, net of allowance for loan and lease losses, were $528.8 billion in 2005, an increase of 14 percent from 2004. The increase of $40.0 billion in the consumer loan and lease portfolio and $24.6 billion in the commercial loan and lease portfolio was primarily due to organic loan growth. Average Loans and Leases, net of allowance for loan and lease losses, also increased due to the impact of the FleetBoston Merger. For a more detailed discussion of the loan portfolio and the allowance for credit losses, see Credit Risk Management, and Note 7 and Note 8 of the Consolidated Financial Statements.

Deposits

Average Deposits increased $80.9 billion to $632.4 billion in 2005 compared to 2004 due to a $46.3 billion increase in average domestic interest-bearing deposits and a $24.1 billion increase in average noninterest-bearing deposits primarily due to organic growth including the impact of FleetBoston. We categorize our deposits as core or market-based deposits. Core deposits are generally customer-based and represent a stable, low-cost funding source that usually reacts more slowly to interest rate changes than market-based deposits. Core deposits include savings, NOW and money market accounts, consumer CDs and IRAs, and noninterest-bearing deposits. Core deposits exclude negotiable CDs, public funds, other domestic time deposits and foreign interest-bearing deposits. Average core deposits increased $69.5 billion to $563.6 billion in 2005, a 14 percent increase from the prior year. The increase was distributed between consumer CDs, noninterest-bearing deposits, NOW and money market deposits, and savings. Average market-based deposit funding increased $11.4 billion to $68.8 billion in 2005 compared to 2004. The increase was primarily due to a $10.5 billion increase in foreign interest-bearing deposits.

Federal Funds Purchased and Securities Sold under Agreements to Repurchase

The Federal Funds Purchased and Securities Sold under Agreements to Repurchase average balance increased $65.5 billion to $230.8 billion in 2005 as a result of expanded trading activities related to the strategic initiative and investor client activities.

Trading Account Liabilities

Our Trading Account Liabilities consist primarily of short positions in fixed income securities (including government and corporate debt), equity and convertible instruments. The average balance increased $22.4 billion to $57.7 billion in 2005, which was due to growth in client-driven market-making activities in interest rate, credit and equity products, and an increase in proprietary trading activities. For additional information, see Market Risk Management.

Commercial Paper and Other Short-term Borrowings

Commercial Paper and Other Short-term Borrowings provide a funding source to supplement Deposits in our ALM strategy. The average balance increased $33.3 billion to $95.7 billion in 2005 due to funding needs associated with the growth of core asset portfolios, primarily Loans and Leases, and AFS Securities.

Table 2

Five-Year Summary of Selected Financial Data⁽¹⁾


(Dollars in millions, except per share information)	2005		2004 (Restated)		2003 (Restated)		2002 (Restated)		2001 (Restated)
Income statement
Net interest income	$	30,737	$	27,960	$	20,505	$	20,117	$	19,904
Noninterest income		25,354		21,005		17,329		14,874		15,863
Total revenue		56,091		48,965		37,834		34,991		35,767
Provision for credit losses		4,014		2,769		2,839		3,697		4,287
Gains on sales of debt securities		1,084		1,724		941		630		475
Noninterest expense		28,681		27,012		20,155		18,445		20,709
Income before income taxes		24,480		20,908		15,781		13,479		11,246
Income tax expense		8,015		6,961		5,019		3,926		3,747
Net income		16,465		13,947		10,762		9,553		7,499
Average common shares issued and outstanding (in thousands)		4,008,688		3,758,507		2,973,407		3,040,085		3,189,914
Average diluted common shares issued and outstanding (in thousands)		4,068,140		3,823,943		3,030,356		3,130,935		3,251,308

Performance ratios
Return on average assets		1.30%		1.34%		1.44%		1.46%		1.16%
Return on average common shareholders’ equity		16.51		16.47		21.50		19.96		15.42
Return on average tangible common shareholders’ equity⁽²⁾		34.03		32.59		29.20		27.53		23.51
Total ending equity to total ending assets		7.86		9.03		6.76		7.92		7.92
Total average equity to total average assets		7.86		8.12		6.69		7.33		7.55
Dividend payout		46.61		46.31		39.76		38.79		48.40

Per common share data
Earnings	$	4.10	$	3.71	$	3.62	$	3.14	$	2.35
Diluted earnings		4.04		3.64		3.55		3.05		2.30
Dividends paid		1.90		1.70		1.44		1.22		1.14
Book value		25.32		24.70		16.86		17.04		15.63

Average balance sheet
Total loans and leases	$	537,218	$	472,617	$	356,220	$	336,820	$	365,447
Total assets		1,269,892		1,044,631		749,104		653,732		644,887
Total deposits		632,432		551,559		406,233		371,479		362,653
Long-term debt		97,709		92,303		67,077		65,550		69,621
Common shareholders’ equity		99,590		84,584		50,035		47,837		48,610
Total shareholders’ equity		99,861		84,815		50,091		47,898		48,678

Capital ratios (at year end)
Risk-based capital:
Tier 1		8.25%		8.20%		8.02%		8.41%		8.44%
Total		11.08		11.73		12.05		12.63		12.81
Leverage		5.91		5.89		5.86		6.44		6.67

Market price per share of common stock
Closing	$	46.15	$	46.99	$	40.22	$	34.79	$	31.48
High closing		47.08		47.44		41.77		38.45		32.50
Low closing		41.57		38.96		32.82		27.08		23.38

Footnote (1)

As a result of the adoption of SFAS 142 on January 1, 2002, we no longer amortize Goodwill. Goodwill amortization expense was $662 million in 2001.

Footnote (2)

Return on average tangible common shareholders’ equity equals net income available to common shareholders plus amortization of intangibles, divided by average common shareholders’ equity less goodwill, core deposit intangibles and other intangibles.

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2005 Summary Annual Report: Form 10-K: Balance Sheet Overview