Java Card Expands

Nokia’s Research Centre is testing a new smart card application which implements an existing remote banking security solution in a new way. Based on the new Java-compatible Cyberflex smart card from Schlumberger, the application handles a combination of one-time and fixed passwords. This technique is already used by a number of banks for their remote banking services. The smart card implementation makes the security technique easier and more secure to use.

“Cyberflex is very attractive because it opens up many development possibilities” says Martti Granberg, Senior Consultant, Nokia Research Center. “We like the idea of a smart card compatible with Java, as the ability to dynamically download applications is extremely interesting. Cyberflex is a strong platform for the development of telecommunications security applications such as user authentication, data integrity and data confidentiality, and is also good for implementing multi-functional cards, such as one combining payment and loyalty schemes for example.”

Schlumberger’s Cyberflex product provides an interoperable Java platform for smart card applications. Thanks to the interpreted nature of the Java language, applications can now be written and trialled in a matter of days, eliminating the mask creation cycle required for conventional smart card projects. This approach makes smart cards much more like conventional computers, allowing them to run Java Card-compliant application, and adapt to meet the needs of card users. Applications can also be added or removed from Cyberflex cards after they are manufactured, bringing much lower costs for support and new product roll-out.

The Java Card security test application has been developed by the Nokia Research Center in Helsinki, Finland. This is one of the world’s leading centres for communications technologies and systems concept research, and it interacts closely with Nokia business units worldwide. Headquartered in Finland, Nokia is a leader in digital technologies including mobile phones, cellular and fixed telecommunications networks, wireless data solutions and multimedia terminals. With sales in approximately 130 countries, net sales totalled FIM 39.3 billion ($8.5 billion) in 1996. Nokia employs more than 34,000 people in 45 countries. Nokia’s shares are listed in Helsinki, New York, London, Stockholm, Frankfurt and Paris.

Details

HONOR’s Annual Conference

HONOR will host its 1997 Annual Conference–“A Meeting of the Minds”–on October 26-28, 1997, at the Buena Vista Palace & Spa, located at the Disney World Village in Lake Vista, Fla. This will be the first network-wide meeting since the merger of the HONOR®, MOST® and ALERT® networks in January.

“The conference provides an excellent opportunity for financial institutions and processors to learn more about HONOR’s upcoming plans and the overall state of the EFT industry,” said Mary A. Kilby, senior vice president of marketing and strategic planning at HONOR. “We have assembled an impressive list of speakers in many areas of expertise, and we look forward to meeting our new members and clients.”

Conference activities will begin on Sunday afternoon, October 26, with a series of training and educational sessions. On Monday, T.O. Bennion, president and CEO of HONOR, will officially open the meeting with his welcoming address. The keynote speaker for the conference will be Susan Dentzer, chief economics correspondent of U.S. News & World Report, who will discuss the economy and its impact on banking and electronic funds transfer. Other Monday morning sessions include a panel discussion on “The Future of Retail Delivery,” featuring Jack Benton of Benton International, Jeffrey Kutler of the American Banker, Deborah McWinney of Visa, Richard Redick of Barnett Bank and Mary Jo Winterer of MasterCard.

Subsequent program topics include such wide-ranging issues as marketing, fraud prevention, smart card technology, electronic benefits transfer (EBT), off-line debit card programs and home banking.

“With the many changes at HONOR and in our industry, this conference takes on special significance,” said Kilby. “We look forward to an enjoyable, informative and productive three days with our members, clients and industry associates.”

HONOR Technologies, Inc. is headquarted in Mainland, Fla. and serves more than 40 million cardholders and 1,870 financial institution members with more than 28,000 ATMs and 350,000 merchant Point of Sale terminals. HONOR processes more than 80 million transactions per month, and offers a variety of EFT services such as terminal driving, card production, MasterMoney and Visa Check Card processing and home banking.

HONOR serves members across the Mid-Atlantic and Southern regions of the United States, with primary operations in Alabama, Delaware, Florida, Georgia, Maryland, North Carolina, New Jersey, Pennsylvania, South Carolina, Tennessee, Virginia, Washington, D.C. and West Virginia. In addition to its Maitland headquarters, HONOR has offices in Birmingham, Ala; Reston, Va; Columbia, S.C.; and Altamonte Springs, Fla.

Details

Java 2.0 API Ready

Sun Microsystems, Inc. (NASDAQ:SUNW) announced today that the Java(TM) Card Application Programming Interface (API) 2.0 specification is now final and available for download at [http://java.sun.com/products/javacard.][1]

Java Card 2.0 is a blueprint for building applications to run on smart cards. A smart card is a plastic card that looks almost exactly like a credit card. The difference is that a smart card has a computer chip that stores and processes information. For example, a smart card might contain bank account information, medical records or even money that acts just like cash at retail outlets or on the Internet.

Java Card 2.0 enables any card manufacturer to build smart cards that can interoperate, not only with each other, but with existing cards and card reading terminals. The cards integrating Java Card 2.0 technology will be used to store and update account information, money and personal data. The smart cards created will span a variety of industries, including financial services, telephony, healthcare, Internet access and electronic commerce.

“Java Card 2.0 is the catalyst that will launch the widespread use of multi-function smart cards worldwide,” said Alan Baratz, president of Sun Microsystems’ JavaSoft division. “With the ‘Write Once, Run Anywhere(TM)’ capabilities of Java, the smart card industry can provide the consumer with a card that can store money as easily as it can track frequent flyer miles or provide secure access to a cellular phone.”

The Java Card API, a specialized application programming interface, was unveiled by Sun on October 29, 1996. Sun’s Java Card has been licensed by companies representing more than 90 percent of worldwide smart card manufacturing capacity. The Java Card API 2.0 was developed in collaboration with the industry, including smart card manufacturers, card issuers and smart card associations.

Companies who have endorsed Java Card 2.0 include Bull, Citicorp, First Union, Gemplus, Giesecke & Devrient, Hitachi, Motorola, Schlumberger, Toshiba, VeriFone, Visa and many others (see attached addendum).

Many of Sun Microsystems’ Java Card partners will be introducing Java Card 2.0 applications and products at Cartes `97 in Paris France on October 16, 1997.

Java Card API 2.0 Features

— The Java Card API 2.0 includes support for code reusability. With the memory limitations in cards, efficient use and reuse of code is indispensable.

— Java Card supports secure inter-applet communication. For example, a payment applet can exchange payment transaction information with a cooperating loyalty applet.

— Support is provided for ISO standard card/terminal communication.

— A standard cryptography API is included for access to commonly used cryptographic functions.

— The Java Card API is compliant with ISO standards 7816-4 and 7816-5. With 7816-4, ISO has standardized a number of important functions included in the Java Card API such as I/O and file system access. 7816-5 has standardized identifiers and naming conventions which are supported by Java Card.

About Sun

Since its inception in 1982, a singular vision, “The Network Is The Computer(TM)” has propelled Sun Microsystems, Inc. (NASDAQ:SUNW) to its position as a leading provider of hardware, sofware and services for establishing enterprise-wide intranets and expanding the power of the Internet. With more than $8 billion in annual revenues, Sun can be found in more than 150 countries and on the World Wide Web at http://www.sun.com .

Press announcements and other information about Sun Microsystems are available on the Internet via the World Wide Web at [http://www.sun.com.][2] For inquiries about Java technologies and services, telephone 1-800-528-2763 (512/434-1591 for international callers) or visit [http://java.sun.com.][3]

[1]: http://java.sun.com/products/javacard
[2]: http://www.sun.com
[3]: http://www.java.sun.com

Details

Bank Declares War on ATM Fees

USAA Federal Savings Bank has made automated teller withdrawals essentially free for its customers by offering rebates on domestic ATM user fees. USAA FSB waives its $1 fee on the first 10 ATM withdrawals per statement cycle from any non-USAA ATM. Also, the USAA bank rebates up to $1.50 on each of the first 10 non-USAA ATM withdrawals per statement cycle when the ATM’s owner assesses a fee or surcharge. All ATM transactions at any USAA FSB ATM are already free for the bank’s cardholders. USAA FSB operates without branches, yet offers worldwide financial services to 1.8 million customers via phone, mail and personal computer.

Details

Consumers Want More ATM Services

Many consumers want their banks to provide additional services such as event ticketing, coupons and internet access through their ATMs, according to a nationwide survey carried out by NCR Corporation. The survey shows that these new services can help banks justify charging ATM fees. While 32 per cent of respondents agree with paying fees for ordinary ATM usage, the figure rises to 37 percent for those more advanced services. Among young people – 18 to 35 – the figure rises to 42 per cent. There is also a demand for personalized services from banks. Almost half – 48 per cent – of the respondents felt happy with banks using personal data if it would lead to better, more individual services, while 47 per cent of 18-34 year olds said that this was an important factor in their choice of banks.

Details

Metris’ Steamroller

Metris Companies scored another impressive quarter as quarterly card volume shot up 52% compared to third quarter 1996 with receivables mushrooming 108% since Sept 30, 1996. As card account balances have grown so have chargeoffs and delinquency. The managed charge-off rate for the third quarter stood at 8.7% compared to 5.7% one year ago. Managed 30+ day delinquency was 6.4% for the third quarter compared to 5.2% last year. The good news is chargeoffs did decline somewhat from the second quarter’s 9.0% rate and delinquency increased slightly from the second quarter’s 5.9%. At the end of the third quarter card loans stood at $2.7 billion and total accounts at 1.8 million. Last month Metris acquired 280,000 accounts from KeyCorp and signed an agreement to acquire 500,000 accounts from Mercantile. This week Metris’ parent, Fingerhut, announced it will seek to spin-off the nation’s fastest growing major issuer.

Details

3Com POS Partners Program

3Com Corp., a leader in providing networking solutions for the retail industry, today launched its Point of Sale (POS) Partners Program to deliver the industry’s first complete enterprise-wide, standards-based networked POS solution.

The first-of-its-kind in the networking industry, the 3Com POS Partners Program brings a new level of functionality, performance and investment protection to the point of sale.

3Com is announcing the POS Partners Program as many of the nation’s largest retailers are migrating from proprietary to open POS architecture. This shift in technology is placing greater demands on POS systems to provide store associates with access to network-centric, customer-focused applications that require connectivity across the enterprise to centralized application and database servers.

The 3Com POS Partners Program leverages the company’s traditional strengths in both the WAN (wide area network) and LAN (local area network) to deliver a complete networked POS solution — from remote access concentrators at the central site (for support of electronic payments, polling, and new online applications), to store-based network routers, modems, Ethernet hubs and NICs (network interface cards) which reside in both POS terminals and servers.

“Our retail customers have told us how critical it is for their POS investment to be not only affordable, but also scaleable to support the bandwidth-intensive retail applications that are rapidly becoming available,” said Jeff Siegel, 3Com retail industry manager. “By working with leading POS vendors, resellers and systems integrators retailers benefit from a highly integrated POS solution that delivers the application performance and future-proofing that even the most growth-oriented retailers require.”

Using POS Networks to Help Manage Customer Relationships

The new generation POS network, in addition to the traditional retail applications of credit authorization, polling and price changes, now must increasingly support new enterprise networked applications such as gift registry, merchandise locator, special ordering and frequent shopper programs which help retailers provide better service while managing individual customer relationships.

“Intelligent technology in the store is quickly becoming the source of a retailer’s competitive advantage, an advantage based on recaptured intimacy with the three basic resources of the business: customers, associates, and merchandise,” said Steven Beck of Gateway Data Sciences Corp., a leading software application provider for the retail industry and a 3Com POS partner. “3Com’s complete enterprise POS network solution provides store associates with access to valuable customer information, enabling them to provide greater service.”

3Com: The POS Choice of Leading Retailers

3Com’s patented technologies, such as Parallel Tasking(R) and x2(TM) technology WAN connectivity, provide unprecedented POS application performance to retailers. The Home Depot, Kinko’s, Sears, Hudson’s Bay, Carrefour, Ross Stores, Gymboree, Musicland, Diamond Shamrock, and other leading retailers have already deployed 3Com networked POS for competitive advantage. Working in conjunction with another 3Com POS Partner, Harmonic Systems Inc., the solution enables an end-to-end private TCP/IP network while introducing a new level of economy and performance for retail chains.

“3Com has been selected as our equipment provider because of the flexibility and economy of their high performance digital channel banks,” said Barrs Lewis, CEO of Harmonic Systems. “The 3Com product line has helped us deliver state-of-the art WAN capability to large retail chains.”

One such chain is Gymboree. “With 3Com’s networked POS solution, we have cut credit authorization times by half,” said Robert Notte, director of information technology at Gymboree, a nationwide high quality children’s apparel retailer that recently deployed a 3Com networked POS solution in over 400 stores. “Our networked applications allow our store associates to better serve our customers.”

Even the most growth-oriented large format store chains have turned to 3Com’s POS solution for future-proofing and fastest application performance. “We operate an extremely high transaction per store business,” said Dave Ellis, The Home Depot senior director of IT. “Our networked POS systems must meet very high availability standards while also delivering immediate response time. Our application growth dictates a highly scaleable network solution which 3Com delivered.”

3Com has been delivering network solutions to retailers since its inception. Today, more than 700,000 retail stores, including most of the top 100 largest U.S. retailers, currently use 3Com products in their network infrastructure, and 3Com’s WAN solution for supporting POS transactions is pervasive throughout the electronic payment industry. According to 3Com research, 80 percent, or $640 billion, of all credit card transactions in the U.S. each year are processed over 3Com enabled networks operated by AT&T, CompuServe, VisaNet and others.

Building the POS Architecture of the Future

The 3Com POS Partners Program combines 3Com’s award winning Ethernet and enterprise connectivity products with service and support from major POS service organizations, including ICL, SHL Systemhouse, Siemens-Nixdorf and NCR, with leading-edge software applications from POS developers. Utilizing OfficeConnect(R) and SuperStack(R) hubs, Total Control(TM) remote access concentrators, SuperStack II and OfficeConnect NETBuilder(R) routers, Parallel Tasking Ethernet network interface cards, and x2 modem technology, the 3Com networked POS solution helps retailers reduce the cost of ownership and complexity of in-store networks while making the point of sale an “intelligent” access point for information that resides both in-store and throughout the enterprise.

3Com Authorizes Top North American Resellers to Deliver Networked POS Solution

As part of the 3Com POS Partners Program, 3Com has developed POS Network Packs that allow POS resellers to easily integrate 3Com POS network products into a complete solution inclusive of POS terminals, servers, and application software. The Network Packs are currently available to authorized POS resellers throughout the U.S. and Canada, and are expected to be available in Europe in late 1997, and in Japan and Latin America in 1998.

“POS resellers have always wanted to deliver a single vendor, end-to-end solution at a cost effective price,” said Mike Baur, president of ScanSource. “3Com’s POS Partners Program allows resellers for the first time to deliver this complete solution and the lowest possible price.”

Resellers interested in becoming an authorized 3Com POS Partner should contact ScanSource at 800/944-2439, ext. 215.

About 3Com

3Com Corp. enables individuals and organizations worldwide to communicate and share information and resources at anytime from anywhere. As one of the world’s preeminent suppliers of data, voice and video communications technology, 3Com has delivered networking solutions to more than 100 million customers worldwide. With global reach and local touch, the company provides enterprises, network service providers and carriers, small businesses and consumers with comprehensive, innovative information access products and system solutions for building intelligent, reliable and high performance local and wide area networks. 3Com has worldwide revenues of approximately $6.0 billion and employs about 13,200 employees in 45 countries. For further information, visit 3Com’s World Wide Web site at

Details

BofA Losses Moderate

BankAmerica Corporation (BAC) today reported third-quarter 1997 fully-diluted earnings per share of $1.11, up 28 percent from $0.87 for the same period a year ago. Net income for the period was $819 million, up 20 percent from $683 million for the third quarter of 1996. The return on average common equity for the third quarter of 1997 was 16.82 percent, an increase of 266 basis points from the same period a year ago and 9 basis points from the second quarter of 1997.

BAC’s fully-diluted earnings per share for the first nine months of 1997 were $3.20, an increase of 19 percent from $2.69 for the first nine months of 1996. Net income for the first nine months of 1997 was $2,398 million, an increase of 13 percent from $2,126 million for the first nine months of 1996. The return on average common equity for the first nine months of 1997 was 16.69 percent, an increase of 177 basis points from the same period last year.

Cash earnings per share for the third quarter of 1997 were $1.20, up 24 percent from $0.97 for the third quarter of 1996. Cash earnings per share for the first nine months of 1997 were $3.48, up 17 percent from $2.97 for the first nine months of 1996.

The per share results include the effects of a two-for-one stock split which was effective June 2, 1997.

“We again produced solid results by concentrating on operating leverage–which is achieved when revenues increase significantly faster than expenses,” David A. Coulter, Chairman and Chief Executive Officer, said. “I was pleased with the increase in revenue growth resulting from strong capital market activities, a strengthening California economy and numerous marketing initiatives. At the same time we have continued to effectively manage our capital.”

Coulter cited the following examples of managing capital since the end of the second quarter of 1997:

— The completion of the sale of our consumer finance company, Security Pacific Financial Services Inc.;

— The completion of the Robertson Stephens and Company acquisition on October 1;

— The decisions, announced today, to exit our Midwest retail facilities and to sell BA Housing Services;

— The securitization of $750 million of credit card receivables in the third quarter of 1997;

— The sale of $3.2 billion of residential first mortgages;

— The redemptions of Series L and M preferred stock; and also the planned redemption of Series N preferred stock announced on October 6, which when redeemed will reduce stockholders’ equity by $234 million.

FINANCIAL HIGHLIGHTS:

— Net interest income was up $42 million from the third quarter of 1996. BAC’s net interest margin for the third quarter of 1997 was 4.06 percent, down 11 basis points from the comparable period a year ago.

— Noninterest income increased $351 million from the third quarter of 1996. Included in noninterest income for the third quarter of 1997 was a $246 million gain associated with the previously announced sale of Security Pacific Financial Services Inc. The effect of this gain was partially offset by charges of approximately $112 million for asset dispositions, personnel expenses, and other costs associated primarily with the decision to exit Midwest retail facilities. Excluding the effects of these items, noninterest income would have been $1,536 million, or an increase of $217 million over the same period in 1996. The increase primarily relates to a strong quarter of trading and equity investment income and increased revenues from fees and commissions.

— Noninterest expense was $2,232 million, an increase of $151 million from the third quarter of 1996. Included in noninterest expense for the third quarter of 1997 were charges associated with multiple legal matters, writedowns on corporate real estate, and contributions to the BA Foundation. Included in noninterest expense for the third quarter of 1996 was a one-time assessment of $82 million associated with the recapitalization of the Savings Association Insurance Fund (SAIF). Without these items, noninterest expense would have been $2,092 million for the third quarter of 1997 compared to $1,999 million for the third quarter of last year, or an increase of $93 million. This increase was principally attributable to increased personnel expense of $56 million, primarily associated with variable pay, and to expenses associated with trust preferred securities of $36 million.

— The provision for credit losses was $260 million, up $10 million from the previous quarter and $25 million from the third quarter of 1996. Net credit losses were $259 million for the third quarter of 1997, an increase of $35 million and $33 million from the second quarter of 1997 and the third quarter of 1996, respectively.

— Nonaccrual assets were $930 million at September 30, 1997, an increase of $69 million, or 8 percent, from their June 30, 1997 level, but a decrease of $189 million, or 17 percent, from their September 30, 1996 level.

— In connection with BAC’s ongoing efforts to effectively manage capital, BAC repurchased 7.5 million shares of its common stock during the third quarter of 1997 at an average per-share price of $70.22, which reduced stockholders’ equity by $525 million. These shares were repurchased on the open market over 60 trading days and represented approximately 7 percent of the total volume of BAC common stock traded on those days. Remaining buyback authority for common stock under the current repurchase program totaled $2.3 billion at September 30, 1997.

— On July 14, 1997, BAC redeemed all outstanding shares of its 8.16% Cumulative Preferred Stock, Series L, which reduced stockholders’ equity by $399 million. In addition, on September 30, 1997, BAC redeemed all outstanding shares of its 7 7/8% Cumulative Preferred Stock, Series M, which reduced stockholders’ equity by $349 million.

This earnings report and other material of interest to investors can be found on the new shareholder resources section of BankAmerica’s Internet web site ().

BankAmerica Corporation and Subsidiaries
Financial Highlights

Table 1
Summary of Results and Statistical Data

Third Second Third
(dollar amounts in millions, Quarter Quarter Quarter
except per share data) 1997 1997 1996/c/
——– ——– ——-

1 Net income $ 819 $ 799 $ 683
2 Earnings per common
and common
equivalent share 1.11 1.07 0.87/b/
3 Earnings per common share —
assuming full dilution 1.11 1.07 0.87/b/

Rate of return (based
on net income) on:
4 Average common equity 16.82% 16.73% 14.16%
5 Average total assets 1.26 1.26 1.12
6 Net interest margin/a/ 4.06 4.11 4.17

7 Full-time-equivalent
staff at period end
(in thousands) 76.0 77.4 78.2
8 Employees at period
end (in thousands) 89.5 91.0 92.7

Nine Months Ended
September 30
——————–
1997 1996/c/
——- ——

9 Net income $2,398 $2,126
10 Earnings per common and common
equivalent share 3.20 2.69/b/
11 Earnings per common share —
assuming full dilution 3.20 2.69/b/

Rate of return (based on
net income) on:
12 Average common equity 16.69% 14.92%
13 Average total assets 1.26 1.18
14 Net interest margin/a/ 4.11 4.26
———————————————————————-

/a/ The net interest margin is computed on a tax-equivalent basis.
The taxable-equivalent basis adjustments to net interest income were
$9 million, $6 million, and $5 million, for the third quarter of
1997, the second quarter of 1997, and the third quarter of 1996,
respectively, and $21 million, and $11 million for the nine-month
periods ended September 30, 1997 and 1996, respectively.

/b/ Restated to reflect a two-for-one stock split effective June 2,
1997.

/c/ Includes the income statement effect of the previously discussed
one-time SAIF assessment.

Table 2
Summary of Results Excluding the Effects
of Amortization of Intangibles/a/

Third Second Third
(dollar amounts in millions, Quarter Quarter Quarter
except per share data) 1997 1997 1996
——- ——- ——-

1 Net income $ 884 $ 865 $ 751
2 Cash earnings per common
and common equivalent share 1.20 1.16 0.97/b/
3 Rate of return on average
common equity 18.20% 18.17% 15.66%

Nine Months Ended
September 30
———————
1997 1996
—— ——

4 Net income $2,595 $2,330
5 Cash earnings per common and common
equivalent share 3.48 2.97/b/
6 Rate of return on average
common equity 18.11% 16.45%
—————————————————————–

/a/ For purposes of this table, amortization amounts are related to
those intangibles that are deducted from Tier 1 capital under
regulatory guidelines. These amortization amounts were excluded from
BAC’s results and totaled $65 million, $66 million, and $68 million,
for the third quarter of 1997, the second quarter of 1997, and the
third quarter of 1996, respectively, and $197 million, and $204
million for the nine-month periods ended September 30, 1997 and 1996,
respectively.

/b/ Restated to reflect a two-for-one stock split effective June 2, 1997.

=================================================================

Table 3
Tier 1 Capital Generation

Nine Months Ended
September 30
———————
(in millions) 1997 1996
——- ——-
Generation:
1 Net income $ 2,398 $ 2,126
2 Amortization of intangibles 197 204
3 Common stock issuances and other 417 220
4 Trust preferred securities 396 –
——- ——-
5 Total generation 3,408 2,550

Applications:
6 Common stock dividends (642) (587)
7 Preferred stock dividends (86) (141)
8 Common stock repurchased (1,475) (901)
9 Preferred stock redeemed (1,113) (399)
——- ——-
10 Total applications (3,316) (2,028)

11 Capital attributed to growth
in risk-weighted assets (399)/a/ (630)
—— ——
12 Net capital applied $ (307) $ (108)
====== ======
——————————————————————-
/a/ Amount is preliminary.

Table 4
Stock and Capital Data

(dollar amounts in millions, Sept. 30 June 30 Sept. 30
except per share data) 1997 1997 1996
——– ——- ——–

1 Book value per common share $27.51 $26.88 $25.46/a/
Common stock cash dividends:
2 Quarter ended 212 214 194
3 Year-to-date 642 430 587
Preferred stock cash dividends:
4 Quarter ended 22 30 43
5 Year-to-date 86 64 141
6 Number of common shares
outstanding (in thousands) 693,468 698,407 717,651/a/
Average number of common and
common equivalent shares
outstanding (in thousands):
7 Quarter ended 718,384 719,514 731,343/a/
8 Year-to-date 721,566 723,157 737,733/a/
Average number of common
shares outstanding — assuming
full dilution (in thousands):
9 Quarter ended 719,532 722,179 731,770/a/
10 Year-to-date 722,837 724,490 738,683/a/
11 Common equity to total assets 7.41% 7.27% 7.52%
12 Total risk-based capital ratio 11.59/b/ 11.66 11.35
13 Tier 1 risk-based capital ratio 7.63/b/ 7.72 7.30
14 Total risk-based capital $ 26,074/b/ $ 25,901 $ 24,125
15 Risk-weighted assets 224,950/b/ 222,149 212,628
16 Tier 1 risk-based capital 17,161/b/ 17,145 15,532
——————————————————————–
/a/ Restated to reflect a two-for-one stock split effective June 2,
1997.

/b/ Amounts are preliminary.

====================================================================
Table 5
Selected Average Balance Sheet Components

Third Second Third
Quarter Quarter Quarter
(in millions) 1997 1997 1996
——– ——– ——–

1 Available-for-sale securities $ 11,984 $ 11,277 $ 11,373
2 Held-to-maturity securities 3,753 3,918 4,221
3 Loans 165,852 167,007 159,779
4 Earning assets 216,154 214,462 206,618
5 Total assets 257,380 255,131 243,769
6 Deposits 170,279 168,994 161,514
7 Interest-bearing liabilities 178,933 175,768 171,809
8 Common equity 18,787 18,459 17,963
9 Total equity 20,022 20,055 20,205

Table 6
Business Sectors

Nine Months Ended September 30, 1997/a/
———————————————-
(dollar amounts Return
in billions except Average Average on Expense
for net income, Net Total Total Common to
which is in Income Assets Deposits Equity Revenue/b/
millions) —— ——- ——– —— ——-

1 Consumer banking $1,033 $ 94 $ 99 15.57% 56.63%
2 U.S. Corporate and
international
banking 764 104 48 17.02 50.21
3 Middle-market
banking 276 25 8 16.72 42.00
4 Commercial real
estate 195 10 2 34.32 25.86
5 Wealth management 51 6 7 11.15 75.59
6 All other 79 16 5 NM NM
—— —- —-

7 Total $2,398 $255 $169 16.69% 53.70%
====== ==== ====

Nine Months Ended September 30, 1996/a/
———————————————–
Return
Average Average on Expense
Net Total Total Common to
Income Assets Deposits Equity Revenue/b/
—— ——- ——– —— ——-

1 Consumer banking/c/$ 728 $ 93 $ 96 10.81% 60.34%
2 U.S. Corporate and
international
banking 752 94 45 17.24 52.90
3 Middle-market
banking 269 22 7 16.99 45.85
4 Commercial real
estate 162 10 2 24.50 29.18
5 Wealth management 45 5 7 9.73 75.98
6 All other 170 17 4 NM NM
—— —- —-

7 Total $2,126 $241 $161 14.92% 55.92%
====== ==== ====
——————————————————————–
/a/ Amounts are preliminary. For comparability purposes, both 1997
and 1996 amounts reflect BAC’s business-sector allocation
methodologies at September 30, 1997.

/b/ Excludes net other real estate owned expense, amortization of
intangibles, and expenses associated with trust preferred securities.

/c/Includes the income statement effect of the previously discussed
one-time SAIF assessment.

NM – Not meaningful.

Table 7
Trading-Related Income

Third Second Third
Quarter Quarter Quarter
(in millions) 1997/a/ 1997 1996
——- ——- ——-

Trading income:
1 Interest rate $ 24 $ 17 $ 17
2 Foreign exchange 106 107 64
3 Debt instruments 93 94 72
—- —- —-
4 Total trading income $223 $218 $153
==== ==== ====

Other trading-related income/b/:
5 Interest rate $ 6 $ 12 $ 5
6 Foreign exchange 1 2 4
7 Debt instruments 49 47 52
—- —- —-
8 Total other trading-related
income $ 56 $ 61 $ 61
==== ==== ====

Nine Months Ended
September 30
——————
1997/a/ 1996
—— ——
Trading income:
9 Interest rate $ 53 $ 37
10 Foreign exchange 305 252
11 Debt instruments 271 207
—- —-
12 Total trading income $629 $496
==== ====

Other trading-related income/b/:
13 Interest rate $ 28 $ 18
14 Foreign exchange 7 17
15 Debt instruments 146 155
—- —-
16 Total other trading-related
income $181 $190
==== ====
———————————————————————
/a/ Detailed breakouts of total amounts are preliminary.

/b/ Primarily includes the net interest revenue and expense
associated with the contracts.

Table 8
Impact of Credit Card Securitization

Third Quarter 1997/a/
————————————————
Before
(dollar amounts Credit Card Credit Card
in millions) Securitization Securitization Reported
————– ————– ——–

Operating Results:
1 Net interest income $ 2,251 $ (57) $ 2,194
2 Credit card fees 107 (11) 96
3 Other noninterest income 1,528 46/b/ 1,574
——– ——- ——–
4 Total revenue 3,886 (22) 3,864
5 Noninterest expense 2,232 – 2,232
——– ——- ——–
6 Income before provision
for credit losses and
income taxes 1,654 (22) 1,632
7 Provision for credit
losses 299 (39)/c/ 260
——– ——- ——–
8 Income before income
taxes $ 1,355 $ 17 $ 1,372
======== ======== ========

9 Net interest margin 4.13% (0.07)% 4.06%

Balance Sheet Data at
Period End:
10 Credit card loans
outstanding $ 10,021 $(2,971) $ 7,050
11 Total assets 260,491 (2,971) 257,520

Average Balance
Sheet Data:
12 Credit card loans 9,906 (2,271) 7,635
13 Earning assets 218,425 (2,271) 216,154
14 Total assets 259,651 (2,271) 257,380

15 Net credit losses – credit
card portfolio 161 (39) 122

Selected Financial Ratios:
16 Annualized ratio of net
credit losses on credit
card loans to average credit
card loans outstanding 6.42% (0.10)% 6.32%
17 Delinquent credit card
loan ratio/d/ 2.76 (0.04) 2.72
———————————————————————
/a/ Includes the impact of credit card securitizations since
mid-1996. There were credit card securitizations of $750 million
during the third quarter of 1997, $750 million during the second
quarter of 1997, and $1,471 million during the last half of 1996.

/b/Includes $17 million associated with the requirements of
Statement of Financial Accounting Standards No. 125, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities,” as amended.

/c/Represents the investors’ share of charge-offs.

/d/ 60 days or more past due.

Table 9
Loan Outstandings

Sept. 30 June 30 Sept. 30
(in millions) 1997 1997 1996
——– ——– ——–

Domestic
Consumer:
1 Residential first mortgages $ 34,279 $ 35,709 $ 37,445
2 Residential junior mortgages 14,915 15,154 14,525
3 Other installment 18,432 18,410 15,998
4 Credit card 7,050/a/ 7,624/a/ 9,021/a/
5 Other individual lines
of credit 1,939 1,961 1,845
6 Other 442 413 303
——– ——- ——–
7 Total consumer 77,057 79,271 79,137

Commercial:
8 Commercial and industrial 34,082 34,266 33,076
9 Loans secured by real estate 12,833 12,669 12,062
10 Financial institutions 3,452 2,947 2,537
11 Lease financing 2,700 2,809 2,682
12 Construction and development
loans secured by real estate 2,257 2,262 2,530
13 Loans for purchasing or carrying
securities 2,000 2,616 1,328
14 Agricultural 1,774 1,560 1,561
15 Other 1,745 1,738 1,253
——– ——– ——–
16 Total commercial 60,843 60,867 57,029
——– ——– ——–
17 Total domestic loans 137,900 140,138 136,166

Foreign
18 Commercial and industrial 18,260 17,762 16,257
19 Banks and other financial
institutions 4,295 4,818 3,480
20 Governments and official
institutions 861 851 943
21 Other 5,670 5,237 4,987
——– ——– ——–
22 Total foreign loans 29,086 28,668 25,667
——– ——– ——–

23 Total Loans $166,986 $168,806 $161,833
======== ======== ========

———————————————————————–
/a/ Excludes outstanding securitized credit card receivables of
$2,971 million, $2,221 million, and $500 million at September 30,
1997, June 30, 1997, and September 30, 1996, respectively. There
were credit card securitizations of $750 million during the third
quarter of 1997, $750 million during the second quarter of 1997, and
$1,471 million during the last half of 1996.

Table 10
Selected Credit Quality Data

Sept. 30 June 30 Sept. 30

(dollar amounts in millions) 1997 1997 1996
——– ——– ——–

Nonaccrual assets:
1 Commercial and industrial $263 $228 $ 357
2 Commercial loans secured by
real estate 136 120 229
3 Construction and development
loans secured by real estate 39 59 119
4 Consumer 378 373 291
5 Foreign 114 81 123
—- —- ——
6 Total nonaccrual assets $930 $861 $1,119
==== ==== ======

7 Restructured loans $285 $302 $ 274
8 Loans past due 90 days or more
and still accruing interest/a/ 197 214 363
9 Other real estate owned 197 242 397
10 Allowance for credit losses to
total loans 2.10% 2.11% 2.17%
11 Allowance for credit losses to
total nonaccrual assets 376.70 413.99 313.77
Annualized ratio of net credit
losses to average total loan
outstandings:
12 Quarter ended 0.62 0.54 0.56
13 Year-to-date 0.55 0.52 0.60

——————————————————————————
/a/ Includes consumer loans of $177 million, $190 million, and $332
million at September 30, 1997, June 30, 1997, and September 30, 1996,
respectively.

==============================================================================

Table 11
Analysis of Change in Nonaccrual Assets

Third Second First
Quarter Quarter Quarter
(in millions) 1997 1997 1997
——- ——- ——-

1 Balance, beginning of period $861 $1,030 $1,118

Additions:
2 Loans placed on nonaccrual
status 244 103 108

Deductions:
3 Sales (26) (103) (3)
4 Restored to accrual status (31) (38) (75)
5 Foreclosures – (1) (8)
6 Charge-offs (47) (20) (10)
7 Other, primarily payments (71) (110) (100)
—- —— ——

8 Balance, end of period $930 $ 861 $1,030
==== ====== ======

Table 12
Net Credit Losses (Recoveries)

Third Second Third

Quarter Quarter Quarter
(in millions) 1997 1997 1996
——- ——- ——-

Domestic consumer:
1 Residential first mortgages $ 4 $ 7 $ 11
2 Residential junior mortgages 7 8 13
3 Credit card 122 124 111
4 Other installment 63 49 42
5 Other individual lines of credit 19 20 18
6 Other 5 4 3
Domestic commercial:
7 Commercial and industrial 46 19 9
8 Loans secured by real estate 2 – 2
9 Construction and development
loans secured by real estate 1 (8) 16
10 Financial institutions, lease
financing, loans for
purchasing or carrying
securities, and agricultural (5) (1) –
—- —- —-
11 Total domestic 264 222 225
12 Foreign (5) 2 1
—- —- —-

13 Total Net Credit Losses $259 $224 $226
==== ==== ====
———————————————————————–

Table 13
Domestic Consumer Loan Delinquency Information/a/

Sept. 30 June 30 Sept. 30
(dollar amounts in millions) 1997 1997 1996
——– ——– ——–

Delinquent consumer loans:
1 Residential first mortgages $431 $422 $518
2 Residential junior mortgages 44 59 64
3 Credit card 192 204 207
4 Other 134 126 113
—- —- —-
5 Total delinquent consumer
loans $801 $811 $902
==== ==== ====

Delinquent consumer loan ratios/b/:
6 Residential first mortgages 1.26% 1.18% 1.38%
7 Residential junior mortgages 0.29 0.39 0.44
8 Credit Card 2.72 2.67 2.29
9 Other 0.65 0.61 0.63
10 Total delinquent consumer
loan ratio 1.04% 1.02% 1.14%
==== ==== ====
———————————————————————–
/a/ 60 days or more past due.

/b/ Ratios represent delinquent balances expressed as a percentage
of total loans for that loan category.

BankAmerica Corporation and Subsidiaries
Consolidated Statement of Operations

Third Second Third
Quarter Quarter Quarter
(in millions) 1997 1997 1996
——- ——- ——-

Interest Income
1 Loans, including fees $3,522 $3,497 $3,371
2 Interest-bearing deposits in banks 107 105 95
3 Federal funds sold 14 9 9
4 Securities purchased under
resale agreements 208 180 178
5 Trading account assets 323 298 268
6 Available-for-sale and held-to-
maturity securities 277 270 285
—— —— ——
7 Total interest income 4,451 4,359 4,206

Interest Expense
8 Deposits 1,502 1,424 1,332
9 Federal funds purchased 11 19 17
10 Securities sold under repurchase
agreements 227 178 201
11 Other short-term borrowings 268 287 243
12 Long-term debt 249 257 261
—— —— ——
13 Total interest expense 2,257 2,165 2,054
—— —— ——
14 Net interest income 2,194 2,194 2,152
15 Provision for credit losses 260 250 235
—— —— ——
16 Net interest income after
provision for credit losses 1,934 1,944 1,917

Noninterest Income
17 Deposit account fees 364 361 345
18 Credit card fees 96 93 92
19 Trust fees 62 61 53
20 Other fees and commissions 424 417 360
21 Trading income 223 218 153
22 Private equity investment activities 140 83 97
23 Net gain on sales of
subsidiaries and operations 139 27 41
24 Net gain on sales of loans 53 44 25
25 Net gain on available-for-sale
securities 33 14 7
26 Other income 136 124 146
—— —— ——
27 Total noninterest income 1,670 1,442 1,319

Noninterest Expense
28 Salaries 892 873 822
29 Employee benefits 177 189 191
30 Occupancy 192 183 188
31 Equipment 182 173 180
32 Communications 95 96 89
33 Amortization of intangibles 88 89 93
34 Professional services 107 82 87
35 Regulatory fees and related expenses 10 10 95
36 Other expense 489 352 336
—— —— ——
37 Total noninterest expense 2,232 2,047 2,081
—— —— ——
38 Income before income taxes 1,372 1,339 1,155
39 Provision for income taxes 553 540 472
—— —— ——

40 Net Income $ 819 $ 799 $ 683
====== ====== ======

BankAmerica Corporation and Subsidiaries
Consolidated Statement of Operations

Nine Months Ended
September 30
———————
(in millions) 1997 1996
——- ——-

Interest Income
1 Loans, including fees $10,442 $9,975
2 Interest-bearing deposits in banks 311 308
3 Federal funds sold 31 22
4 Securities purchased under
resale agreements 543 509
5 Trading account assets 890 731
6 Available-for-sale and held-to-
maturity securities 833 876
——- ——
7 Total interest income 13,050 12,421

Interest Expense
8 Deposits 4,292 3,953
9 Federal funds purchased 43 59
10 Securities sold under repurchase
agreements 554 540
11 Other short-term borrowings 830 629
12 Long-term debt 769 783
——- ——
13 Total interest expense 6,488 5,964
——- ——
14 Net interest income 6,562 6,457
15 Provision for credit losses 730 665
——- ——
16 Net interest income after
provision for credit losses 5,832 5,792

Noninterest Income
17 Deposit account fees 1,085 1,035
18 Credit card fees 276 261
19 Trust fees 180 172
20 Other fees and commissions 1,216 1,013
21 Trading income 629 496
22 Private equity investment activities 322 319
23 Net gain on sales of
subsidiaries and operations 179 175
24 Net gain on sales of loans 156 69
25 Net gain on available-for-sale
securities 67 41
26 Other income 387 332
——- ——
27 Total noninterest income 4,497 3,913

Noninterest Expense
28 Salaries 2,604 2,457
29 Employee benefits 555 606
30 Occupancy 561 564
31 Equipment 537 518
32 Communications 284 271
33 Amortization of intangibles 268 281
34 Professional services 264 248
35 Regulatory fees and related expenses 30 121
36 Other expense 1,209 1,025
——- ——
37 Total noninterest expense 6,312 6,091
——- ——
38 Income before income taxes 4,017 3,614
39 Provision for income taxes 1,619 1,488
——- ——

40 Net Income $ 2,398 $2,126
======= ======

BankAmerica Corporation and Subsidiaries
Consolidated Balance Sheet

Sept. 30 June 30 Sept. 30
(in millions) 1997 1997 1996
——– ——– ——–

Assets
1 Cash and due from banks $ 13,854 $ 14,884 $ 13,619
2 Interest-bearing deposits in
banks 5,368 7,037 5,829
3 Federal funds sold 48 270 306
4 Securities purchased under resale
agreements 10,076 7,272 6,287
5 Trading account assets 16,351 16,765 14,000
6 Available-for-sale securities 12,408 11,959 11,717
7 Held-to-maturity securities 3,689 3,858 4,200

8 Loans 166,986 168,806 161,833
9 Less: Allowance for credit
losses 3,504 3,563 3,511
——– ——– ——–
10 Net loans 163,482 165,243 158,322
11 Customers’ acceptance liability 3,154 3,230 3,165
12 Accrued interest receivable 1,593 1,567 1,435
13 Goodwill, net 3,727 3,842 4,017
14 Identifiable intangibles, net 1,459 1,499 1,664
15 Unrealized gains on off-balance-
sheet instruments 7,892 7,319 6,598
16 Premises and equipment, net 3,909 3,944 3,968
17 Other assets 10,510 9,674 7,826
——– ——– ——–

18 Total Assets $257,520 $258,363 $242,953
======== ======== ========

Liabilities & Stockholders’ Equity
Deposits in domestic offices:
19 Interest-bearing $ 94,074 $ 83,308 $ 83,779
20 Noninterest-bearing 31,206 41,434 37,589
Deposits in foreign offices:
21 Interest-bearing 44,450 46,667 42,035
22 Noninterest-bearing 1,683 1,759 1,498
——– ——– ——–
23 Total deposits 171,413 173,168 164,901
24 Federal funds purchased 1,349 1,730 1,093
25 Securities sold under repurchase
agreements 11,024 9,699 8,489
26 Other short-term borrowings 18,701 18,327 16,263
27 Acceptances outstanding 3,154 3,230 3,165
28 Accrued interest payable 1,023 958 868
29 Unrealized losses on off-balance-
sheet instruments 7,541 7,157 6,458
30 Other liabilities 7,318 7,117 5,750
31 Long-term debt 14,198 14,736 15,454
——– ——– ——–
32 Total liabilities 235,721 236,122 222,441

33 Corporation obligated mandatorily
redeemable preferred securities
of subsidiary trusts holding
solely junior subordinated
deferrable interest debentures
of the corporation (trust
preferred securities) 1,873 1,873 –

Stockholders’ Equity
34 Preferred stock 848 1,596 2,242
35 Common stock 1,210/a/ 1,210/a/ 605
36 Additional paid-in capital 7,947/a/ 7,872/a/ 8,458
37 Retained earnings 13,168 12,598 10,989
38 Net unrealized gain (loss) on
available-for-sale securities 108 13 (27)
39 Common stock in treasury, at cost (3,355) (2,921) (1,755)
——- ——– ——–
40 Total stockholders’ equity 19,926 20,368 20,512
——- ——– ——–

41 Total Liabilities and
Stockholders’ Equity $257,520 $258,363 $242,953
======== ======== ========
———————————————————————–
/a/ Reflects a two-for-one stock split effective June 2, 1997.

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ARKSYS Signs Global Marketer

ARKSYS announced today a global marketing agreement with ALLTEL, a worldwide leader in information service and telecommunications.

As part of the partnership, ALLTEL Information Services and ARKSYS will actively market ARKSYS products and services to the international banking industry outside the United States.

ALLTEL will market ARKSYS’ ATM, Point of Sale (POS) and debit card packages, Electronic Funds Transfer (EFT) network solutions, interactive voice response, smart card consulting, international credit card systems, and Internet and intranet banking offerings for cash management and home banking software.

ARKSYS is distinguished as one of the most experienced software companies in the payment system industry providing dependable, comprehensive products, services and access systems for enterprises of all sizes from major international banks and national and regional networks to retail and utility companies.

ALLTEL Information Services, with customers in 45 countries around the world, provides information processing management, outsourcing services and application software to the financial, mortgage, healthcare and telecommunications industries. The company has revenues of approximately $3.2 billion and assets of $5.4 billion. ALLTEL has regional offices in the United Kingdom, Singapore and Philippines.

ALLTEL, headquartered in Little Rock, Arkansas, is a customer-focused information technology company that provides wireline and wireless communications and information services.

ARKSYS is a privately-held transaction and payment processing software company headquartered in Little Rock, Arkansas with experience in over 70 countries worldwide.

For more information, contact Rob Roedel, Director of Public Relations, Voice 501-218-7226 (USA)/ Fax 501-218-7302 (USA)/E-mail rroedel@arksys.com or by mail at 17500 Chenal Parkway, Little Rock, AR USA 72211. ARKSYS’ home page address is .

ARKSYS, Integrated Transaction Management and ITM are trademarks of Arkansas Systems, Inc.

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BJ’s/BNB MasterCard Settle

The fallout between cardflash1997october1b_97.html and BJ’s Wholesale Club over BNB’s decision to cancel unprofitable MasterCard accounts ended Wednesday afternoon after both parties reached an out-of-court settlement. BNB USA spent the better part of a year seeking adjustments to the ‘BJ’s Wholesale Club MasterCard’ to stem program losses largely linked to non-revolving cardholders. The negotiations broke down last month with BNB filing suit Sept 19 and going forward with its decision not renew 12,000 accounts expiring Sept 30. BJ’s responded with its own suit Sept 24. Both lawsuits will be dismissed and the canceled accounts will effectively be reinstated. Other terms of yesterday’s settlement include the payment to BNB of $1.3 million and BJ’s commitment to share in the maintenance cost of the program until the expiration of the contract Aug 1, 2000. Beneficial agreed not to terminate accounts of low-interest-paying or non-revolving accounts in good standing. Both parties also agreed to institute an annual usage fee of $30 for such cardholders, subject to an annual review of finance charges paid during the previous 12 months. Other features of the program remain intact including the 2% rebate on BJ’s purchases and the 1% rebate on other purchases.

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NHL Extends MBNA Contract

MBNA America Bank, N.A., announced today that the National Hockey League has extended its exclusive agreement making MBNA the official MasterCard credit card issuer for the NHL and its 26 member teams to the year 2002.

The new agreement between MBNA and the NHL significantly expands the program that began in 1996. MBNA, which recently formed MBNA Canada Bank to issue credit cards in Canada, will begin issuing the NHL MasterCard in Canada by the first quarter next year. In addition, MBNA has the rights to market the NHL credit card program in Europe and will issue cards with the logos of the four expansion teams when they join the league.

“The National Hockey League is one of the premier sports organizations in North America,” said John R. Cochran, MBNA Vice Chairman and Chief Marketing Officer. “The MBNA MasterCard program with the NHL has been very successful and we are pleased to be expanding our program to its many loyal fans in many countries and for many years to come.”

“We are pleased to extend and significantly expand our partnership with MBNA,” said Rick Dudley, President, NHL Enterprises. “The opportunity to further expand our reach with hockey fans both in North America and other parts of the world gives us even greater exposure for the `Coolest Game on Earth.'”

The extension of this agreement represents an important endorsement of MBNA’s sports marketing sector, one of the company’s fastest growing business development areas with more than $3 billion in loans. In addition to the NHL, MBNA’s sports marketing sector includes endorsements from more than 600 sports organizations, including Major League Baseball, the National Football League, National Association of Stock Car Auto Racing (NASCAR), many of the National Basketball Association teams, the PGA of America, the American Quarter Horse Association, and the ATP Tennis Tour. MBNA has endorsements in every major sport, including football, baseball, basketball, tennis, hockey, soccer, golf, horse racing, and automobile racing.

To apply for one of the 26 NHL team cards, call MBNA at 888-COOL-ICE.

MBNA Corporation (NYSE: KRB), a bank holding company and parent of MBNA America Bank, N.A., a national bank, has $46.2 billion in managed loans. MBNA, the country’s second largest credit card lender, also provides retail deposit, consumer loan, insurance, and card acceptance services.

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