BANK OF BOSTON CORPORATION
--------------------------------------------------------------------------------
CONSOLIDATED SELECTED FINANCIAL DATA
--------------------------------------------------------------------------------

YEARS ENDED DECEMBER 31 1993 1992 1991 1990 1989 1988

(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA(1)
Interest income........................................ $ 6,823.9 $ 5,106.7 $4,454.9 $5,689.4 $6,699.5 $5,237.1
Interest expense....................................... 5,305.1 3,800.9 3,340.1 4,466.5 5,311.1 3,872.4
--------- --------- -------- -------- -------- --------
Net interest revenue............................... 1,518.8 1,305.8 1,114.8 1,222.9 1,388.4 1,364.7
Provision for credit losses(2)......................... 70.1 180.6 518.7 764.3 773.7 176.0
--------- --------- -------- -------- -------- --------
Net interest revenue after provision for credit
losses........................................... 1,448.7 1,125.2 596.1 458.6 614.7 1,188.7
Noninterest income(3).................................. 571.6 707.6 762.9 764.1 1,019.2 764.8
Noninterest expense(2)(4).............................. 1,530.8 1,474.1 1,537.9 1,732.0 1,410.8 1,366.0
--------- --------- -------- -------- -------- --------
Income (Loss) before income taxes, extraordinary items
and cumulative effect of changes in accounting
principles........................................... 489.5 358.7 (178.9) (509.3) 223.1 587.5
Provision for (Benefit from) income taxes.............. 214.7 152.8 (58.0) 2.6 85.0 205.1
--------- --------- -------- -------- -------- --------
Income (Loss) before extraordinary items and cumulative
effect of changes in accounting principles........... 274.8 205.9 (120.9) (511.9) 138.1 382.4
Extraordinary items:
Recognition of prior year tax benefit
carryforwards.................................... 73.0
Gains from early extinguishment of debt, net of
tax.............................................. 7.8 43.7
Cumulative effect of changes in accounting principles,
net(5)............................................... 24.2
--------- --------- -------- -------- -------- --------
Net income (loss).................................. $ 299.0 $ 278.9 $ (113.1) $ (468.2) $ 138.1 $ 382.4
========= ========= ======== ======== ======== ========
Net income (loss) applicable to common stock....... $ 264.3 $ 259.0 $ (126.4) $ (482.0) $ 124.2 $ 368.0
========= ========= ======== ======== ======== ========
Per common share:
Income (Loss) before extraordinary items and
cumulative effect of changes in accounting
principles:
Primary............................................ $ 2.28 $ 1.82 $ (1.42) $ (5.67) $ 1.37 $ 4.28
Fully diluted...................................... 2.22 1.78 (1.42) (5.67) 1.37 4.12
Net income (loss):
Primary............................................ 2.51 2.54 (1.33) (5.20) 1.37 4.28
Fully diluted...................................... 2.44 2.45 (1.33) (5.20) 1.37 4.12
Cash dividends declared(6)........................... .40 .10 .10 .82 1.24 1.12
Average number of common shares: (in thousands)
Primary............................................ 105,336 101,977 94,730 92,634 90,435 86,078
Fully diluted...................................... 110,258 107,157 94,730 92,634 90,777 90,478
AVERAGE BALANCE SHEET DATA(1)
Loans and lease financing(2)........................... $ 26,586 $ 25,330 $ 26,167 $ 28,949 $ 32,061 $ 29,588
Securities............................................. 3,624 4,704 5,098 4,509 4,831 4,341
Other earning assets................................... 4,089 3,195 3,298 6,865 3,243 2,578
--------- --------- -------- -------- -------- --------
Total Earning Assets................................. 34,299 33,229 34,563 40,323 40,135 36,507
--------- --------- -------- -------- -------- --------
Cash and due from banks................................ 1,790 1,596 1,485 1,780 1,826 1,795
Other assets(2)........................................ 2,278 2,030 1,867 1,667 1,713 1,814
--------- --------- -------- -------- -------- --------
Total Average Assets................................. $ 38,367 $ 36,855 $ 37,915 $ 43,770 $ 43,674 $ 40,116
========= ========= ======== ======== ======== ========
Deposits............................................... $ 28,539 $ 29,028 $ 29,861 $ 33,505 $ 29,440 $ 26,539
Funds borrowed......................................... 4,349 3,485 3,544 4,518 7,823 7,959
Other liabilities...................................... 1,017 919 1,014 1,218 1,551 1,142
Notes payable.......................................... 1,743 1,197 1,552 2,098 2,254 2,194
Stockholders' equity................................... 2,719 2,226 1,944 2,431 2,606 2,282
--------- --------- -------- -------- -------- --------
Total Average Liabilities and Stockholders' Equity... $ 38,367 $ 36,855 $ 37,915 $ 43,770 $ 43,674 $ 40,116
========= ========= ======== ======== ======== ========
<FN>
(1) Consolidated selected financial data for each of the five years in the
period ended December 31, 1992 has been restated, except where specifically
noted, to reflect the Corporation's mergers with Society for Savings
Bancorp, Inc. (Bancorp) and Multibank Financial Corp. (Multibank), which
were completed in July 1993 and accounted for as poolings of interests.

(2) During 1993, in response to guidance issued by banking regulators, the
Corporation reclassified its in-substance repossessions (ISRs) from other
real estate owned (OREO) to loans. In addition, valuation adjustments to
write down the loans to the fair value of the underlying collateral are
treated as credit losses rather than OREO expense. All prior period amounts
were reclassified for comparative purposes. Accordingly, valuation
adjustments related to ISRs were reclassified from OREO expense to the
provision for credit losses for each period, with corresponding amounts
recorded as credit losses. The reclassifications of these valuation
adjustments for each of the five years in the period ended December 31, 1992
amounted to $37 million, $54 million, $36 million, $4 million and zero,
respectively.

(3) Includes a $43 million gain from the settlement of certain pension
obligations in 1990, and in 1989, $190 million of gains from sales of the
domestic credit card portfolios and a $52 million gain from the settlement
of certain pension obligations.

(4) Includes merger and restructuring charges of $85 million in 1993, primarily
in connection with the Corporation's mergers with Bancorp and Multibank, as
well as other expense reduction initiatives of the Corporation. Also
includes restructuring charges of $54 million in 1991, and $139 million in
1990, including $7 million in 1991 and $89 million in 1990 in connection
with a Bancorp restructuring plan, and $47 million in 1991, and $50 million
in 1990 in connection with the Corporation's plans for the consolidation and
downsizing of various domestic and international operations and facilities
and staff reductions.

(5) Includes a cumulative benefit of $77 million resulting from the adoption of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," and a cumulative charge of $53 million, net of taxes,
relating to a change in accounting methodology pertaining to the valuation
of purchased mortgage servicing rights.

(6) Amounts represent the historical cash dividends of the Corporation.

30
2

BANK OF BOSTON CORPORATION
--------------------------------------------------------------------------------
CONSOLIDATED SELECTED FINANCIAL DATA,
--------------------------------------------------------------------------------
CONTINUED

1993 1992 1991 1990 1989 1988

(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SELECTED RATIOS(1)
Return on average assets............................... .78% .76% (.30)% (1.07)% .32% .95%
Return on average common equity(7)..................... 11.78 13.37 (7.28) (21.68) 5.18 17.75
Common dividend payout ratio(8)........................ 14.4 3.4 NM NM 155.0 24.0
Common equity to total assets.......................... 5.9 5.7 4.5 4.7 5.0 5.3
Average total stockholders' equity to average total
assets............................................... 7.1 6.0 5.1 5.6 6.0 5.7
Risk-based capital ratios:
Tier 1............................................... 7.2 7.1 5.2 5.3 NA NA
Total................................................ 12.4 12.0 9.3 9.4 NA NA
Leverage ratio......................................... 6.8 6.6 4.6 4.5 NA NA
Net credit losses to average loans and lease
financing............................................ .84 1.22 1.87 2.50 1.65 .74
Reserve for credit losses to loans and lease
financing............................................ 2.68 3.63 4.14 3.90 3.20 2.33
Reserve for credit losses to nonaccrual loans and lease
financing............................................ 139.69 118.51 69.48 56.26 59.34 66.99
Nonaccrual loans and OREO as a percent of related asset
categories........................................... 2.3 3.7 7.2 7.8 6.0 4.1
Market value/book value................................ 101.28 126.2 63.9 32.5 73.5 92.1
BALANCE SHEET DATA AT DECEMBER 31(1)
Loans and lease financing.............................. $ 28,782 $ 25,399 $ 25,368 $ 26,210 $ 30,762 $ 31,752
Reserve for credit losses.............................. (770) (923) (1,051) (1,023) (983) (741)
Total assets........................................... 40,588 37,315 38,309 39,351 46,663 42,893
Deposits............................................... 29,614 29,102 29,291 31,813 34,105 28,739
Funds borrowed......................................... 4,975 2,947 4,634 2,704 6,420 8,312
Notes payable.......................................... 1,973 1,686 1,419 1,536 2,124 1,859
Stockholders' equity................................... 2,912 2,554 1,919 2,046 2,562 2,501
Common shares outstanding (in thousands)............... 105,801 104,664 95,025 93,575 91,057 89,408
Common stockholders of record(9)....................... 23,633 25,263 27,665 27,414 22,700 22,551
Number of employees.................................... 18,644 19,459 18,752 20,339 21,733 22,462
Per common share:
Book value........................................... $ 22.71 $ 20.21 $ 18.00 $ 19.64 $ 25.85 $ 25.65
Market value......................................... 23 25 1/2 11 1/2 6 3/8 19 23 5/8
<FN>
(1) Consolidated selected financial data for each of the five years in the
period ended December 31, 1992 has been restated, except where specifically
noted, to reflect the Corporation's mergers with Society for Savings
Bancorp, Inc. (Bancorp) and Multibank Financial Corp. (Multibank), which
were completed in July 1993 and accounted for as poolings of interests.

(7) For purposes of this ratio, preferred stock dividends have been deducted
from net income.

(8) Ratios are based on the historical cash dividends and net income applicable
to common stock of the Corporation.

(9) The number of stockholders of record includes banks and brokers who act as
nominees, each of whom may represent more than one stockholder.

NM - Not meaningful

NA - Information for calculating the risk-based capital ratios and leverage
ratio prior to 1990 is unavailable.

31
3

- --------------------------------------------------------------------------------
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------

Bank of Boston Corporation is a superregional bank holding company with both
national and international operations. The Corporation's major banking
subsidiaries are The First National Bank of Boston (FNBB), South Shore Bank,
Mechanics Bank and Multibank West, all with headquarters in Massachusetts; Casco
Northern Bank, N.A. (Casco), in Maine; Bank of Boston Connecticut (Connecticut);
Rhode Island Hospital Trust National Bank (Hospital Trust), and Bank of Vermont
(Vermont). FNBB is the largest of the banking subsidiaries with total assets of
$29.5 billion, representing approximately three-quarters of the Corporation's
total assets as of December 31, 1993.

MERGERS, ACQUISITIONS AND BUSINESS UNIT SALES

During 1993, the Corporation completed its mergers with Society for Savings
Bancorp, Inc. (Bancorp), a registered bank holding company based in Hartford,
Connecticut and Multibank Financial Corp. (Multibank), a registered bank holding
company based in Dedham, Massachusetts. These two mergers combined to add nearly
$5 billion in total assets to the Corporation. These mergers were accounted for
as poolings of interests and as such, are reflected in the consolidated
financial statements as though the Corporation, Bancorp and Multibank had been
combined as of the beginning of the earliest period presented. In addition, on
September 21, 1993, the Corporation announced that it had reached a definitive
agreement to acquire BankWorcester Corporation (BankWorcester). The
BankWorcester transaction is subject to approval by the bank regulators.
Additional information on the transactions described above is included in Note 2
to the Financial Statements.

On December 7, 1993, the Corporation announced the sale of its United States and
Canadian factoring businesses. The sale of the United States business was
completed on January 31, 1994, and the Corporation recorded a pre-tax gain of
approximately $27 million on the transaction at that time. The sale of the
Canadian business is subject to regulatory approval and is expected to close in
mid-1994 for an additional pre-tax gain of approximately $5 million. The
factoring businesses' contribution to the Corporation's net income was not
material.

The Corporation engages on an ongoing basis in reviewing and discussing possible
acquisitions of financial institutions, as well as banking and other assets, in
order to expand its business incident to the implementation of its business
strategy. The Corporation intends to continue to explore acquisition
opportunities as they arise in order to take advantage of the continuing
consolidation in the banking industry.

REVIEW OF FINANCIAL STATEMENTS

The following is a discussion and analysis of the Corporation's consolidated
results of operations and financial position. In order to understand this
section in context, it should be read in conjunction with the Financial
Statements on pages 53 through 78 and Consolidated Statistical Information on
pages 79 through 94 of this report.

OVERVIEW

Results of Operations
In 1993, the Corporation reported net income of $299 million, or $2.51 per share
on a primary basis and $2.44 per share on a fully diluted basis. This compares
with net income of $279 million, or $2.54 per share on a primary basis and $2.45
per share on a fully diluted basis, in 1992.

The Corporation's 1993 net income included $77 million of income representing
the cumulative effect to January 1, 1993 of its adoption of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
and a $53 million charge (net of income taxes of $32 million) representing the
cumulative effect to January 1, 1993 of a change in its accounting for purchased
mortgage servicing rights (PMSR). In addition, 1993's net income included a $57
million charge (net of income taxes of $28 million) for merger and restructuring
charges, primarily related to the Corporation's 1993 mergers with Bancorp and
Multibank. The Corporation's 1992 net income included $73 million of
extraordinary income related to the recognition of prior year tax benefit
carryforwards. Excluding the cumulative effect of accounting changes and merger
and restructuring charges, net income for 1993 was $332 million. This
represented an increase of $126 million, compared with 1992's net income of $206
million, measured on the same basis.

Pre-tax income in 1993, on a fully taxable equivalent basis and excluding the
effect of 1993's $85 million merger and restructuring charge, increased $213
million from 1992, caused, in part, by a $179 million decline in credit costs,
which includes the provision for credit losses and costs related to other real
estate owned (OREO). The provision for credit losses declined $110 million,
reflecting management's assessment of the current risk characteristics of the
loan portfolio and level of the reserve for credit losses in light of further
declines in nonaccrual loans and leases and net credit losses, as well as
modestly improved United States and New England economies. Nonaccrual loans and
leases were $551 million at December 31, 1993, compared with $779 million at
December 31, 1992 and $1,513 million at December 31, 1991. Net credit losses
were $223 million in 1993, compared with $309 million in 1992 and $490 million
in 1991. OREO costs declined $69 million in 1993, primarily because of lower
valuation adjustments reflecting the lower level of OREO. In addition to the
significant reduction in credit costs during 1993, total revenue, which is the
sum of net interest revenue on a fully taxable equivalent basis and noninterest
income, increased by $74 million. This was mainly the result of improved net
interest revenue reflecting wider domestic spreads and higher international
average loan volume. Noninterest expense, before OREO costs and merger and
restructuring charges, increased $41 million from 1992. This reflected a higher
average number of employees, normal salary increases, higher advertising
expenses and an increase in Federal Deposit Insurance Corporation (FDIC) deposit

32
4

- --------------------------------------------------------------------------------
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CONTINUED

insurance. A significant portion of the increase in noninterest expense was
attributable to the Corporation's increased investment in growth businesses,
mainly in Latin America and domestic Retail and Small Business Banking. While
the full year increase in noninterest expense was $41 million, there was a $24
million decline between the first and second half of 1993. In addition,
noninterest expense in the fourth quarter of 1993 was $15 million lower than in
the fourth quarter of 1992.

In 1991, the Corporation reported a net loss of $113 million, or $1.33 per share
on both a primary and fully diluted basis. This compares with net income in 1992
of $279 million. Credit costs in 1992 were $338 million lower than 1991,
reflecting a significant decline in the levels of nonaccrual loans and net
credit losses, while total revenue, on a fully taxable equivalent basis, was
$126 million higher in 1992 compared with 1991. In addition, 1991 included a $54
million restructuring charge.

Consolidated Balance Sheet
At December 31, 1993, Bank of Boston Corporation was the nineteenth largest bank
holding company in the United States, with total assets of $40.6 billion,
compared with $37.3 billion at the end of 1992. The change in total assets from
the end of 1992 included a $3.4 billion increase in loans, partially offset by a
$1.1 billion decline in securities.

Loans and leases were $28.8 billion at December 31, 1993, compared with $25.4
billion at the end of 1992. Loans from domestic operations grew $2.1 billion,
reflecting a $1.7 billion increase in commercial and industrial loans and a $.5
billion increase in residential mortgages, which more than offset a $.3 billion
decline in commercial real estate loans. Loans from international operations
grew $1.3 billion since December 31, 1992, and have grown $2.2 billion since
December 31, 1991. These increases were attributable to higher levels of Latin
American loans, as the Corporation has expanded its Latin American businesses,
particularly in Argentina and Brazil. These two countries accounted for most of
the increase in international loans.

Nonaccrual loans and leases and OREO amounted to $659 million, or 2.3% of
related asset categories, at December 31, 1993, compared with $949 million, or
3.7%, and $1,838 million, or 7.2% of related asset categories, at December 31,
1992 and 1991, respectively.

The reserve for credit losses was $770 million at December 31, 1993, compared
with $923 million at the end of 1992. The reserve as a percent of nonaccrual
loans and leases was 140% at December 31, 1993, and 119% at the end of 1992. The
reserve as a percent of total loans and leases was 2.68% at the end of 1993, and
3.63% at the end of 1992.

Securities, including both securities available for sale and securities held to
maturity, decreased $1.1 billion from December 31, 1992. The comparative split
of securities between securities available for sale and securities held to
maturity was affected by the transfer of certain Bancorp and Multibank
securities from the held to maturity to the available for sale category at the
date of their mergers with the Corporation. In addition, mezzanine and venture
securities were reclassified from the held to maturity to the available for sale
category at December 31, 1993 in connection with the Corporation's adoption of
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," on December 31, 1993. The adoption of SFAS No. 115 also resulted in
a $42 million increase in stockholders' equity as of December 31, 1993. The
overall decline in total securities resulted, in part, from sales of securities
available for sale. The Corporation recognized $32 million of gains on sales of
securities in 1993, of which $25 million came from the domestic available for
sale portfolio and the balance from the international available for sale
portfolio. Additional information regarding the Corporation's securities and its
accounting policies, including the adoption of SFAS No. 115, can be found in
Notes 1 and 5 to the Financial Statements.

Deposits were $29.6 billion at December 31, 1993, representing a $.5 billion
increase from the end of 1992. This reflected a $.6 billion increase in
noninterest bearing deposits, primarily from domestic offices. Total interest
bearing deposits declined $.1 billion, including a $2.1 billion decline from
domestic offices, offset by a $2.0 billion increase from international offices.
In addition, funds borrowed grew $2.0 billion between December 31, 1992 and
December 31, 1993.

Stockholders' equity totaled $2.9 billion at December 31, 1993, compared with
$2.6 billion at the end of 1992. The Corporation's regulatory risk-based capital
ratios at December 31, 1993 were 7.2% for tier 1 capital and 12.4% for total
capital, and its leverage ratio was 6.8%. This compares with ratios of 7.1% for
tier 1 capital, 12.0% for total capital and 6.6% for leverage at December 31,
1992. All of the capital ratios exceeded the minimum requirements set by current
regulations. The increase in stockholders' equity and the capital ratios at the
end of 1993 mainly reflected the retention of earnings coupled with the issuance
of $70 million of preferred stock on June 30, 1993. In addition, the total
capital ratio benefited from the issuance of $450 million of subordinated notes
during the year. The Board of Directors declared quarterly common dividends of
$.10 per share in each quarter of 1993 and on January 27, 1994 declared a
quarterly common dividend of $.22 per share.

RESULTS OF OPERATIONS

REVENUE
Total revenue, the sum of net interest revenue on a fully taxable equivalent
basis and noninterest income, was $2,098 million in 1993, compared with $2,024
million in 1992. During 1993, the Corporation continued its strategy of
maintaining a currency position in Brazil that is designed to capitalize on the
spread between local Brazilian interest rates and devaluation. This strategy has
involved investing capital or dollar denominated/indexed liabilities in local
currency assets, leaving the Corporation "underhedged". With local Brazilian
interest rates exceeding the rate of devaluation during the past two years, such
a strategy has

33
5

enabled the Corporation to improve its total revenue compared with what would
have been earned from funding local currency assets with local currency
liabilities. The Corporation accounts for this position in accordance with SFAS
No. 52, "Foreign Currency Translation," which results in higher levels of net
interest revenue that are partially offset by translation losses included in
noninterest income.

Below is an analysis of total revenue, net interest revenue, noninterest
income and net interest margin showing the effect of the Brazilian currency
position for 1993 and 1992; such a position was not significant in 1991.
Consolidated total revenue and net interest revenue are presented on a fully
taxable equivalent basis. Total revenue attributable to the Corporation's
entire Brazilian operation, including the portion related to the currency
position, represented approximately 5% of consolidated total revenue in 1993
and 1992.

NET INTEREST REVENUE NONINTEREST INCOME TOTAL REVENUE
YEARS ENDED DECEMBER 31 1993 1992 CHANGE 1993 1992 CHANGE 1993 1992 CHANGE

(IN MILLIONS)
Consolidated, excluding estimated
effect of Brazilian
currency position................... $1,335 $1,250 $ 85 $ 745 $ 757 $ (12) $ 2,080 $2,007 $ 73
Estimated effect of Brazilian currency
position............................ 192 67 125 (174) (50) (124) 18 17 1
------ ------ ----- ----- ----- ------ ------- ------ ----
Total consolidated.................... $1,527 $1,317 $ 210 $ 571 $ 707 $ (136) $ 2,098 $2,024 $ 74
====== ====== ===== ===== ===== ====== ======= ====== ====

CONSOLIDATED INTERNATIONAL
NET INTEREST MARGIN NET INTEREST MARGIN
YEARS ENDED DECEMBER 31 1993 1992 CHANGE 1993 1992 CHANGE

Excluding estimated effect of Brazilian currency
position............................................. 3.89% 3.76% .13% 3.16% 3.46% (.30)%
Estimated effect of Brazilian currency position........ .56 .20 .36 2.54 1.13 1.41
---- ---- --- ---- ---- ----
Total net interest margin.............................. 4.45% 3.96% .49% 5.70% 4.59% 1.11%
==== ==== === ==== ==== ====

An increase in the average level of the Brazilian currency position from
approximately $40 million in 1992 to approximately $80 million in 1993, coupled
with higher Brazilian interest and devaluation rates in 1993, have significantly
affected the levels of consolidated net interest revenue, noninterest income and
net interest margin as compared with 1992. There was little change, however, in
the total revenue from this position, which was estimated to be $18 million in
1993, compared with $17 million in 1992. Additional revenue from maintaining a
higher average position in 1993 was offset by a narrowing of the spread between
local interest rates and devaluation. The level of the position grew during the
course of 1993, and stood at $103 million at December 31, 1993, compared with
$27 million at December 31, 1992.

The Corporation's currency position exposes it to losses should devaluation
exceed local currency interest rates; such losses could be significant if
government intervention results in a major unanticipated devaluation.
Management, however, has been able to quickly close its position during the past
year when market conditions warranted. Management will continue to closely
monitor the position and will alter the present strategy if necessary. The
position could increase or decrease from the year-end 1993 level. The level of
the position and, in turn, its effect on total revenue, net interest revenue,
noninterest income and net interest margin, will continue to be a function of
management's assessment of the frequently changing economic situation in Brazil,
a country that continues to be hindered by hyperinflation and economic
difficulties. In addition, 1994 is a presidential election year in Brazil, which
brings with it the potential for change in economic policy, both before and
after the election. There can be no assurance, given the hyperinflationary
conditions and economic difficulties experienced by Brazil, that the results of
this position will not have an adverse effect on future levels of total
revenue, net interest revenue, noninterest income and net interest margin.

The following pages present a detailed analysis of the Corporation's net
interest revenue, net interest margin and noninterest income.

NET INTEREST REVENUE
(FULLY TAXABLE EQUIVALENT BASIS)
This discussion of net interest revenue excludes the estimated effect of the
Brazilian currency position discussed above. For this review, interest income
that is either exempt from federal income taxes or taxed at a preferential rate
has been adjusted to a fully taxable equivalent basis. This adjustment has been
calculated using a federal income tax rate of 35% for 1993, and 34% for 1992 and
1991, plus applicable state and local income taxes, net of related federal
income tax benefits.

34
6

The following table shows a summary of net interest revenue, related average
earning assets and net interest margin. Consolidated and international net
interest revenue and margin exclude the estimated effect of the Brazilian
currency position.

YEARS ENDED DECEMBER 31
(DOLLARS IN MILLIONS) 1993 1992 1991

UNITED STATES OPERATIONS
Net interest revenue..................................................... $ 1,087.8 $1,033.8 $ 951.2
Tax equivalent adjustment................................................ 7.8 10.8 20.8
--------- -------- --------
Net interest revenue -- (fully taxable equivalent basis)................. $ 1,095.6 $1,044.6 $ 972.0
========= ======== ========
Average loans and lease financing........................................ $ 21,063 $ 20,892 $ 22,729
Average earning assets................................................... $ 26,742 $ 27,305 $ 30,043
Net interest margin...................................................... 4.10% 3.83% 3.24%

INTERNATIONAL OPERATIONS
Net interest revenue -- (fully taxable equivalent basis)................. $ 239.1 $ 205.2 $ 163.6
========= ======== ========
Average loans and lease financing........................................ $ 5,523 $ 4,438 $ 3,438
Average earning assets................................................... $ 7,557 $ 5,924 $ 4,520
Net interest margin...................................................... 3.16% 3.46% 3.62%
CONSOLIDATED
Net interest revenue..................................................... $ 1,326.9 $1,239.0 $1,114.8
Tax equivalent adjustment................................................ 7.8 10.8 20.8
--------- -------- --------
Net interest revenue -- (fully taxable equivalent basis)................. $ 1,334.7 $1,249.8 $1,135.6
========= ======== ========
Average loans and lease financing........................................ $ 26,586 $ 25,330 $ 26,167
Average earning assets................................................... $ 34,299 $ 33,229 $ 34,563
Net interest margin...................................................... 3.89% 3.76% 3.29%

1993 Compared with 1992
Consolidated net interest revenue, on a fully taxable equivalent basis, was
$1,335 million in 1993, an increase of $85 million from $1,250 million in 1992.
Consolidated net interest margin grew 13 basis points, from 3.76% in 1992 to
3.89% in 1993.

The improvement in net interest revenue resulted, in part, from a $51 million
increase from domestic operations. The domestic increase was mainly attributable
to wider domestic spreads resulting from lower deposit costs, higher levels of
noninterest bearing sources of funds, including deposits and stockholders'
equity, and a decline in nonaccrual loans and leases and OREO. Although average
domestic loan volume was up only slightly from 1992 and, therefore, contributed
modestly to the growth in domestic net interest revenue, there was a $2.1
billion increase in the ending balance of domestic loans and leases between
December 31, 1992 and December 31, 1993. Domestic loans and leases declined
during the course of 1992 and through the first quarter of 1993, with growth in
the portfolio occurring during the last three quarters of 1993. The increase in
international net interest revenue of $34 million was mainly caused by a $1.1
billion increase in average loan volume stemming from Latin American operations,
particularly Argentina and Brazil. Narrower international spreads partially
offset the improvement that resulted from volume growth.

The 13 basis point increase in consolidated net interest margin reflected a
higher domestic margin, resulting from the same factors that caused the growth
in net interest revenue as discussed above. The margin improvement from domestic
operations was partially offset by a decline in margin from international
operations. Spreads narrowed in Argentina, mainly because of the stabilizing
economy, which has resulted in declining inflation. In addition, spreads on
local currency operations (local currency assets funded with local currency
liabilities) in Brazil were narrower, stemming, in part, from a change in the
mix of assets from higher-yielding loans to other earning assets.

The levels of increases in net interest revenue and margin from 1992 to 1993 are
not necessarily indicative of future results. Net interest revenue and margin
are affected by the current interest rate environment, the mix and volume of
assets and liabilities, the level of nonperforming assets, competitive pressure,
economic and political conditions in the countries where the Corporation does
business, and other factors. As such, there can be no assurance as to the future
levels of net interest revenue or margin.

1992 Compared with 1991
Consolidated net interest revenue, on a fully taxable equivalent basis and
excluding the estimated effect of the Brazilian currency position, was $1,250
million in 1992, compared with $1,136 million in 1991. In addition, net interest
margin grew from 3.29% in 1991 to 3.76% in 1992. The improvement in net interest
revenue mainly reflected a $73 million increase from domestic operations,
stemming from lower funding costs, a decline in the level of nonaccrual loans
and leases and OREO, and higher levels of noninterest bearing sources of funds,
including deposits and stockholders' equity. These same factors helped increase
the domestic margin. The positive factors affecting domestic net interest
revenue more than offset a decline caused by a $2.7 billion drop in average
earning assets. Net interest revenue from international operations grew $41
million due to average loan growth of $1 billion, primarily in Latin America.
The loan growth more than offset the effect of a 16 basis point decline in
international margin.

NONINTEREST INCOME
The following is an analysis of the major components of noninterest income.

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN MILLIONS)
Financial service fees (see table below)........................................... $ 350 $ 355 $ 357
Trust and agency fees.............................................................. 178 166 157
Trading profits and commissions.................................................... 24 16 22
Securities gains................................................................... 32 39 29
Mezzanine/venture capital profits.................................................. 38 17 41
Net foreign exchange trading profits............................................... 45 41 41
Gains from sales of mortgage servicing rights...................................... 1 15 34
Recognition of deferred gain from the 1984 sale of the headquarters building....... 16
Other.............................................................................. 77 92 82
----- ----- -----
Subtotal..................................................................... 745 757 763
Estimated effect of Brazilian currency position.................................... (174) (50)
----- ----- -----
Total........................................................................ $ 571 $ 707 $ 763
===== ===== =====

The following is an analysis of the major components of financial service fees.

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN MILLIONS)
Deposit fees....................................................................... $ 122 $ 119 $ 111
Letter of credit and acceptance fees............................................... 58 55 51
Mortgage servicing fees:
Fee income....................................................................... 105 99 91
Amortization of mortgage servicing assets........................................ (99) (71) (37)
----- ----- -----
Net mortgage servicing fees.................................................... 6 28 54
Loan-related fees.................................................................. 45 35 28
Factoring fees..................................................................... 29 31 34
Other.............................................................................. 90 87 79
----- ----- -----
Total.......................................................................... $ 350 $ 355 $ 357
===== ===== =====

1993 Compared with 1992
Consolidated noninterest income was $571 million in 1993, compared with $707
million in 1992. This decline was mainly caused by a $124 million increase in
net translation/hedge losses from the estimated effect of the Corporation's
Brazilian currency position; however, the negative effect on noninterest income
from this currency position was offset by a $125 million increase in net
interest revenue. A detailed discussion of the Brazilian currency position is
included on page 33. Excluding the estimated effect of the Brazilian currency
position, noninterest income in 1993 was $745 million, compared with $757
million in 1992.

During 1993, there was a $21 million increase in profits from mezzanine and
venture investments, as a result of a large gain from one sale transaction
recorded in 1993; a $17 million increase in financial service fees (excluding
net mortgage servicing fees), including a $10 million increase in loan-related
fees; a $12 million increase in trust and agency fees, principally from higher
stock transfer and international mutual fund fees, and an $8 million increase in
trading profits and commissions, primarily from Argentine securities. Trading
profits and commissions included $5 million in 1993 and $3 million in 1992 from
trading in off-balance-sheet financial markets instruments. More than offsetting
these improvements were declines in several noninterest income categories,
including a $22 million decrease in net mortgage servicing fees, which reflected
a $28 million increase in the level of amortization of mortgage servicing
assets. The increase in amortization was moderated by a $6 million increase in
gross mortgage servicing fees, stemming from a higher level of originations and
the retention of servicing business.

As a result of a substantial increase in mortgage prepayments that began in the
latter half of 1992 and continued throughout 1993, amortization of PMSR was
increased. In addition, effective January 1, 1993, the Corporation changed its
method of evaluating the carrying value of PMSR to a discounted method adopted
by the banking regulators in the first quarter of 1993. The Corporation recorded
an additional charge of $17 million in 1993 from applying this new methodology,
all of which was recorded in the first quarter of 1993. The cumulative effect of
applying this new method to January 1, 1993 is discussed in Note 9 to the
Financial Statements. Also, beginning in the first quarter of 1993, the
Corporation refined its risk management strategy with respect to PMSR by
entering into contracts that are designed to reimburse the Corporation for a
portion of the reduction in value of PMSR, as interest rates fall and
prepayments increase. The level of amortization in 1993 was modestly benefited
by these contracts. The Corporation will continue its regular review of the
mortgage servicing portfolio and, if conditions warrant, will adjust its future
amortization levels or take additional writedowns in light of changes in
interest rates, prepayment experience and other factors. No assurance can be
given as to the future level of net mortgage servicing fees, as they will be
affected by a variety of factors including changes in the level of mortgage
interest rates.

Additional items affecting noninterest income were: the recognition in 1992 of
the remaining $16 million unamor-

36
8

tized gain from the 1984 sale of the Corporation's headquarters building, as a
result of the termination of the original lease agreement and subsequent entry
into a new lease of the building; a $14 million decline in gains from the sales
of mortgage servicing rights, and a $7 million decline in securities gains, as
lower gains from sales of U.S. government securities more than offset higher
gains from sales of Argentine securities. The $15 million decline in other
income included lower gains from the sales of assets received in connection with
lending activities.

1992 Compared with 1991
Noninterest income declined $56 million from 1991, of which $50 million was
attributable to the estimated effect of the Brazilian currency position on 1992
results. The estimated effect of this position on 1991 was not significant.
Excluding the estimated effect of the Brazilian currency position, noninterest
income declined $6 million from 1991. Net mortgage servicing fees declined $26
million because of higher amortization of mortgage servicing assets, resulting
from the higher level of prepayments that the Corporation began experiencing in
the second half of 1992. In addition, profits from mezzanine and venture
investments declined $24 million as the third quarter of 1991 included a large
gain from one sale transaction, and gains from sales of mortgage servicing
rights declined $19 million, mainly from Bancorp's 1991 sale of its entire
portfolio of these rights. These declines were partially offset by a $24 million
increase in financial service fees, excluding net mortgage servicing fees, the
recognition in 1992 of the remaining $16 million unamortized gain from the 1984
sale of the Corporation's headquarters building discussed above, a $10 million
increase in securities gains and a $9 million increase in trust and agency fees.

NONINTEREST EXPENSE
The following table is an analysis of the major components of noninterest
expense.

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN MILLIONS)
Salaries...................................................................... $ 635 $ 605 $ 571
Employee benefits............................................................. 136 121 113
Occupancy expense............................................................. 128 126 135
Equipment expense............................................................. 96 101 103
Professional fees............................................................. 56 68 80
FDIC deposit insurance........................................................ 62 56 56
Other......................................................................... 289 284 293
------- ------ ------
Noninterest expense, excluding OREO costs and special charges............. 1,402 1,361 1,351
OREO costs.................................................................... 44 113 113
Merger and restructuring charge............................................... 85 54
Acquisition-related costs..................................................... 20
------- ------ ------
Total................................................................. $ 1,531 $1,474 $1,538
======= ====== ======

1993 Compared with 1992
Noninterest expense was $1,531 million in 1993, compared with $1,474 million in
1992. Noninterest expense, excluding OREO costs and special charges, increased
$41 million from $1,361 million in 1992 to $1,402 million in 1993. This mainly
resulted from an increase in employee costs, including a $30 million rise in
salaries and a $15 million increase in employee benefits. The growth in employee
costs reflected increased investments in growth businesses, mainly in Latin
America and domestic Retail and Small Business Banking, a higher average number
of employees, normal salary increases and the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
Additional information on SFAS No. 106 can be found in Note 16 to the Financial
Statements. In addition, advertising costs increased $8 million and FDIC deposit
insurance grew $6 million reflecting higher assessment rates. These increases
were partially offset by a $12 million decline in professional fees,
attributable to lower consulting and legal expense, and a $5 million decline in
equipment expense, caused by lower rent and repair expenses.

While noninterest expense grew $41 million and the average number of employees
increased as described above, noninterest expense, excluding OREO costs, in the
fourth quarter of 1993 was $15 million less than the fourth quarter of 1992, and
the number of employees declined by 815 between December 31, 1992 and December
31, 1993, from 19,459 to 18,644. The improvement in the fourth quarter
comparison reflected management's efforts to reduce costs and staff levels, as
well as the integration of the operations of Bancorp and Multibank, which are
discussed below. There can be no assurance, however, that these improvements in
noninterest expense and the trend in employee levels will continue as the
Corporation continues to assess new business opportunities and additional
investments in businesses considered strategically important to the Corporation.

During the third quarter of 1993, the Corporation recorded $85 million of merger
and restructuring charges ($57 million after taxes). These charges were
primarily recorded in connection with the July 1993 mergers with Bancorp and
Multibank and included investment banking and other professional fees, stock
issuance costs and other expenses associated with the mergers, as well as
estimated costs to reorganize and restructure facilities and operations, systems
conversion costs and severance costs associated with the integration of these
entities. A portion of the total charge covered the costs of other expense
reduction initiatives in the Corporation. Since both of the mergers represented
in-

market combinations, the Corporation estimates that it will achieve cost
savings, primarily through reductions in staff, as well as systems and space
consolidations. Current estimates are that the Corporation will achieve savings
approximating 40% of the annual pre-merger level of noninterest expense
(excluding OREO costs) of Bancorp's and Multibank's New England operations.
Certain of these savings were achieved in the second half of 1993, and
additional savings will be achieved through 1995, as the Corporation implements
the remainder of its detailed integration plans. There can be no assurance,
however, as to the level or timing of actual cost savings from the integrations
of Bancorp and Multibank. In addition, these savings could be offset by
increased costs from new business opportunities or additional investments in
businesses considered strategically important to the Corporation.

OREO costs declined $69 million from 1992, reflecting lower valuation writedowns
associated with these assets, as the OREO balance declined 36% from December 31,
1992 to December 31, 1993.

1992 Compared with 1991
Noninterest expense, excluding OREO costs, restructuring charges and
acquisition-related costs, increased $10 million in 1992 from 1991. Employee
costs rose $42 million, mainly reflecting an increase in incentive compensation,
higher employee costs from Brazilian and Argentine operations, an increase in
the number of domestic employees and normal salary increases. In addition,
advertising expense grew $9 million stemming from new domestic and international
advertising campaigns launched in 1992. Factors, which offset the growth in
employee costs and advertising expense, were the absence of a $17 million
write-off of computer equipment, bank premises, and undeveloped real estate
recorded by Bancorp in 1991, a $12 million decline in professional fees as a
result of lower problem loan-related expenses and proactive management of legal
fees, and a $9 million decline in occupancy expense as lower domestic rent
expense, the result of space consolidations and the renegotiation of leases,
more than offset the absence of amortization associated with the unamortized
gain from the 1984 sale of the Corporation's headquarters building.

In addition, 1991 included a $54 million restructuring charge ($7 million of
which was recorded by Bancorp) incurred mainly in connection with the
Corporation's plans for the consolidation and downsizing of various domestic and
international operations and facilities and reducing the number of employees.
Also included in 1991 were $20 million of expenses associated with the
Corporation's unsuccessful bid to acquire the failed Bank of New England
franchise and merger discussions with Shawmut National Corporation that were
terminated.

PROVISION FOR CREDIT LOSSES
The provision for credit losses was $70 million in 1993, compared with $180
million in 1992, and $519 million in 1991. The $110 million decline from 1992
reflected management's assessment of the current risk characteristics of the
loan portfolio and level of the reserve for credit losses in light of further
declines in nonaccrual loans and leases and net credit losses, as well as
modestly improved United States and New England economies and other factors.
Nonaccrual loans and leases declined $962 million, from $1,513 million at the
end of 1991 to $551 million at the end of 1993 and, as a result, the reserve for
credit losses increased to 140% of nonaccrual loans and leases at December 31,
1993, compared with 119% at the end of 1992, and 69% at the end of 1991.
Consolidated net credit losses declined to $223 million in 1993, compared with
$309 million in 1992, and $490 million in 1991. Net credit losses exceeded the
provision for credit losses in each of the last two years: by $153 million in
1993, and by $128 million in 1992. While it is anticipated that the provision
for credit losses will increase from the 1993 level, the amount will be a
function of the quarterly review of the reserve for credit losses. This review
will be affected by the risk characteristics of the portfolio and the economic
conditions existing at that time and, therefore, there can be no assurance as to
the amount of future provisions.

During 1993, the Corporation reclassified in-substance repossessions (ISRs) from
OREO to nonaccrual loans. ISRs are loans where the borrower has little or no
remaining equity in the collateral when considering its fair value; where
repayment can only be expected to come from the operation or sale of the
property and where the borrower has effectively abandoned control of the
property, or where it is doubtful that the borrower will be able to rebuild
equity in the property. Although the Corporation did not possess title to these
properties, it carried these properties as OREO since 1989, as required by the
bank regulators. In June 1993, however, the regulators revised their position to
allow ISRs to be carried as loans. The Corporation chose to reclassify ISRs from
OREO to nonaccrual loans, and has restated the balance sheets and income
statements of all prior periods for comparative purposes. Additional information
on the reclassification of ISRs is included in Note 6 to the Financial
Statements.

PROVISION FOR INCOME TAXES
The 1993 income tax provision was $215 million, compared with a provision of
$153 million in 1992, and a benefit of $58 million in 1991. The current year
provision included the effect of the 1993 federal income tax law changes, which
were not significant. A minor increase in the provision from a higher income tax
rate on current earnings was offset by required adjustments to the Corporation's
deferred tax balance. Effective January 1, 1993, the Corporation adopted
prospectively SFAS No. 109, which principally affected the manner in which the
Corporation accounted for deferred income taxes. The cumulative effect to
January 1, 1993 of adopting SFAS No. 109 was an increase to net income of $77
million. The 1992 provision was offset by the recognition of prior year tax
benefit carryforwards of $73 million, which are shown separately as
extraordinary income. The 1991 income tax benefit included $52 million ($34
million after federal income tax effect) from a tax settlement reached with The
Commonwealth of Massachusetts and $25 million from the refund of prior years'
federal minimum taxes. These benefits were offset by the inability of the

38
10

Corporation to recognize in 1991, for financial statement purposes, $61 million
of tax benefits related to foreign tax credits and net operating loss
carryforwards in that year. Additional information with respect to the
Corporation's income taxes, including information related to the adoption of
SFAS No. 109, is included in Note 20 to the Financial Statements.

FINANCIAL CONDITION

Asset quality and asset/liability management, including liquidity, interest rate
risk and capital resources, are important elements to be considered in
understanding and assessing the Corporation's financial condition. Inflation has
generally had a minimal impact on the Corporation because substantially all of
its assets and liabilities are of a monetary nature and a large portion of its
operations are based in the United States, where inflation has been low. As
discussed on page 33, a currency position maintained by the Corporation in
Brazil, a country with a hyperinflationary economy, has had an effect on the
levels of net interest revenue, noninterest income and net interest margin,
while modestly benefiting total revenue.

ASSET QUALITY

CREDIT POLICY
The Senior Credit Officer, in consultation with the Credit Policy Committee, is
responsible for ensuring that credit policies are well constructed and complete,
approving underwriting guidelines and approving those credit authorities over $1
million that are granted to individual officers. In addition, the Credit
Department, reporting to the Senior Credit Officer, is responsible for ensuring
that credit due diligence and administration meet the Corporation's standards
and conform to the Corporation's policies. The Credit Policy Committee is
responsible for reviewing and approving portfolio concentration limits relating
to industry, geography and product type.

The Corporation also has a risk rating system that is intended to assess risk in
the credit portfolio and identify problems before they result in losses. This
system, which is overseen by the Risk Review Department, is an important element
in the monitoring process. The Risk Review Department is independent from the
core businesses' credit areas. It reviews the risk rating process and tests the
ratings that are established by lending officers.

While sound credit policies serve to reduce the Corporation's exposure to credit
risks, they do not insulate the Corporation from losses.

LOANS AND LEASES
Of the Corporation's $35.9 billion in earning assets at December 31, 1993, 80%
were loans and leases, compared with 77% at the end of 1992. The remaining
earning assets were invested in interest bearing deposits in other banks,
federal funds sold and resale agreements, mortgages held for sale and
securities. The size of the loan portfolio relative to total earning assets
exposes the Corporation to varying degrees of credit risk. While the Corporation
experienced deterioration in certain portions of its loan portfolio in prior
years, particularly in the domestic commercial real estate portfolio, nonaccrual
loans and leases and OREO have been reduced to $659 million at December 31,
1993, from $949 million at the end of 1992, and $1,838 million at the end of
1991. These decreases included reductions in domestic commercial real estate
nonaccrual loans and OREO of $227 million in 1993 and $591 million in 1992. The
reductions reflected the results of a number of programs introduced by the
Corporation over the last few years that reinforced its commitment to a stronger
management of credit, as well as the effects of modestly improved economies in
the United States and New England in 1993. Further discussion on the management
of the Corporation's domestic commercial real estate portfolio can be found in
the Domestic Commercial Real Estate Loans and OREO section on page 40.

Domestic loans and leases as of December 31, 1993 were $22.6 billion and
accounted for 78% of the consolidated portfolio, compared with $20.5 billion and
81% at the end of 1992, and $21.4 billion and 84% at the end of 1991. Slightly
more than half of the domestic loans and leases were to borrowers domiciled in
New England. The $2.1 billion growth in 1993 included a $.6 billion increase in
loans from the Specialized Finance businesses, mainly Energy and Utilities,
Transportation and Environmental Services, as the Corporation benefited from its
status as a top-tier relationship bank to these industries; a $.5 billion
increase in residential mortgages, resulting from a decision to retain more
mortgages in 1993 rather than sell them into the secondary market, and a $.3
billion increase in loans from the New England Corporate lending businesses. The
remainder of the increase came from other commercial lending businesses and
loans to individuals. The domestic loan growth has been helped by the Bank of
Boston Credit Initiative that was announced in May 1992. The largest single
category of domestic loans and leases, which is diversified as to industry,
consists of lending to commercial, industrial and financial borrowers, and
equaled 53% of domestic loans and leases at December 31, 1993. Retail loans,
which include residential mortgage, home equity and installment loans, amounted
to 26% of the domestic portfolio. Loans secured by commercial real estate were
17% of the domestic portfolio and represented the only industry concentration
that exceeded 10% of the portfolio.

While total domestic loans and leases rose $2.1 billion during 1993, the
proportion of domestic loans and leases to total loans and leases has declined
during the past two years. This resulted from an increase in international loans
and leases, from $4.0 billion at December 31, 1991, and $4.9 billion at December
31, 1992 to $6.2 billion at December 31, 1993. These increases mainly reflected
growth in the Corporation's Argentine and Brazilian portfolios. The Corporation
has a strong market position in both of these countries. Information on the
Corporation's cross-border outstandings to these and other countries can be
found in Consolidated Statistical Information on pages 86 and 87.

39
11
- -------------------------------------------------------------------------------
MANAGEMENT'S FINANCIAL REVIEW
- -------------------------------------------------------------------------------
CONTINUED

Consolidated loans and leases grew 13% from the end of 1992 and the Corporation
continues to pursue new lending opportunities. The Corporation's ability to
extend new credit, however, is a function of a variety of factors, including
competition for customers' business and the economies in New England, other
parts of the United States and in other countries where the Corporation does
business. As such, there can be no assurance that the rate of loan growth
experienced in 1993 will be sustained in the future. Further information on the
Corporation's loan and lease portfolio can be found in Consolidated Statistical
Information on pages 88 through 89 and in Note 6 to the Financial Statements.

Domestic Commercial Real Estate Loans and OREO
The Corporation's domestic commercial real estate portfolio, including OREO, was
$3.8 billion at December 31, 1993, compared with $4.2 billion at the end of
1992, and $4.9 billion at the end of 1991. The $1.1 billion decrease since the
end of 1991 reflected the effect of tighter underwriting standards for new loans
and renewals or extensions of existing loans; payments received; sales of OREO
properties; credit losses and valuation adjustments recorded, and proactive
management of the portfolio. The table below details domestic commercial real
estate loans and OREO by geographic location. The portion attributable to other
states at the end of 1993 was spread among approximately 23 states.

DOMESTIC COMMERCIAL REAL ESTATE OUTSTANDINGS
BY GEOGRAPHIC LOCATION

OTHER NEW OTHER
(IN MILLIONS) MASSACHUSETTS CONNECTICUT ENGLAND FLORIDA TEXAS STATES TOTAL

Balance at December 31, 1993................ $1,373 $607 $802 $187 $ 54 $823 $3,846
====== ==== ==== ==== ==== ==== ======
Balance at December 31, 1992................ $1,348 $775 $805 $234 $ 91 $971 $4,224
====== ==== ==== ==== ==== ==== ======
Balance at December 31, 1991................ $1,774 $964 $854 $268 $115 $963 $4,938
====== ==== ==== ==== ==== ==== ======

Developmental real estate outstandings, which are included in the totals shown
above, were approximately $3.2 billion at December 31, 1993, compared with $3.3
billion at the end of 1992. These are assets from which ultimate payment to the
Corporation is expected to come from the sale, operation or refinancing of the
underlying property. The collateral underlying developmental real estate
outstandings is valued at least annually using various real estate valuation
techniques, including discounted cash flows and appraisals. The remaining
portfolio of $.6 billion at December 31, 1993, and $.9 billion at the end of
1992 was primarily composed of outstandings, secured by real estate, where the
property is not viewed as the principal source of repayment and is usually
occupied by the owner.

The Corporation has been an active real estate lender for over forty years.
While it has had experience with the cyclical nature of real estate markets,
the simultaneous deterioration in New England and several other markets
nationwide had a significant adverse effect on the quality of the Corporation's
domestic commercial real estate portfolio during the past several years. These
markets have experienced overbuilding, high vacancy rates and reduced lease
rates, which have triggered a shortfall of revenues. This effect has been
experienced with respect to all types of properties to such an extent that many
borrowers have been unable to service their debt. Through its active management
of the portfolio during the past few years and because of a modestly improved
economy in 1993, the Corporation has been able to reduce its domestic
commercial real estate nonaccrual loans and OREO. The reduced interest rate
environment has assisted in these efforts. At December 31, 1993, total domestic
commercial real estate nonaccrual loans and OREO were $367 million, compared
with $594 million at the end of 1992, and $1,185 million at the end of 1991.

The following table details domestic commercial real estate nonaccrual loans and
OREO by geographic location at December 31, 1993:

DOMESTIC COMMERCIAL REAL ESTATE NONACCRUAL LOANS AND OREO
BY GEOGRAPHIC LOCATION

OTHER NEW OTHER
(DOLLARS IN MILLIONS) MASSACHUSETTS CONNECTICUT ENGLAND FLORIDA TEXAS STATES TOTAL

Balance at December 31, 1993................ $103 $ 68 $ 52 $15 $ 8 $121 $ 367
==== ==== ==== === ==== ==== ====
Percent of related outstandings............. 9% 13% 6% 8% 15% 11% 10%
Balance at December 31, 1992................ $179 $118 $ 88 $22 $12 $175 $ 594
==== ==== ==== === ==== ==== ====
Percent of related outstandings............. 13% 15% 11% 9% 13% 18% 14%
Balance at December 31, 1991................ $358 $237 $177 $45 $24 $344 $1,185
==== ==== ==== === === ==== =====
Percent of related outstandings............. 20% 25% 21% 17% 21% 36% 24%

40
12

The Corporation continues to actively manage its pool of domestic commercial
real estate loans and OREO in an effort to minimize losses by quickly
identifying and resolving problems. The Boston-based Real Estate Department
manages the majority of the Corporation's accruing domestic commercial real
estate loans. The Asset Recovery Department, which includes real estate lenders
and workout specialists, handles substantially all of the Corporation's domestic
nonaccrual commercial real estate loans and OREO. These departments continually
review their portfolios and update plans for resolution of problem real estate
assets, focusing on the sale and refinancing options that are realistically
available in the current market. An essential part of the workout strategy is
the regular monitoring of property cash flows. Where appropriate, these
departments will work with borrowers and guarantors of loans to improve equity
in the properties or otherwise renegotiate the credits so that they can make a
positive contribution to the Corporation. If a renegotiation is accomplished, it
is accounted for in accordance with SFAS No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings" (see discussion of Renegotiated
Loans on page 44). If warranted, the Corporation will foreclose on the
collateral. When a property becomes owned, the strategy is to dispose of the
property as soon as possible with the objective of maximizing value to the
Corporation.

Domestic OREO, which is included in the preceding table, was $106 million at
December 31, 1993, compared with $168 million at the end of 1992, and $322
million at the end of 1991.

The commercial real estate portfolio is affected by changes in the economy,
interest rates, the supply of commercial properties and other factors. While the
level of domestic commercial real estate nonaccrual loans and OREO has declined
during the past three years, no assurance can be given as to the future level of
domestic commercial real estate nonaccrual loans and OREO.

HLTs
Loans made by many of the Corporation's lending divisions to finance
transactions involving leveraged buyouts, acquisitions, and recapitalizations
are classified as HLTs, if, by the nature of the loan terms and the profile of
the customer, the transaction qualifies for this classification under the
current bank regulatory definition of HLTs.

The HLT definition encompasses areas where a high degree of leverage would be
expected in a traditional lending environment, such as asset-based lending and
lending to the communications industry, particularly cable, where equity is
traditionally low and cash flow is the predominant factor in assessing repayment
ability. Under the definition, an HLT is a credit extended to, or an investment
made in, a business where the transaction involves the buyout, acquisition, or
recapitalization of an existing business, and where one of the following three
criteria is met: the transaction at least doubles the customer's liabilities and
results in a leverage ratio greater than 50%; the transaction results in a
leverage ratio greater than 75%, or the transaction is designated an HLT by its
syndication agent. Leverage is defined as the ratio of total liabilities, which
include subordinated debt and nonperpetual preferred stock, to total assets. The
definition excludes loans and exposures to customers in which the total original
financing package, including all obligations held by all participants, amounts
to $20 million or less. Delisting of a credit from HLT status is allowed under
certain circumstances related to the customer's performance.

HLT loans were $1.3 billion, or 5% of the total loan and lease portfolio, at
December 31, 1993, compared with $1.6 billion, or 6%, at the end of 1992 and
$2.6 billion, or 10%, at end of 1991. The decline in HLT loans from December 31,
1992 was mainly a result of a combination of principal payments and delistings.
Of the total HLT portfolio outstanding at December 31, 1993, 94% were domestic
credits that were spread over 21 states, with 13% to companies with headquarters
in New England.

41
13

The following is an analysis of the year-end outstanding HLT loan portfolio by
industry, segregated between those in which the Corporation has a lending
specialization and others:

HLT LOANS BY INDUSTRY

DECEMBER 31
NUMBER OF PERCENT OF 1993 1992 1991
(DOLLARS IN MILLIONS) COMPANIES OUTSTANDING Outstandings Outstandings

INDUSTRY SPECIALIZATION
Cable................................................. 9 13% $ 167 $ 447 $ 538
Broadcasting.......................................... 6 4 56 137 324
Media and publishing.................................. 4 7 90 71 172
-- ---- ------ ------ ------
Total communications................................ 19 24 313 655 1,034
High technology....................................... 3 2 22 70 224
Transportation........................................ 4 9 119 115 124
Energy and utilities.................................. 3 5 70 19 30
Insurance and mutual funds............................ 2 3 37 18 39
-- ---- ------ ------ ------
Total industry specialization....................... 31 43 561 877 1,451
-- ---- ------ ------ ------
OTHERS
Food, beverages and tobacco........................... 12 21 271 50 169
Consumer products/retailing........................... 7 6 81 127 182
Metals................................................ 1 2 27 132 208
Machinery, equipment and components................... 4 5 69 159 212
Textiles and apparel.................................. 3 4 50 51 71
Health care........................................... 4 4 51 32 73
Other................................................. 13 15 194 159 254
-- ---- ------ ------ ------
Total others........................................ 44 57 743 710 1,169
-- ---- ------ ------ ------
Total HLTs........................................ 75 100% $1,304 $1,587 $2,620
== ==== ====== ====== ======

The following is an analysis of the HLT loan portfolio by loan size at the end
of 1993, 1992 and 1991:

HLT LOANS BY SIZE

DECEMBER 31 1993 1992 1991
NUMBER OF AVERAGE
(DOLLARS IN MILLIONS) COMPANIES OUTSTANDINGS LOAN SIZE Average Loan Size

OUTSTANDING LOAN SIZE
$0 - 24.................................................... 57 $ 650 $11 $ 12 $ 13
$25 - 49................................................... 14 441 32 37 36
$50 - 74................................................... 4 213 53 63 66
$75 - 99................................................... 96
$100+...................................................... 114 120
-- ------
75 $1,304 17 21 23
== ====== === ===== =====

In addition to the loans above, certain of the Corporation's outstanding
mezzanine and venture capital investments meet the definition of HLT
investments. Such investments amounted to $121 million in 24 companies at
December 31, 1993, compared with $152 million in 32 companies at December 31,
1992, and $193 million in 43 companies at the end of 1991.

The amount of unused lending commitments for HLTs at December 31, 1993 was $540
million, compared with $404 million at December 31, 1992, and $639 million at
the end of 1991. These totals do not necessarily represent the actual future
funding by the Corporation since a portion can be syndicated or assigned to
others or may expire without being drawn upon. During 1993, the Corporation made
commitments in connection with HLT financings of approximately $654 million,
with an average commitment size of approximately $30 million.

The Corporation recognizes that in an economic downturn or sustained period of
high interest rates, borrowers whose loans are classified as HLTs may experience
financial stress. As a result, risks associated with certain of these
transactions may be higher than for more traditional financings. The approval
process for HLTs includes varying levels of individual and committee reviews
based upon the loan size. The process also includes a review by the Syndications
Division if distribution of the transaction is contemplated. Individual
customer, underwriting and internal limits are in effect for all of the
Corporation's loans, including special limits, established in 1990, on HLTs held
for the Corporation's own account. These special limits are $50 million if the
HLT is agented by the Corporation and $25 million for all other HLTs. Once
originated, all credits are subject to periodic reviews, with the frequency of
the review determined by the loan's risk rating.

In general, HLT loans are assets that yield more than most commercial loans.
Typically, interest rates on new HLTs range from 1.5% to 2.75% over LIBOR and
fees charged range from .75% to 1.5% of the principal amount committed. Certain
fees are deferred and recognized as income in future periods in accordance with
SFAS No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of Leases."

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MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CONTINUED

During 1993, the Corporation recognized approximately $16 million of fee income
on HLT loans, of which $8 million related to fees received and deferred in prior
years and $7 million reflected fees received and recognized in 1993 from loans
originated prior to 1993. In addition, the Corporation received $4 million of
fees related to loans originated in 1993, of which $1 million was recognized as
income during the year.

During 1992, the Corporation recognized approximately $26 million of fee income
on HLT loans, of which $7 million related to fees received and deferred in prior
years and $18 million reflected fees received and recognized in 1992 from loans
originated prior to 1992. In addition, the Corporation received $3 million of
fees related to loans originated in 1992, of which $1 million was recognized as
income during that year.

During 1991, the Corporation recognized approximately $18 million of fee income
on HLT loans.

HLT net credit losses were $21 million in 1993, compared with $19 million in
1992, and $50 million in 1991. Of the total net credit losses during the past
three years, 68% related to three large credits. The 1993 and 1992 net credit
losses included $7 million, and $8 million, respectively, related to HLTs
collateralized by commercial real estate. HLT nonaccruals at December 31, 1993
were $10 million compared with $57 million at December 31, 1992, and $155
million at the end of 1991. Included in the nonaccrual amounts for 1993, 1992
and 1991 were $4 million, $14 million and $22 million, respectively, which were
collateralized by commercial real estate and are, therefore, also reflected in
the amounts and tables detailed in the Domestic Commercial Real Estate Loans and
OREO section on pages 40 to 41.

Over the past several years, the Corporation has experienced a significant
reduction in its HLT activities. At the end of 1989, the Corporation's HLT loan
portfolio stood at $5.3 billion, compared with $1.3 billion at the end of 1993,
a 75% reduction. During 1993, 1992 and 1991, respectively, twenty new loans
totaling $380 million, eight new loans totaling $116 million and twelve new
loans totaling $145 million were funded. It is estimated that the new HLT loans
did not make a significant contribution to the Corporation's pre-tax results and
gross revenues in 1993, 1992 and 1991. Historically, the Corporation has been
actively involved in transactions that qualify as HLTs and it expects to
continue to agent and participate in such transactions in the future. The
Corporation, however, does not currently anticipate a substantial increase in
HLT lending over the level at December 31, 1993.

NONACCRUAL LOANS AND LEASES AND OREO
Under the Corporation's nonaccrual policy, a loan or lease is placed on
nonaccrual status when collectibility of principal or interest is doubtful, or
when any portion of the principal or interest is ninety days past due, unless it
is well secured and in the process of collection. Whenever a loan or lease is
placed on nonaccrual status, all other credit exposures to the same borrower are
also placed on nonaccrual status; exceptions are made only when it can be
clearly demonstrated that such credits are well secured, fully performing and
insulated from the weakness surrounding the nonaccrual credit to which they
relate. Interest payments received on nonaccrual loans and leases are applied as
a reduction of the principal balance when concern exists as to the ultimate
collection of principal; otherwise such payments are recognized as interest
income.

The following table is a summary of nonaccrual loans and leases and OREO:

DECEMBER 31 1993 1992 1991

(DOLLARS IN MILLIONS)
DOMESTIC NONACCRUAL LOANS AND LEASES
Commercial, industrial and financial............................................. $ 118 $ 201 $ 385
Construction..................................................................... 30 81 123
Other commercial real estate..................................................... 231 345 740
Real estate secured by 1-4 family residences..................................... 64 58 69
Loans to individuals............................................................. 10 26 32
Lease financing.................................................................. 1 2 5
----- ----- ------
454 713 1,354
INTERNATIONAL NONACCRUAL LOANS AND LEASES 97 66 159
----- ----- ------
Total nonaccrual loans and leases 551 779 1,513
OREO
Domestic......................................................................... 106 168 322
International.................................................................... 2 2 3
----- ----- ------
Total nonaccrual loans and leases and OREO..................................... $ 659 $ 949 $1,838
===== ===== ======
Nonaccrual loan and leases and OREO as a percent of related asset categories....... 2.3% 3.7% 7.2%
===== ===== ======

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15

The following table summarizes the changes in nonaccrual loans and leases and
OREO that have occurred during the last two years:

YEARS ENDED DECEMBER 31 1993 1992

(IN MILLIONS)
Beginning balance......................................................................... $ 949 $ 1,838
Additions................................................................................. 486 670
Sales, restructurings, payments and other decreases....................................... (482) (1,072)
Charge-offs and valuation adjustments..................................................... (294) (487)
------ --------
Ending balance............................................................................ $ 659 $ 949
====== ========

The level of nonaccrual loans and leases and OREO is influenced by the economic
environment, interest rates, regulatory attitudes and other internal and
external factors. While the Corporation has experienced a decline in the balance
of its nonaccrual loans and leases and OREO during the past two years,
additions, as seen in the above table, exceeded outflows before the effect of
charge-offs and valuation adjustments, by $4 million in 1993; for the second
half of 1993, additions were higher than outflows by $54 million. At December
31, 1993, the ratio of nonaccrual loans and OREO to related asset categories was
2.3%, the lowest reported by the Corporation in over a decade. Given this low
level of nonaccrual loans and leases and OREO, the Corporation may experience an
increase in the level of these assets in 1994.

RENEGOTIATED LOANS
Loans are renegotiated when the Corporation determines that it will ultimately
receive greater economic value by relaxing the terms than through foreclosure,
liquidation or bankruptcy. Candidates for renegotiation must meet specific
guidelines and undergo extensive due diligence reviews. Guidelines consider the
quality of the borrower and the borrower's ability to enhance the value of the
property; the collateral; the ability of the guarantor, if any, to perform, and
the economic value of the renegotiated loan relative to foreclosure and other
options. Renegotiation also allows the Corporation to maintain the customer
relationship and grants the customer more time to regain equity in the property.
The terms of the renegotiation generally involve some or all of the following
characteristics: a reduction in the interest pay rate to reflect actual property
income, an extension of loan maturity date to allow time for stabilization of
property income and partial forgiveness of principal and interest. In certain
circumstances, the Corporation also obtains the right to share in future
benefits arising from the upside potential of the collateral. Once a
renegotiation takes place, the loan is subject to the accounting and disclosure
rules prescribed by SFAS No. 15.

Renegotiated loans, which are performing in accordance with their new terms and,
therefore, are not included in nonaccrual loans, amounted to $225 million at
December 31, 1993, compared with $401 million at December 31, 1992, and $353
million at the end of 1991. The average current yield on these loans was
approximately 8% at December 31, 1993, 1992 and 1991. Of the renegotiated loans
at December 31, 1993, $126 million were domestic commercial real estate loans.
Additionally, in connection with the restructuring of loans, the Corporation may
obtain equity interests in the borrower. Such interests, which are included in
other assets, amounted to $41 million at December 31, 1993, compared with $30
million at the end of 1992 and 1991.

During 1993, $19 million of loans were renegotiated. These additions to the
renegotiated portfolio were more than offset by the transfer to a conventional
fully performing status of $143 million of loans, that had sustained a market
rate of interest, in conformity with SFAS No. 15. Other outflows from the
renegotiated loan portfolio during 1993 included the transfer of $21 million to
nonaccrual status. Additional information with respect to the Corporation's
renegotiated loans is included in Note 6 to the Financial Statements.

RESERVE FOR CREDIT LOSSES
The Corporation determines the level of its reserve for credit losses using a
credit-by-credit assessment of higher risk credit exposures in the portfolio,
based upon internal credit ratings, and an analysis of loan concentrations by
industry for the rest of the portfolio; an evaluation of credit risk related to
off-balance-sheet financial instruments; cross-border risks, and other internal
and external factors. The other factors considered in the assessment include
current economic and political conditions, levels of nonaccrual and other
problem credits, historical trends in the portfolio and the level and quality of
credit management.

The reserve for credit losses was $770 million at December 31, 1993, compared
with $923 million at the end of 1992, and $1,051 million at the end of 1991. The
reserve for credit losses was 2.68% of loans and leases at December 31, 1993,
compared with 3.63% at December 31, 1992, and 4.14% at the end of 1991. The
reserve as a percentage of nonaccrual loans was 140% at December 31, 1993,
compared with 119% at December 31, 1992, and 69% at the end of 1991. As a
percentage of nonaccrual and renegotiated loans, the reserve was 99% at December
31, 1993, compared with 78% at December 31, 1992, and 56% at the end of 1991.

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16

Net credit losses for 1993, 1992 and 1991 were as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(DOLLARS IN MILLIONS)
DOMESTIC NET CREDIT LOSSES
Commercial, industrial and financial............................................. $ 40 $ 66 $ 120
Commercial real estate........................................................... 73 181 287
Real estate secured by 1-4 family residences..................................... 18 21 16
Loans to individuals............................................................. 31 27 46
Lease financing.................................................................. 1 1 2
----- ----- -----
163 296 471
INTERNATIONAL NET CREDIT LOSSES.................................................... 60 13 19
----- ----- -----
Total.......................................................................... $223 $ 309 $ 490
===== ===== =====
Net credit losses to average loans and leases...................................... .84% 1.22% 1.87%

The higher level of international net credit losses in 1993 was mainly due to
charge-offs taken on certain Asian loans. The Corporation exercises considerable
efforts to recover loans even though they have been charged off. The following
table compares gross credit losses with recoveries for 1993, 1992 and 1991.

YEARS END DECEMBER 31 1993 1992 1991

(DOLLARS IN MILLIONS)
Gross credit losses................................................................. $273 $ 412 $ 597
Recoveries.......................................................................... $ 50 $ 103 $ 107
Ratio of recoveries to gross credit losses.......................................... 18.3% 25.0% 17.9%

OFF-BALANCE-SHEET CREDIT-RELATED INSTRUMENTS
In the normal course of business, the Corporation makes various commitments,
which differ from the Corporation's funded lending activities in that they are
executory in nature. These include credit-related obligations, such as
commitments to extend credit, standby letters of credit and foreign office
guarantees, that are provided to meet the financing needs of customers. In
addition, credit risk is also contained in the off-balance-sheet financial
markets instruments, which are discussed on page 47. Off-balance-sheet
instruments are subject to the same credit standards, financial controls and
monitoring practices used for loans and leases. At December 31, 1993, the
Corporation's unused commitments to lend, net of participations to other
financial institutions, aggregated $17.4 billion, compared with $15.0 billion at
the end of 1992. These amounts do not reflect the actual demand on liquidity
that the Corporation will be subjected to in the future, since historical
experience with loan commitments indicates that a portion generally expire
without being drawn upon. Standby letters of credit and foreign office
guarantees, net of participations, were $2.3 billion at December 31, 1993,
compared with $2.1 billion at the end of 1992. Additional information with
respect to the Corporation's off-balance-sheet credit-related instruments is
included in Notes 21 and 28 to the Financial Statements.

ASSET/LIABILITY MANAGEMENT

The Boston-based Treasury Department is responsible for managing the
Corporation's asset/liability process with respect to liquidity and interest
rate risk. In addition, the Corporation relies upon the collective experience of
its management in Treasury areas throughout its global network. Capital is
managed by Treasury in coordination with the Finance function.

LIQUIDITY MANAGEMENT
Liquidity is defined as the ability to meet known near-term and projected
long-term funding commitments, while supporting selective business expansion in
accordance with the Corporation's strategic plan. The Corporation proactively
manages liquidity to ensure its ability to meet present and future funding
needs. Liquidity is monitored on a daily basis and is reviewed monthly by the
Executive Committee of the Corporation's Board of Directors; a review by the
full Board of Directors occurs quarterly. Management's Asset/Liability Committee
(ALCO), which is chaired by the Treasury Department Executive, reviews liquidity
monthly. The adequacy of sources of liquidity is measured against anticipated
needs for the Corporation as a whole, the Parent Company and each of the
subsidiary banks. Alternative funding strategies are reviewed by ALCO, updated
and implemented as considered necessary.

Deposits are the principal source of the Corporation's liquidity and amounted to
$29.6 billion, or 73%, of total assets at December 31, 1993, as compared with
$29.1 billion, or 78%, of total assets at December 31, 1992. In addition,
deposits were 103% of the Corporation's outstanding loans and leases at December
31, 1993, compared with 115% at the end of 1992. The overall increase in
deposits from the end of 1992 was mainly due to higher levels of interest
bearing deposits in overseas offices and noninterest bearing deposits in
domestic offices, partially offset by a decline in interest bearing deposits in
domestic offices. International interest bearing deposits increased $2 billion
and were mainly used to fund the Corporation's Latin American loan growth, while
a $.5 billion increase in domestic noninterest bearing deposits primarily
resulted from a higher volume of business from mortgage banking companies and
customers. Included in the increase in international interest bearing deposits
was a $.4 billion increase from the Corporation's banking operation in
Argentina, which represented growth of 54% from December 31, 1992. During the
year, the

Corporation expanded its retail operation in Argentina as the local economy
continued its improvement and loan demand rose. A $2.1 billion decline in
interest bearing deposits in domestic offices was due to a combination of a
lower level of deposits obtained through retail programs with brokers (brokered
CDs) and a decline in retail deposits. The level of brokered CDs declined $1
billion since the end of 1992, from $1.7 billion to $700 million. Brokered CDs
had been issued with original maturities of one to three years; however, they
are no longer actively used as a source of additional liquidity. The Corporation
has replaced these deposits and funded a portion of its loan growth through the
wholesale funding markets, which included the use of term federal funds
purchased and FNBB's short-term Bank Note program discussed below. With respect
to domestic retail interest bearing deposits, the banking industry continued to
be challenged by the issue of deposit retention during 1993 in the face of
historically low interest rates. New deposit products such as the "First Rate
Plus" and "Max" accounts enabled the Corporation to better compete for consumer
deposits and are part of the Corporation's strategic emphasis on Retail and
Small Business Banking.

The Corporation's liquid assets consist primarily of interest bearing deposits
in other banks, federal funds sold and resale agreements, money market loans,
and unencumbered U.S. Treasury and government agency securities. At December 31,
1993, total liquid assets stood at $4.5 billion, compared with $4.7 billion at
December 31, 1992. The Corporation's ability to access funds at market rates
continued to improve in 1993 as it received upgrades from all major ratings
agencies during the year. In 1993, the Corporation issued $70 million of
preferred stock and $450 million of subordinated debt, while FNBB commenced a $2
billion short-term Bank Note program. At December 31, 1993, $350 million of
notes from this program were outstanding and it is anticipated that FNBB will be
issuing additional notes in 1994. Management believes that its liquidity
position at December 31, 1993 is adequate to support the Corporation's future
liquidity needs.

The balance sheet of Bank of Boston Corporation (on a Parent Company only basis)
reflected a liquid asset level in excess of short-term funding commitments of
$194 million at December 31, 1993, compared with $272 million at the end of
1992. During 1993, Parent Company liquidity was increased as a result of the
aforementioned issuances of $450 million of subordinated notes and $70 million
of preferred stock. The major uses of liquidity during the year included $299
million of capital cash contributions and $149 million of advances to various
banking and non-banking subsidiaries. These funds provided capital in support of
balance sheet growth during the year and enabled the banking subsidiaries to
maintain appropriate regulatory capital ratios (see further discussion in the
Capital Management section on page 49). In addition, the Parent Company called
for redemption $88 million of its notes payable that were due in 1996, and used
$73 million for dividend payments on common and preferred stock. Management
considers the Parent Company's overall liquidity at December 31, 1993 to be
adequate to meet current obligations and carry on normal operations. At December
31, 1993, substantially all of the Parent Company's funding came from
stockholders' equity and notes payable with no scheduled principal payment dates
until 1997. In January, 1994, the Parent Company issued $300 million of
subordinated notes and, in February 1994, announced its intent to redeem $179
million of notes payable due in September, 2000.

INTEREST RATE RISK MANAGEMENT
Interest rate risk can be defined as an exposure to a movement in interest rates
that could have an adverse effect on the Corporation's net income or financial
position. Interest rate risk arises from the Corporation's normal banking
activities due to an imbalance in the repricing or maturity schedules of assets
and liabilities. The Corporation seeks to limit its risk of exposure to changes
in interest rates, while also allowing for some imbalance that could enable it
to profit from favorable market opportunities. The Corporation uses certain
balance sheet items and off-balance-sheet financial markets instruments,
including interest rate futures and swaps, in the management of its interest
rate risk. Off-balance-sheet financial markets instruments provide the
Corporation with important flexibility in managing its interest rate exposure,
enabling it to efficiently manage risk while minimizing the impact on balance
sheet leverage and liquidity. Historically, the Corporation has not had a
significant amount of anticipatory hedge transactions. Additional information on
off-balance-sheet financial markets instruments is included on page 47.

The Corporation manages its interest rate risk within policies approved and
limits established by the Board of Directors. The Executive Committee of the
Board of Directors reviews the Corporation's interest rate risk profile on a
monthly basis; a review by the full Board of Directors occurs quarterly. ALCO
determines appropriate general guidelines and specific directives for the
management of interest rate risk within Board established policy and limits.
ALCO also reviews the Corporation's interest rate risk profile, including
tactical and planned strategic management initiatives, monthly. The Treasury
Department Executive, who is the Chairman of ALCO, is responsible for reporting
on the Corporation's interest rate risk management initiatives to the Chairman's
Office, ALCO, and the Board of Directors.

Interest rate risk limits and directives are established to restrict volatility
in income at risk and market value sensitivity, which could result under various
interest rate scenarios. A variety of methodologies, including static gap
analysis, net interest revenue simulation and market value modeling, are used to
evaluate the Corporation's exposure to various potential changes in interest
rates and to facilitate the management of interest rate exposure. One method of
monitoring interest rate risk is through the analysis of gap positions. Simply
stated, gap is the difference between the amount of assets and the amount of
liabilities that mature or are repriced during a given period of time. A
'positive' gap results when more assets than liabilities mature or are repriced
in a given time frame. Conversely, a 'negative' gap results when there are more
liabilities than assets maturing or being repriced during a given period of
time. Gap positions can be quickly modified by management as warranted by market
conditions.

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18
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MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CONTINUED

The following table shows the gap position of the Corporation at December 31,
1993.

INTEREST SENSITIVITY GAP ANALYSIS(1)

AFTER 1
AFTER 3 YEAR
MONTHS BUT BUT
WITHIN 3 WITHIN WITHIN AFTER 5 NONINTEREST
(IN MILLIONS) MONTHS 1 YEAR 5 YEARS YEARS BEARING TOTAL

ASSETS
Interest bearing deposits in other
banks............................. $ 839 $ 146 $ 6 $ 991
Federal funds sold and securities
purchased under agreements to
resell............................ 1,434 20 1,454
Trading securities(2)............... 306 306
Mortgages held for sale(2).......... 1,322 1,322
Securities:
Available for sale(3)........... 620 262 306 $ 77 $ 173 1,438
Held to maturity(3)............. 171 716 577 37 68 1,569
Loans and lease financing(4):
United States operations........ 14,250 2,998 4,308 549 (308) 21,797
International operations........ 3,472 2,058 526 70 89 6,215
Other nonearning assets............. 5,496 5,496
-------- ------ ------ ----- ------- -------
TOTAL ASSETS........................ $ 22,414 $6,200 $5,723 $ 733 $ 5,518 $40,588
======== ====== ====== ===== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Total deposits:
Domestic offices(5)............. $ 13,088 $2,482 $1,418 $ 508 $ 5,040 $22,536
Overseas offices................ 5,671 803 77 1 526 7,078
Funds borrowed...................... 4,084 779 106 6 4,975
Notes payable....................... 507 163 514 789 1,973
Noninterest bearing liabilities..... 1,115 1,115
Stockholders' equity................ 2,911 2,911
-------- ------ ------ ----- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................ $ 23,350 $4,227 $2,115 $1,304 $ 9,592 $40,588
======== ====== ====== ====== ======= =======
Interest sensitivity gap before the
net effect of off-balance-sheet
financial markets instruments..... $ (936) $1,973 $3,608 $ (571) $(4,074)
Net effect of off-balance-sheet
financial markets
instruments(6).................... (1,205) (307) 357 1,155
-------- ------ ------ -----
Interest sensitivity gap adjusted
for off-balance-sheet financial
markets instruments............... $ (2,141) $1,666 $3,965 $ 584 $(4,074)
======== ====== ====== ====== =======
CUMULATIVE INTEREST SENSITIVITY
GAP............................... $ (475) $3,490 $4,074 $ 0
====== ====== ====== =======

<FN>
(1) Allocations to specific interest sensitivity periods are based primarily on
the earlier of the repricing or maturity date.
(2) Since trading securities and mortgages held for sale are expected to be sold
in a relatively short period of time, they are included in the "within 3
months" category.
(3) Noninterest bearing securities include certain venture capital debt and
equity securities, as well as Federal Reserve and Federal Home Loan Bank
stock.
(4) Nonaccrual loans and leases and the reserve for credit losses are shown
within the "noninterest bearing" category.
(5) Domestic savings deposits and NOW accounts have been allocated 100% to the
"within 3 months" category based upon the Corporation's recent experience
with these deposits and assessment of current market conditions.
(6) Includes off-balance-sheet financial markets instruments used to modify the
repricing sensitivity of certain assets and liabilities, principally loans,
deposits and notes payable.

Exposure to interest rate risk can be altered by management, as warranted,
through changes in the Corporation's asset/liability structure or the use of
off-balance-sheet financial markets instruments, such as interest rate futures
and swap agreements. During the year, the Corporation maintained a modest
repricing imbalance on assets and liabilities, enabling it to benefit from a
decline in long term rates, which resulted in a flattening of the yield curve.
This action contributed to the Corporation's improvement in net interest revenue
throughout 1993.

OFF-BALANCE-SHEET FINANCIAL MARKETS INSTRUMENTS
The Corporation, through its subsidiary banks, participates as a counterparty in
various off-balance-sheet financial markets instruments. Such instruments are
also known as derivatives. In the negotiated over-the-counter (OTC) markets,
these instruments include swaps, forwards and options, which are based upon
interest rates and foreign currencies. Standardized exchange-traded futures
contracts are also utilized. The Corporation enters into such transactions in
connection with its trading activities, including offering them to its
customers. For asset/liability management purposes, these instruments may also
be used to manage the Corporation's own interest rate and currency risks. The
principal or notional values of commitments related to off-balance-sheet
financial markets instruments represent the volume of outstanding transactions
and do not represent the potential for gain or loss associated with the market
risks or credit risk of such transactions. As such, the actual market or credit
exposure for all these instruments is significantly less than the notional
amount. Gains and losses stemming from changes in the market values of the

47
19

financial markets instruments entered into in connection with the Corporation's
trading activities are recognized currently as part of trading profits and
commissions or foreign exchange profits. The majority of the Corporation's off-
balance-sheet financial markets instruments, not used in managing interest rate
or foreign exchange risk, are hedged with other such instruments. Profits and
losses from instruments used to manage the Corporation's own balance sheet
interest rate or foreign exchange risk are netted against the results of the
item being hedged.

The Corporation enters into foreign exchange contracts and foreign currency
options primarily in connection with its trading activities and to hedge foreign
currency risk. In addition, the Corporation uses foreign exchange contracts to
hedge a portion of its exposure to translation gains and losses from overseas
branches and foreign subsidiaries. Foreign exchange contracts include such
commitments as foreign currency spot, forward, futures, option and swap
contracts. The risks in these transactions result from trading in a volatile
commodity and the ability of the counterparties to deliver under the terms of
the contract. The Corporation actively monitors all transactions and positions
against predetermined limits assigned to business units and types of currency to
ensure reasonable risk taking.

The Corporation enters into interest rate swap agreements in connection with its
trading activities, including offering these agreements to its customers, and to
manage its own interest rate risk. These agreements generally involve the
exchange of fixed and variable rate interest payments between two parties based
on a common notional principal amount and maturity date. The notional value is
the basis for calculating payment streams and is never exchanged. The primary
risks associated with swaps are the exposure to movements in interest rates and
the ability of the counterparties to meet the terms of the contracts.

The Corporation uses futures and forward contracts, including forward rate
agreements, in connection with its trading activities and to manage its own
interest rate exposure. Futures and forward contracts generally are contracts
for the delayed delivery of securities or money market instruments in which the
buyer agrees to purchase and the seller agrees to make a delivery of a specific
instrument at a predetermined date for a specific price. These contracts also
include agreements that are settled between counterparties based on a notional
principal value and do not involve an actual movement of principal. Risks on
both types of agreements stem from market movements in the underlying
securities' values and interest rates and from the ability of the counterparties
to meet the terms of the contracts.

The Corporation purchases and writes (or sells) interest rate options in
connection with its trading and risk management activities, including providing
these products to its customers, and to manage its own interest rate exposure.
Interest rate options are contracts that allow the holder of the option to
receive cash, purchase, sell or enter into a financial instrument at a specified
price within a specified period of time. Options include interest rate caps and
floors, which are types of interest rate protection instruments involving
potential payment between the seller and buyer of an interest differential. In
addition, other types of option products provide the holder with the right to
enter into interest rate swap, cap and floor agreements with the "writer". The
primary risks associated with all types of options are the exposure to current
and expected movements in interest rates and the ability of the counterparties
to meet the terms of the contracts.

The following presents information concerning the off-balance-sheet financial
markets instruments discussed above as of December 31, 1993:

RISK MANAGEMENT PORTFOLIO
TRADING PORTFOLIO AVERAGE
NOTIONAL FAIR NOTIONAL REMAINING FAIR UNRECOGNIZED
(DOLLARS IN MILLIONS) AMOUNT VALUE(1) AMOUNT MATURITY VALUE(1) GAIN(2)

Futures and forwards................................ $15,026 $3,581 3 months $ 2 $ 2
Interest rate swaps................................. 6,732 $ 84 3,463 4 years 47 46
Interest rate options:
Written or sold................................. 5,744 (14) 39 6 months
Purchased....................................... 4,922 25 414 3 years 5 5
Foreign exchange:
Spot and forward contracts...................... 21,592 (10) 556 3 months 13
Options written or sold......................... 613 (22)
Options purchased............................... 691 21
<FN>
(1) Fair value represents the amount at which a given instrument could be
exchanged in an arm's length transaction with a third party as of December
31, 1993. In certain cases, such as the futures and forwards contained in
the trading portfolio, instruments are subject to daily cash settlements; as
such the fair value of these instruments is zero. Instruments in the trading
portfolio are marked to market with changes in fair value recognized as
either trading profits and commissions or foreign exchange trading profits.
Additional information on amounts recognized as trading profits and
commissions and foreign exchange trading profits is included in the
Noninterest Income section on page 36.

(2) Unrecognized gain represents the amount of gain earned on the instruments as
of December 31, 1993 that has not been recognized in the income statement
or, in certain cases, cumulative translation adjustments. The unrecognized
gain for interest rate swaps contained in the risk management portfolio
includes $15 million associated with swaps that were transferred to the
trading portfolio during the year. This $15 million represents the remaining
unamortized amount of the deferred gain that existed as of the date of
transfer to the trading portfolio. The notional and fair values of these
swaps are included in the trading portfolio.

Historically, the Corporation has experienced minimal credit losses associated
with its off-balance-sheet financial markets instruments. Additional information
with respect to the Corporation's off-balance-sheet financial markets
instruments, including its accounting policies, is included in Notes 1, 21 and
28 to the Financial Statements.

CAPITAL MANAGEMENT
At December 31, 1993, the Corporation had $2.9 billion in stockholders' equity,
compared with $2.6 billion at December 31, 1992. The growth in stockholders'
equity from the end of 1992 mainly reflected retention of earnings, the issuance
of $70 million of preferred stock during the year

48
20

and a $42 million increase from the Corporation's adoption of SFAS No. 115 (see
Note 5 to the Financial Statements for further discussion of SFAS No. 115).
These increases were partially offset by the payment of $73 million in dividends
on common and preferred stock.

Regulatory risk-based capital requirements take into account the differing risk
profiles of banking organizations by assigning risk weights to both assets and
the credit equivalent amounts of off-balance-sheet exposures. In addition,
capital is divided into two tiers. Tier 1 capital includes common stockholders'
equity and qualifying preferred stock. Tier 2, or supplementary capital,
includes, subject to certain limitations, limited-life preferred stock,
mandatory convertible securities, subordinated debt and a portion of the reserve
for credit losses. Total capital is defined as the sum of tier 1 and tier 2
capital.

At December 31, 1993, banking organizations were required to meet a minimum
total capital ratio of 8%, with at least one-half being in the form of tier 1
capital. In addition, higher tier 1 and total capital ratios can be imposed on
particular institutions at the discretion of the regulatory agencies. Banking
organizations are also subject to a minimum leverage capital ratio, which is
defined as the ratio of tier 1 capital to adjusted total average assets, of 3%;
however, all but the most highly rated organizations are expected to maintain an
additional cushion of at least 100 to 200 basis points above this minimum.

The following presents the Corporation's regulatory capital position:

REGULATORY CAPITAL

REGULATORY
DECEMBER 31 1993 1992 MINIMUM

(DOLLARS IN MILLIONS)
Risk-based capital ratios:
Tier 1 capital ratio............................................ 7.2% 7.1% 4.00%
Total capital ratio............................................. 12.4% 12.0% 8.00%
Leverage ratio...................................................... 6.8% 6.6% 3.00%(1)
Tier 1 capital...................................................... $ 2,754 $ 2,437
Total capital....................................................... $ 4,725 $ 3,987
Total risk-adjusted assets.......................................... $ 38,179 $34,405
<FN>
(1) Plus an additional cushion of at least 100 to 200 basis points for all but
the most highly rated institutions.

The Corporation has in place a capital planning process, to assist the
Corporation and its banking subsidiaries in maintaining appropriate capital
levels and ratios. In June 1993, the Corporation issued $70 million of preferred
stock and $100 million of subordinated notes and in November 1993, it issued an
additional $350 million of subordinated notes. The Corporation, as a condition
of the Federal Reserve Board's approval of the Multibank merger, committed to
use the proceeds from the June preferred stock and subordinated note issuances
exclusively in addressing any needs in the Corporation's banking subsidiaries.
By December 31, 1993, the Corporation had fulfilled this commitment.

During 1993, the Board of Directors declared quarterly dividends of $.10 per
share on the Corporation's common stock and in January 1994, a quarterly
dividend of $.22 was declared. The payment of dividends on the Corporation's
common stock is determined by the Board of Directors based on the Corporation's
liquidity, asset quality profile, capital adequacy and recent earnings history,
as well as economic conditions and other factors deemed relevant by the Board of
Directors, including applicable government regulations and policies and the
amount of dividends paid to the Corporation by its subsidiaries. On October 7,
1993, a 1991 agreement between the Corporation and the Federal Reserve and the
Division of Banking Supervision and Regulation of the Federal Reserve Board was
terminated. Among other things, this agreement had required regulatory approval
of the declaration and payment of dividends on the Corporation's common stock.

At December 31, 1993, all of the Corporation's banking subsidiaries' capital
ratios met both the minimum regulatory requirements and the capital ratio
aspects of the "well capitalized" category under the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) (see further discussion of FDICIA
on page 50). The "well capitalized" minimum ratios are 6% for tier 1 capital,
10% for total capital and 5% for leverage. The Corporation's banking subsidiary
located in Connecticut, as well as two of the subsidiaries acquired in
connection with the Multibank merger (South Shore Bank and Multibank West)
would, in each case, not currently be considered "well capitalized" under FDICIA
due to an existing agreement or order with their respective bank regulatory
agency. The Connecticut banking subsidiary is subject to a stipulation and
agreement with the Connecticut Banking Commissioner and South Shore Bank is
subject to a memorandum of understanding (MOU) with the FDIC and the
Massachusetts Commissioner of Banks. Multibank West, the resulting bank from the
1991 merger of two of Multibank's banking subsidiaries, is subject to the
conditions of the FDIC's approval order in connection with that merger. The
agreements and approval order with respect to these subsidiaries require that
the subsidiary banks meet and maintain certain specific capital ratios. Each of
these banking subsidiaries is in compliance with the capital ratio aspects of
its respective agreement or approval order. The Corporation expects to merge
South Shore Bank, Multibank West and Mechanics Bank into FNBB during the first
half of 1994. These mergers are subject to regulatory approval and no assurance
can be given that such approval will be obtained. The capital categories of the
Corporation's banking subsidiaries are determined solely for the purpose of
applying FDICIA's provisions and, accordingly, such capital categories may not
constitute an

49
21
- --------------------------------------------------------------------------------
MANAGEMENT'S FINANCIAL REVIEW
- --------------------------------------------------------------------------------
CONTINUED

accurate representation of the overall financial condition or prospects of any
of the Corporation's banking subsidiaries.

In order to support the balance sheet growth of the Corporation's banking
subsidiaries and to assist them in maintaining regulatory capital at desired
levels, the Corporation has made capital contributions, and may make future
capital contributions, to certain of its banking subsidiaries. Such capital
contributions during 1993 consisted of $240 million to FNBB, $17 million to
Connecticut, $12 million to South Shore Bank, $4 million to Vermont, $3 million
to Multibank West and $3 million to Casco. During 1993, Hospital Trust paid $7
million in dividends to the Parent Company. The level of future dividends from
bank subsidiaries is dependent on a number of factors. Such factors include
capital adequacy, net income, liquidity, asset quality and economic conditions.
In addition, bank regulations require the approval of bank regulatory
authorities if dividends declared by bank subsidiaries exceed certain prescribed
limits. Also, under the Connecticut banking subsidiary's regulatory agreement
discussed above, the Connecticut subsidiary would need regulatory approval to
remit a dividend to the Parent Company.

During the first quarter of 1993, the Office of the Comptroller of the Currency
terminated its formal agreements with FNBB, Hospital Trust and Casco. In
addition, an MOU between Vermont and the FDIC was lifted in October 1993 and a
similar agreement between Mechanics Bank and the FDIC was lifted in January
1994. Additional information on dividends and the remaining subsidiary
regulatory agreements can be found in Notes 14 and 25 to the Financial
Statements.

REGULATORY AND ACCOUNTING ISSUES

New Accounting Standards
As discussed previously, the Corporation has adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions," SFAS No. 109,
"Accounting for Income Taxes," and SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," in its 1993 Financial Statements.
Additional information on SFAS Nos. 106, 109 and 115 can be found in Notes 16,
20 and 5 to the Financial Statements, respectively.

In addition, SFAS No. 112, "Employers' Accounting for Postemployment Benefits
Other than Pensions," is required to be adopted beginning in 1994; Financial
Accounting Standards Board (FASB) Interpretation No. 39, "Offsetting of Amounts
Related to Certain Contracts," is also required to be adopted beginning in 1994,
and SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," is
required to be adopted beginning in 1995. Information on SFAS No. 112, FASB
Interpretation No. 39 and SFAS No. 114 can be found in Notes 16, 21 and 6 to the
Financial Statements, respectively.

SECURITIES AND EXCHANGE COMMISSION ADMINISTRATIVE PROCEEDING
As previously announced by the Corporation in its public filings, in January
1994, the Securities and Exchange Commission (SEC) instituted an administrative
proceeding against the Corporation. The administrative proceeding relates to the
SEC's claim that the Corporation's second quarter 1989 Form 10-Q did not
disclose known trends or uncertainties with respect to the Corporation's credit
portfolio and specifically its domestic commercial real estate portfolio. The
Corporation reported a significant loss in the third quarter of 1989, as a
result of adding to its reserve for credit losses, primarily due to
deterioration in the credit quality of the domestic commercial real estate
portfolio.

Management believes that the disclosures made in its second quarter of 1989 Form
10-Q were appropriate and intends to defend this action vigorously. While there
can be no assurance as to the outcome of this matter, the ultimate disposition
will not result in monetary penalties to the Corporation.

FDICIA
FDICIA has provided for expanded regulation of financial institutions. The
applicability of many of its provisions is based upon an institution's capital
category in relation to the five categories established by FDICIA (for which the
banking agencies have set specific capital ratio and other requirements). The
federal banking agencies have issued regulations in a number of areas to
implement FDICIA's provisions and these regulations impose progressively more
restrictive constraints on the operations and management of banks, which are not
at least "adequately capitalized,"as they move into lower capital categories. As
noted on page 49, all of the Corporation's banking subsidiaries have capital
ratios that meet the requirements of the "well capitalized" category under
FDICIA.

Additionally, the regulations issued by the banking agencies under FDICIA, among
other things: establish a risk-based system for deposit insurance premiums;
limit the ability of many banks to use brokered deposits; increase requirements
related to independent audits; restrict investments and activities of
state-chartered banks; set standards for real estate lending; increase lending
restrictions with respect to a bank's executive officers and directors, and
establish standards in a number of areas with respect to safety and soundness.
Certain of these provisions are discussed elsewhere in this report.

The Corporation continues to analyze the effect of, and address its ongoing
compliance with, the various regulations issued under FDICIA. It is anticipated
that FDICIA, and the regulations enacted thereunder, will continue to result in
more limitations on banking activities generally, and increased costs for the
Corporation and the banking industry because of higher FDIC assessments, and
higher costs of compliance, documentation and record keeping.

50
22

SUMMARY

Significant progress was made by the Corporation during 1993:

- 1993 net income, excluding the cumulative effects of accounting changes and
merger and restructuring charges improved 61% over 1992's income before
extraordinary item.

- Loans and leases grew $3.4 billion between December 31, 1992 and December
31, 1993.

- Nonaccrual loans and leases and OREO declined 31% between December 31, 1992
and December 31, 1993.

- Net credit losses declined from $309 million in 1992 to $223 million in
1993.

- The Corporation added nearly $5 billion in assets through its mergers with
Bancorp and Multibank.

The economies of the United States and New England improved modestly in 1993
contributing, in part, to many of the improvements noted above. Management,
however, cannot currently predict to what extent the domestic economic recovery
will affect future periods. In addition, it is uncertain what impact future
changes in the economies in Latin America and other foreign countries where the
Corporation does business will have on future periods. No assurance, therefore,
can be given that the positive trends achieved in 1993 will continue.

51
23

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

The Board of Directors and Stockholders
Bank of Boston Corporation:

We have audited the accompanying consolidated balance sheets of Bank of Boston
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1993.
These financial statements are the responsibility of the 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 as to 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 Bank of Boston
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and cash flows for each of the years in
the three year period ended December 31, 1993 in conformity with generally
accepted accounting principles.

As discussed in Notes 1, 5, 9, 16 and 20 to the financial statements, the
Corporation has adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and changed its method of accounting for purchased mortgage servicing
rights, effective January 1, 1993; and adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," effective December 31, 1993.

Boston, Massachusetts
January 20, 1994

53
24

Bank of Boston Corporation
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------

DECEMBER 31 1993 1992

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
Cash and due from banks (Notes 3 and 4)................................................. $ 2,539,286 $ 1,936,396
Interest bearing deposits in other banks (Note 4)....................................... 991,389 1,307,497
Federal funds sold and securities purchased under agreements to resell.................. 1,454,478 1,187,013
Trading securities...................................................................... 305,775 192,198
Mortgages held for sale................................................................. 1,321,607 922,311
Securities:
Available for sale (fair value of $1,523,736 in 1992) (Notes 4 and 5)................. 1,437,887 1,497,138
Held to maturity (fair value of $1,568,617 in 1993 and $2,754,838 in 1992) (Notes 4
and 5).............................................................................. 1,568,823 2,635,399
Loans and lease financing (net of unearned income of $311,955 in 1993 and $290,139 in
1992)
(Notes 4 and 6)....................................................................... 28,781,974 25,399,332
Reserve for credit losses (Note 7)...................................................... (770,279) (923,120)
------------ -----------
Net loans and lease financing................................................... 28,011,695 24,476,212
Premises and equipment, net............................................................. 522,271 507,059
Due from customers on acceptances....................................................... 391,204 228,524
Accrued interest receivable............................................................. 287,368 287,955
Other real estate owned (Note 6)........................................................ 107,845 169,757
Other assets (Notes 8 and 16)........................................................... 1,648,274 1,967,110
------------ -----------
TOTAL ASSETS............................................................................ $ 40,587,902 $37,314,569
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Domestic offices:
Noninterest bearing................................................................. $ 5,040,028 $ 4,513,995
Interest bearing.................................................................... 17,495,905 19,579,369
Overseas offices:
Noninterest bearing................................................................. 525,620 434,320
Interest bearing.................................................................... 6,552,592 4,573,970
------------ -----------
Total deposits.................................................................. 29,614,145 29,101,654
Funds borrowed (Note 10)................................................................ 4,974,580 2,946,827
Acceptances outstanding................................................................. 391,484 228,626
Accrued expenses and other liabilities.................................................. 723,266 797,895
Notes payable (Note 11)................................................................. 1,972,758 1,686,037
------------ -----------
Total liabilities....................................................................... 37,676,233 34,761,039
------------ -----------
Commitments and contingencies (Notes 2, 21, 23 and 24)
Stockholders' equity (Note 13):
Preferred stock without par value (Note 12):
Authorized shares - 10,000,000
Issued shares - 4,593,941 in 1993 and 4,313,941 in 1992............................. 508,436 438,436
Common stock, par value $2.25 (Notes 11 and 17):
Authorized shares - 200,000,000
Issued shares - 105,801,268 in 1993 and 104,783,039 in 1992
Outstanding shares - 105,801,268 in 1993 and 104,664,290 in 1992.................... 238,053 235,762
Surplus............................................................................... 768,372 749,491
Retained earnings (Notes 14 and 17)................................................... 1,361,960 1,135,647
Net unrealized gain on securities available for sale (Note 5)......................... 42,980 226
Cumulative translation adjustments.................................................... (8,132) (5,182)
Treasury stock, at cost (118,749 shares in 1992)...................................... (850)
------------ -----------
Total stockholders' equity.............................................................. 2,911,669 2,553,530
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............................................. $ 40,587,902 $37,314,569
============ ===========

The accompanying notes are an integral part of these financial statements.

54
25

BANK OF BOSTON CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
- --------------------------------------------------------------------------------

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME
Loans and lease financing, including fees............................... $3,035,050 $3,180,378 $3,343,127
Securities.............................................................. 1,068,555 563,485 446,314
Trading securities...................................................... 10,353 9,154 17,363
Mortgages held for sale................................................. 75,592 57,888 38,710
Federal funds sold and securities purchased under agreements to
resell................................................................ 1,569,654 516,413 120,923
Deposits in other banks................................................. 1,064,717 779,407 488,458
----------- ----------- ----------
Total interest income............................................... 6,823,921 5,106,725 4,454,895
----------- ----------- ----------
INTEREST EXPENSE
Deposits of domestic offices............................................ 629,556 923,609 1,389,258
Deposits of overseas offices............................................ 2,956,469 1,848,264 1,342,301
Funds borrowed.......................................................... 1,605,538 955,412 498,120
Notes payable........................................................... 113,573 73,642 110,432
----------- ----------- ----------
Total interest expense.............................................. 5,305,136 3,800,927 3,340,111
----------- ----------- ----------
Net interest revenue.............................................. 1,518,785 1,305,798 1,114,784
Provision for credit losses (Notes 6 and 7)............................. 70,126 180,567 518,656
----------- ----------- ----------
Net interest revenue after provision for credit losses.............. 1,448,659 1,125,231 596,128
----------- ----------- ----------
NONINTEREST INCOME
Financial service fees.................................................. 349,966 355,076 356,962
Trust and agency fees................................................... 177,648 166,092 157,396
Trading profits and commissions......................................... 23,605 15,779 22,368
Securities gains (Notes 5 and 20)....................................... 32,207 38,987 29,053
Other income (Note 15).................................................. (11,796) 131,640 197,131
----------- ----------- ----------
Total noninterest income............................................ 571,630 707,574 762,910
----------- ----------- ----------
NONINTEREST EXPENSE
Salaries................................................................ 634,581 604,874 571,377
Employee benefits (Note 16)............................................. 136,139 120,818 112,543
Occupancy expense (Note 23)............................................. 127,828 126,488 134,892
Equipment expense....................................................... 96,220 100,825 102,816
Other real estate owned expense (Note 6)................................ 43,809 112,670 112,741
Merger and restructuring expense (Note 18).............................. 85,000 53,623
Other expense (Note 19)................................................. 407,206 408,436 449,949
----------- ----------- ----------
Total noninterest expense........................................... 1,530,783 1,474,111 1,537,941
----------- ----------- ----------
Income (Loss) before income taxes, extraordinary items and cumulative
effect of changes in accounting principles............................ 489,506 358,694 (178,903)
Provision for (Benefit from) income taxes (Note 20)..................... 214,683 152,781 (57,990)
----------- ----------- ----------
Income (Loss) before extraordinary items and cumulative effect of
changes in accounting principles...................................... 274,823 205,913 (120,913)
Extraordinary items:
Recognition of prior year tax benefit carryforwards (Note 20)......... 72,968
Gains from early extinguishment of debt, net of tax (Notes 11 and
20)................................................................. 7,758
----------- ----------- ----------
Income (Loss) before cumulative effect of changes in accounting
principles............................................................ 274,823 278,881 (113,155)
Cumulative effect of changes in accounting principles, net (Notes 9 and
20)................................................................... 24,203
----------- ---------- ----------
NET INCOME (LOSS)................................................. $ 299,026 $ 278,881 $ (113,155)
=========== ========== ==========
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK...................... $ 264,337 $ 259,011 $ (126,360)
=========== ========== ==========
PER COMMON SHARE
Income (Loss) before extraordinary items and cumulative effect of
changes in accounting principles:
Primary............................................................. $ 2.28 $ 1.82 $ (1.42)
Fully diluted....................................................... $ 2.22 $ 1.78 $ (1.42)
Net income (loss):
Primary............................................................. $ 2.51 $ 2.54 $ (1.33)
Fully diluted....................................................... $ 2.44 $ 2.45 $ (1.33)
Cash dividends declared................................................. $ .40 $ .10 $ .10
AVERAGE NUMBER OF COMMON SHARES
Primary............................................................. 105,336 101,977 94,730
Fully diluted....................................................... 110,258 107,157 94,730

The accompanying notes are an integral part of these financial statements.

55
26

BANK OF BOSTON CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------

NET
UNREALIZED
GAIN
(LOSS) CUMULATIVE
TWO YEARS ENDED DECEMBER 31, PREFERRED COMMON RETAINED ON TRANSLATION TREASURY
1993 STOCK STOCK SURPLUS EARNINGS SECURITIES ADJUSTMENTS STOCK TOTAL

(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
BALANCE, JANUARY 1, 1992....... $ 208,436 $ 214,082 $ 613,984 $ 887,108 $(333) $(3,484) $ (877) $1,918,916
Net income -- 1992............. 278,881 278,881
Common stock issued in
connection with:
Public offering -- 8,493,000
shares..................... 19,109 127,462 146,571
Dividend reinvestment and
stock purchase plan --
104,997 shares............. 236 2,043 2,279
Exercise of stock options --
783,227 shares (Note 17)... 1,534 7,494 9,028
Restricted stock grants, net
of forfeitures
-- 181,725 shares.......... 409 3,771 4,180
Change in unearned
compensation related to
restricted stock grants
(Note 17).................. (2,838) (2,838)
Other, principally employee
benefit plans
-- 174,314 shares.......... 392 2,336 27 2,755
Preferred stock issued in
connection with public
offering -- 920,000 shares
(Note 12).................... 230,000 (7,599) 222,401
Cash dividends declared:
Preferred stock (Note 12).... (19,052) (19,052)
Common stock -- $.10 per
share...................... (8,452) (8,452)
Change in net unrealized gains
and losses on marketable
equity securities of
nonbanking subsidiary........ 559 559
Translation adjustments, net of
tax.......................... (1,698) (1,698)
--------- --------- --------- ---------- ------- ------- -------- ----------
BALANCE, DECEMBER 31, 1992..... 438,436 235,762 749,491 1,135,647 226 (5,182) (850) 2,553,530
Net income -- 1993............. 299,026 299,026
Common stock issued in
connection with:
Dividend reinvestment and
stock purchase plan --
286,201 shares............. 644 5,943 31 6,618
Exercise of stock options --
800,524 shares (Note 17)... 1,354 11,293 747 13,394
Restricted stock grants, net
of forfeitures
-- 13,740 shares (Note
17)........................ 31 1,510 (1,871) 72 (258)
Change in unearned
compensation related to
restricted stock grants
(Note 17).................. 1,734 1,734
Other, principally employee
benefit plans
-- 116,223 shares.......... 262 2,540 2,802
Preferred stock issued in
connection with public
offering -- 280,000 shares
(Note 12).................... 70,000 (2,405) 67,595
Cash dividends declared:
Preferred stock (Note 12).... (34,459) (34,459)
Common stock -- $.40 per
share...................... (38,117) (38,117)
Net unrealized gain on
securities available for sale
(Note 5)..................... 42,754 42,754
Translation adjustments, net of
tax.......................... (2,950) (2,950)
--------- --------- --------- ---------- ------- ------- -------- ----------
BALANCE, DECEMBER 31, 1993..... $ 508,436 $ 238,053 $ 768,372 $1,361,960 $42,980 $(8,132) $ 0 $2,911,669
========= ========= ========= ========== ======= ======= ======== ==========

The accompanying notes are an integral part of these financial statements.

56
27

NET
UNREALIZED
GAIN
(LOSS) CUMULATIVE
PREFERRED COMMON RETAINED ON TRANSLATION TREASURY
YEAR ENDED DECEMBER 31, 1991 STOCK STOCK SURPLUS EARNINGS SECURITIES ADJUSTMENTS STOCK TOTAL

(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
BALANCE, JANUARY 1, 1991....... $ 208,436 $ 210,859 $ 606,945 $1,024,102 $(2,807) $(1,005) $ (1,005) $2,045,525
Net loss -- 1991............... (113,155) (113,155)
Common stock issued in
connection with:
Dividend reinvestment and
stock purchase plan --
723,386 shares............. 1,627 2,718 4,345
Exercise of stock options --
20,546 shares (Note 17).... 46 306 352
Restricted stock grants, net
of forfeitures
-- 244,150 shares.......... 546 1,846 2,392
Change in unearned
compensation related to
restricted stock grants
(Note 17).................. (2,245) (2,245)
Other, employee benefit plans
-- 446,163 shares.......... 1,004 2,169 (3) 128 3,298
Cash dividends declared:
Preferred stock (Note 12).... (13,255) (13,255)
Common stock -- $.10 per
share...................... (8,336) (8,336)
Change in net unrealized gains
and losses on marketable
equity securities of
nonbanking subsidiary........ 2,474 2,474
Translation adjustments, net of
tax.......................... (2,479) (2,479)
--------- --------- --------- ---------- ------ ------- -------- ----------
BALANCE, DECEMBER 31, 1991..... $ 208,436 $ 214,082 $ 613,984 $ 887,108 $ (333) $(3,484) $ (877) $1,918,916
========= ========= ========= ========== ====== ======= ======== ==========

The accompanying notes are an integral part of these financial statements.

BANK OF BOSTON CORPORATION
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)...................................................... $ 299,026 $ 278,881 $ (113,155)
Reconciliation of net income (loss) to net cash provided from operating
activities:
Cumulative effect of change in accounting for income taxes........... (77,163)
Cumulative effect of change in accounting for PMSR, net ot tax....... 52,960
Extraordinary income from recognition of prior year tax benefit
carryforwards...................................................... (72,968)
Extraordinary gains from early extinguishment of debt, net of tax.... (7,758)
Provision for credit losses.......................................... 70,126 180,567 518,656
Depreciation and amortization........................................ 175,244 153,238 116,358
Provision for deferred taxes......................................... 118,818 109,934 101,636
Net gains on sales of securities and other assets.................... (68,382) (86,773) (103,715)
Change in trading securities......................................... (113,577) 8,057 (23,309)
Change in mortgages held for sale.................................... (399,296) (441,846) (186,254)
Change in securities available for sale, net of transfers............ 991,827 2,575,266
Net change in interest receivables and payables...................... 3,929 9,110 (9,460)
Other, net........................................................... 400,419 10,022 (121,374)
----------- ---------- ----------
Net cash provided from operating activities........................ 1,453,931 2,723,488 171,625
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided from (used for) interest bearing deposits in other
banks................................................................ 316,108 (118,569) 47,755
Net cash provided from (used for) federal funds sold and securities
purchased under agreements to resell................................. (267,465) (313,792) 371,212
Purchases of securities held to maturity............................... (1,722,476) (1,433,038) (8,295,182)
Sales of securities held to maturity................................... 9,820 8,064 3,356,035
Maturities of securities held to maturity.............................. 1,807,983 999,001 3,570,171
Dispositions of venture capital investments............................ 96,627 71,170 54,558
Loans and lease financing originated by nonbank entities............... (5,418,156) (5,323,498) (5,453,265)
Loans and lease financing collected by nonbank entities................ 4,927,419 5,214,499 5,542,951
Proceeds from sales of loan portfolios by bank subsidiaries............ 171,059 25,313 32,090
Loan portfolios purchased by bank subsidiaries......................... (44,000) (97,375) (698,700)
Net cash provided from (used for) lending activities of bank
subsidiaries......................................................... (3,393,717) (779,825) 1,045,387
Lease financing originated by bank entities............................ (50,429) (7,365) (40,333)
Lease financing collected by bank entities............................. 22,193 17,215 26,535
Proceeds from sales of other real estate owned......................... 141,995 309,508 185,651
Expenditures for premises and equipment................................ (96,785) (73,755) (52,134)
Proceeds from sales of business units, premises and equipment.......... 7,552 11,973 10,036
Other, net............................................................. (177,761) 16,126 572,331
----------- ---------- ----------
Net cash provided from (used for) investing activities............... (3,670,033) (1,474,348) 275,098
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided from (used for) deposits............................. 512,491 (189,229) (2,516,344)
Net cash provided from (used for) funds borrowed....................... 2,027,753 (1,687,196) 2,132,104
Proceeds from issuance of notes payable................................ 519,024 304,605 116,012
Repayments/repurchases of notes payable................................ (230,763) (31,716) (426,592)
Net proceeds from issuance of common stock............................. 19,883 155,936 7,887
Net proceeds from issuance of preferred stock.......................... 67,595 222,401
Dividends paid......................................................... (72,576) (27,504) (28,964)
----------- ---------- ----------
Net cash provided from (used for) financing activities............... 2,843,407 (1,252,703) (715,897)
----------- ---------- ----------
Effect of foreign currency translation on cash......................... (24,415) (46,772) (76,790)
----------- ---------- ----------
Net change in cash and due from banks.................................. 602,890 (50,335) (345,964)
Cash and due from banks at January 1................................... 1,936,396 1,986,731 2,332,695
----------- ---------- ----------
Cash and due from banks at December 31................................. $ 2,539,286 $1,936,396 $1,986,731
=========== ========== ==========

The accompanying notes are an integral part of these financial statements.

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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial reporting and accounting policies of Bank of Boston Corporation
(the Corporation) conform to generally accepted accounting principles. Prior
period financial statements have been restated to give retroactive effect to the
mergers with Society for Savings Bancorp, Inc. (Bancorp) and Multibank Financial
Corp. (Multibank) completed on July 9, 1993 and July 13, 1993, respectively,
which were accounted for as poolings of interests. See Note 2 for additional
information regarding the mergers. In addition, certain prior period amounts
have been reclassified to conform with current financial statement presentation.
The following is a summary of the significant accounting policies.

Basis of Presentation. The consolidated financial statements include the
Corporation and its majority owned subsidiaries, including its major banking
subsidiaries: The First National Bank of Boston (FNBB); South Shore Bank;
Mechanics Bank; Multibank West; Casco Northern Bank, N.A. (Casco); Bank of
Boston Connecticut (Connecticut); Rhode Island Hospital Trust National Bank
(Hospital Trust); and Bank of Vermont (Vermont). Intercompany accounts and
transactions have been eliminated in consolidation. Investments in 20% to
50%-owned companies are accounted for using the equity method. The equity
interest in their earnings is included in other income. The excess of cost over
the assigned value of the net assets of companies acquired is included in other
assets and is amortized on a straight-line basis predominantly over a
twenty-five year period.

Foreign Currency Translation. The Corporation translates the financial
statements of its foreign operations in accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, "Foreign Currency Translation." Under the
provisions of SFAS No. 52, a functional currency is designated for each foreign
unit, generally the currency of the primary economic environment in which it
operates. Where the functional currency is not the U.S. dollar, assets and
liabilities are translated into U.S. dollars at period-end exchange rates, while
income and expenses are translated using average rates for the period. The
resulting translation adjustments and any related hedge gains and losses are
recorded, net of tax, as a separate component of stockholders' equity.

For foreign units operating in a highly inflationary economy, the functional
currency is the U.S. dollar. Their financial statements are translated into U.S.
dollars using period-end exchange rates for monetary assets and liabilities,
exchange rates in effect on the date of acquisition for property and equipment
(and related depreciation) and certain investments, and an average exchange rate
during the period for income and expenses. The resulting translation adjustments
and related hedge gains and losses for these units are recorded in the income
statement as a component of other income.

The Corporation hedges a portion of its exposure to translation gains and losses
in overseas branches and foreign subsidiaries through the purchase of foreign
exchange rate contracts and through investments in fixed assets and certain
securities.

Securities. Effective December 31, 1993, the Corporation adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Additional
information with respect to this change in accounting principle is included in
Note 5. Under this new standard, all debt and equity securities are classified
into one of three categories: securities held to maturity, securities available
for sale or trading securities. Securities held to maturity are debt securities
that the Corporation has the positive intent and ability to hold to maturity.
These securities are reported at cost, adjusted for amortization of premium and
accretion of discount. Securities available for sale are debt securities that
the Corporation may not hold to maturity, and equity securities. Excluded from
this category are securities purchased in connection with the Corporation's
trading activities. Securities available for sale include securities which are
purchased in connection with the Corporation's asset/liability risk management
strategy and may be sold in response to changes in interest rates, resultant
prepayment risk and other related factors; securities held in connection with
the Corporation's venture capital and mezzanine financing business, and other
securities that are intended to be held for indefinite periods of time, but
which may not be held to maturity. Within the available for sale category,
equity securities that have a readily determinable fair value and debt
securities are reported at fair value, with unrealized gains and losses,
generally computed on a specific identified cost basis, recorded net of tax, as
a separate component of stockholders' equity. Securities that are not traded on
established exchanges are reported at cost. Prior to the adoption of SFAS No.
115, securities available for sale and marketable equity securities not
designated as available for sale were reported at the lower of aggregate cost or
fair value. There were no valuation adjustments with respect to any period under
the prior policy. If a security available for sale or a security held to
maturity has experienced a decline in value that is other than temporary, it is
written down to its estimated fair value through a charge to current period
income. Realized gains and losses are generally computed on a specific
identified cost basis and are included in current period income. Trading
securities include securities purchased in connection with the Corporation's
trading activities and as such are expected to be sold in the near term. The
Corporation reports trading securities at fair value; realized and unrealized
gains and losses on trading securities are recorded currently in trading profits
and commissions, a component of noninterest income. Obligations to deliver
securities not yet purchased are reported as funds borrowed.

Foreign Exchange Trading. Foreign exchange trading positions, including foreign
currency spot, forward, future, option and cross-currency interest rate swap
positions, are valued at current market rates. Net foreign exchange trading
gains or losses are recorded in the income statement as a component of other
income.

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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

Interest Rate Contracts. Futures and forward contracts, including future rate
agreements, and interest rate swap agreements entered into in connection with
trading activities, are reported at fair value, with gains and losses recognized
currently in trading profits and commissions. Gains and losses on futures and
forward contracts used to manage interest rate exposure are deferred and
amortized over the period being managed as a component of interest income or
expense. Income or expense on interest rate swap agreements used to manage
interest rate exposure is accrued over the life of the agreement as an
adjustment to interest income or expense.

Options purchased and written in connection with trading activities are reported
at fair value, with gains and losses recognized currently in trading profits and
commissions. Gains and losses on agreements used to manage interest rate
exposure are amortized over the life of the agreement as an adjustment to
interest income or expense.

Loans and Lease Financing. Loans are reported at their principal outstanding,
net of charge-offs and unearned income, if any. Mortgages held for sale are
reported at the lower of aggregate cost or fair value. Loans include in-
substance repossessions (ISRs). As discussed more fully in Note 6, ISRs were
previously classified as other real estate owned.

Interest income on loans is accrued as earned. Unearned income on loans and
leases is recognized on a basis approximating a level rate of return over the
term of the loan. Loan origination fees and costs are accounted for in
accordance with SFAS No. 91, "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases," which requires the deferral of these fees and costs and subsequent
amortization to income over the life of the related credit or facility. Fees
that adjust the yield on the underlying credit are included in interest income
on loans and lease financing. Fees for credit related services are included in
financial service fees, a component of noninterest income.

Lease financing receivables, including leveraged leases, are reported at the
aggregate of lease payments receivable and the estimated residual values, net of
unearned and deferred income, including unamortized investment credits.
Leveraged leases are reported net of nonrecourse debt. Unearned income is
recognized in income to yield a level rate of return on the net investment in
the leases.

The Corporation places loans and leases on nonaccrual status when any portion of
the principal or interest is ninety days past due, unless it is well secured and
in the process of collection, or earlier when concern exists as to the ultimate
collectibility of principal or interest. Whenever a loan or lease is placed on
nonaccrual status, all other credit exposures to the same borrower are also
placed on nonaccrual status, except when it can be clearly demonstrated that
such credit exposures are well secured, fully performing and insulated from the
weakness surrounding the nonaccrual credit to which they relate. When loans or
leases are placed on nonaccrual status, the related interest receivable is
reversed against interest income of the current period. Interest payments
received on nonaccrual loans and leases are applied as a reduction of the
principal balance when concern exists as to the ultimate collection of
principal; otherwise such payments are recognized as interest income. Loans and
leases are removed from nonaccrual status when they become current as to both
principal and interest and concern no longer exists as to the collectibility of
principal or interest.

The Corporation may renegotiate the contractual terms of a loan because of a
deterioration in the financial condition of the borrower. The carrying value of
a renegotiated loan is reduced by the fair value of any asset or equity interest
received, and by the extent, if any, that future cash receipts required under
the new terms do not equal the loan balance at the time of renegotiation.
Renegotiated loans performing in accordance with their new terms are not
reported as nonaccrual loans unless concern exists as to the ultimate collection
of principal or interest. Interest, if any, is recognized in income to yield a
level rate of return over the life of the renegotiated loan.

Reserve for Credit Losses and Provision for Credit Losses. The reserve for
credit losses is available for future charge-offs of extensions of credit. The
reserve is increased by the provision for credit losses and by recoveries of
items previously charged off, and is decreased as credits are charged off. A
charge-off occurs once a probability of loss has been determined, with
consideration given to such factors as the customer's financial condition,
underlying collateral and guarantees.

The provision for credit losses is based upon management's estimate of the
amount necessary to maintain the reserve at an adequate level, considering
evaluations of individual credits and concentrations of credit risk, net losses
charged to the reserve, changes in quality of the credit portfolio, levels of
nonaccrual loans and leases, current economic conditions, cross-border risks,
changes in the size and character of the credit risks and other pertinent
factors.

Other Real Estate Owned. Other real estate owned (OREO) includes properties on
which the Corporation has foreclosed and taken title. OREO is reported at the
lower of the carrying value of the loan or the fair value of the property
obtained, less estimated selling costs. The excess, if any, of the loan over the
fair value of the property at the time of transfer from loans to OREO is charged
to the reserve for credit losses. Subsequent declines in the value of the
property and net operating results of the property are recorded in noninterest
expense.

Purchased and Excess Mortgage Servicing Assets. Purchased mortgage servicing
rights (PMSR) represent the cost of purchasing the right to service mortgage
loans originated by others. Excess mortgage servicing receivables (EMSR)
represent the present value of the servicing fee income retained when mortgage
loans are sold in excess of a normal servicing fee rate. PMSR and EMSR are
reported as assets and are amortized as reductions of servicing fee income, a
component of noninterest income, over the estimated servicing period in
proportion to the estimated future net cash flows from the loans serviced.

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Remaining PMSR asset balances are evaluated for impairment by determining their
estimated recoverable amount through applying the discount rate in effect at the
time the servicing portfolios were purchased to the estimated future net cash
flows from servicing the underlying mortgages. The carrying value is written
down for any impairment; such writedowns are recorded as reductions of servicing
fee income. Prior to 1993, this valuation was performed on an undiscounted
basis. Note 9 includes additional information with respect to this change in
accounting principle. EMSR is also evaluated for impairment based on estimated
future cash flows on a discounted basis.

Premises and Equipment. Premises and equipment are reported at cost less
accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the lesser of the estimated life of the
improvement or the term of the lease.

Precious Metals. The Corporation engages in various precious metal activities
including sales and consignment of precious metals to commercial customers and
investors, arbitrage activities and trading of precious metals. Substantially
all precious metal positions resulting from the commercial business and
arbitrage activities are hedged with futures and forward contracts. Such
precious metal positions are reported at cost and the difference between the
fixed futures or forward contract price and cost is amortized into precious
metal income, a component of nontinterest income, over the life of the contract.
Unhedged positions are valued at fair value with gains and losses recorded in
precious metal income. Fees received in connection with precious metal
activities are recorded in precious metal income as earned. Precious metal
assets, including receivables from the commercial business, are recorded in
other assets.

Income Taxes. The Corporation accounts for income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes," which was prospectively adopted
effective January 1, 1993, and, in connection therewith, records certain items
of income and expense in different periods for financial reporting than for
income tax reporting purposes. Note 20 includes additional information with
respect to the adoption of this new accounting standard. Under this new
standard, current tax liabilities or assets are recognized, through charges or
credits to the current tax provision, for the estimated taxes payable or
refundable for the current year. Net deferred tax liabilities or assets are
recognized, through charges or credits to the deferred tax provision, for the
estimated future tax effects, based on enacted tax rates, attributable to
temporary differences and tax benefit carryforwards. Deferred tax liabilities
are recognized for temporary differences that will result in amounts taxable in
the future and deferred tax assets are recognized for temporary differences and
tax benefit carryforwards that will result in amounts deductible or creditable
in the future. A deferred tax valuation reserve is established if it is more
likely than not that all or a portion of the Corporation's deferred tax assets
will not be realized. Changes in the deferred tax valuation reserve are
recognized through charges or credits to the deferred tax provision.

For financial reporting purposes, investment tax credits received in connection
with lease financing are recognized as lease income over the investment life of
the related asset.

Per Share Calculations. Primary net income per common share is computed by
dividing net income, reduced by dividends on preferred stock, by the weighted
average number of common shares outstanding for each period presented.

For fully diluted net income per common share, net income is reduced by
preferred stock dividends and increased by the interest, net of income tax
benefit, recorded on the Corporation's convertible debentures. Such adjusted net
income is divided by the weighted average number of common shares outstanding
for each period plus the shares representing the dilutive effect of stock
options outstanding and the shares that would result from conversion of the
Corporation's convertible debentures. The effect of stock options and
convertible debentures is excluded from the computation of fully diluted net
income per common share in periods in which their effect would be anti-dilutive.

Cash dividends declared per common share for all periods presented represent the
historical cash dividends of the Corporation.

2 MERGERS AND ACQUISITIONS
On July 9, 1993 and July 13, 1993, respectively, the Corporation completed its
mergers with Bancorp, a $2.4 billion registered bank holding company based in
Hartford, Connecticut, and Multibank, a $2.4 billion registered bank holding
company based in Dedham, Massachusetts. In connection with the merger with
Bancorp, the Corporation issued 9.6 million shares of its common stock for all
of the outstanding shares of Bancorp common stock by exchanging .80 of a share
of its common stock for each outstanding Bancorp share. In connection with the
merger with Multibank, the Corporation issued 10.4 million shares of its common
stock for all of the outstanding shares of Multibank common stock by exchanging
1.125 shares of its common stock for each outstanding Multibank share. These
mergers were accounted for as poolings of interests and as such are reflected in
the consolidated financial statements as though the Corporation, Bancorp and
Multibank had been combined as of the beginning of the earliest period
presented. As a condition of the approval of the Corporation's merger with
Multibank by the Board of Governors of the Federal Reserve System (the Federal
Reserve Board), in June 1993, the Corporation raised regulatory capital of
approximately $170 million, comprised of $70 million of preferred stock and $100
million of subordinated debt. This regulatory capital was required to be
maintained exclusively for use in addressing any needs in the Corporation's
banking subsidiaries. By December 31, 1993, the Corporation had utilized this
capital accordingly. Notes 11 and 12 provide additional information concerning
this preferred stock and subordinated debt.

The following table sets forth the results of operations of Bancorp, Multibank
and the Corporation for the six months ended June 30, 1993. These six month
results are included

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in the results of operations for the year ended December 31, 1993, presented in
the accompanying consolidated statement of income. The combined amounts reflect
adjustments to conform Bancorp's accounting policy for postretirement benefits
under SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions," to that adopted by the Corporation and to eliminate unamortized
premium on loans purchased by a banking subsidiary of the Corporation from
Bancorp.

SIX MONTHS ENDED JUNE 30, 1993
(IN MILLIONS) BANCORP MULTIBANK CORPORATION COMBINED

Net interest revenue...... $62.4 $53.4 $598.2 $714.8
Noninterest income........ $14.2 $20.9 $270.2 $305.3
Net income................ $ 8.0 $ 9.5 $132.9 $155.1

The following table sets forth reconciliations of revenue and net income
previously reported by the Corporation with the combined amounts presented in
the accompanying consolidated statements of income for the years ended December
31, 1992 and 1991. The combined amounts for the year ended December 31, 1992
reflect an adjustment to eliminate the effect of the purchase of loans by a
banking subsidiary of the Corporation from Bancorp during that year.

YEAR ENDED DECEMBER 31, 1992
(IN MILLIONS) BANCORP MULTIBANK CORPORATION COMBINED

Net interest revenue...... $107.7 $106.4 $1,087.4 $1,305.8
Noninterest income........ $ 33.3 $ 35.7 $ 640.3 $ 707.6
Net income................ $ 9.7 $ 4.6 $ 263.1 $ 278.9

YEAR ENDED DECEMBER 31, 1991
(IN MILLIONS) BANCORP MULTIBANK CORPORATION COMBINED
Net interest revenue...... $104.7 $103.5 $906.2 $1,114.8
Noninterest income........ $ 53.9 $ 39.3 $676.9 $ 762.9
Net income (loss)......... $(64.5) $(15.2) $(26.6) $(113.1)

On September 21, 1993, the Corporation announced that it had reached a
definitive agreement to acquire BankWorcester Corporation (BankWorcester) for
$34 for each share of BankWorcester common stock outstanding, subject to an
upward adjustment if the acquisition is not consummated on or before June 30,
1994. It is expected that the total purchase price will approximate $247
million. BankWorcester, the holding company for Worcester County Institution for
Savings, had approximately $1.5 billion of assets, approximately $1.3 billion of
deposits and 28 branches at December 31, 1993. The acquisition has been approved
by the boards of directors of both companies and by BankWorcester's
stockholders, and remains subject to the receipt of required regulatory
approvals. The acquisition will be accounted for as a purchase.

3 STATEMENT OF CASH FLOWS

For purposes of the Statement of Cash Flows, cash and due from banks are
considered to be cash equivalents. Foreign currency cash flows are converted to
U.S. dollars using average rates for the period. During 1993, 1992 and 1991, the
Corporation paid interest of approximately $5,302 million, $3,815 million and
$3,384 million, respectively. The Corporation paid income taxes of approximately
$56 million in 1993, $49 million in 1992, and received net income tax refunds of
approximately $94 million in 1991. During 1993, 1992 and 1991, the Corporation
transferred approximately $132 million, $249 million and $416 million,
respectively, to OREO from loans. Loans made to facilitate sales of OREO
properties totaled approximately $9 million, $51 million and $45 million in
1993, 1992, and 1991, respectively. Noncash transactions during 1993 also
included transfers of approximately $861 million of securities held to maturity
to securities available for sale. These transfers resulted from the
Corporation's mergers with Bancorp and Multibank, as well as the Corporation's
adoption of SFAS No. 115, which is described more fully in Note 5. During 1992,
approximately $66 million of securities held to maturity were transferred to
securities available for sale.

4 RESERVE REQUIREMENTS, RESTRICTED
DEPOSITS AND PLEDGED ASSETS

At December 31, 1993 and 1992, cash and due from banks included $1,392 million
and $662 million, respectively, to satisfy the reserve requirements of the
Federal Reserve and various foreign central banks. Interest bearing deposits in
other banks held to satisfy foreign central bank reserve requirements totaled
$39 million and $12 million at December 31, 1993 and 1992, respectively.

At December 31, 1993 and 1992, securities, loans and other assets with a book
value of $3,757 million and $5,467 million, respectively, were pledged to
collateralize repurchase agreements, public deposits and other items.

5 SECURITIES

A summary comparison of securities held to maturity by type is as follows:

GROSS GROSS
UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 COST GAINS LOSSES VALUE

(IN THOUSANDS)
U.S. Treasury.... $ 317,396 $ 276 $ 73 $ 317,599
U.S. government
agencies and
corporations --
Mortgage-backed
securities... 1,045,574 131 1,679 1,044,026
States and
political
subdivisions... 29,480 1,049 17 30,512
Foreign debt
securities..... 108,503 285 178 108,610
Other debt
securities..... 65 65
Other equity
securities..... 67,805 67,805
---------- ------ ------ ----------
$1,568,823 $1,741 $1,947 $1,568,617
========== ====== ====== ==========

GROSS GROSS
UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1992 COST GAINS LOSSES VALUE

(IN THOUSANDS)
U.S. Treasury... $ 285,177 $ 365 $ 113 $ 285,429
U.S. government
agencies and
corporations
--
Mortgage-backed
securities.... 1,774,677 27,796 1,151 1,801,322
States and
political
subdivisions... 51,104 1,385 6 52,483
Foreign debt
securities.... 125,244 116 866 124,494
Other debt
securities.... 175,074 17,518 192,592
Marketable
equity
securities.... 31,035 14,555 591 44,999
Other equity
securities.... 192,862 60,657 253,519
---------- -------- ------ ----------
$2,635,173 $122,392 $2,727 $2,754,838
========== ======== ====== ==========

Other equity securities reported in securities held to maturity at December 31,
1993 represent securities, such as Federal Reserve Bank and Federal Home Loan
Bank stock, which are not traded on established exchanges and have only
redemption capabilities. Fair values for such securities are considered to
approximate cost.

A summary comparison of securities available for sale by type is as follows:

GROSS GROSS
UNREALIZED UNREALIZED CARRYING
DECEMBER 31, 1993 COST GAINS LOSSES VALUE

(IN THOUSANDS)
U.S. Treasury.... $ 108,017 $ 1,584 $ 109,601
U.S. government
agencies and
corporations --
Mortgage-backed
securities... 493,142 5,804 $ 774 498,172
States and
political
subdivisions... 478 4 474
Foreign debt
securities..... 441,038 49,622 594 490,066
Other debt
securities..... 149,585 149,585
Marketable equity
securities..... 57,959 19,989 3,618 74,330
Other equity
securities..... 115,659 115,659
---------- ------- ------ ----------
$1,365,878 $76,999 $4,990 $1,437,887
========== ======= ====== ==========

CARRYING GROSS GROSS
VALUE UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1992 (COST) GAINS LOSSES VALUE

(IN THOUSANDS)
U.S. Treasury...... $ 525,702 $3,546 $ 522,156
U.S. government
agencies and
corporations --
Mortgage-backed
securities........ 568,553 $16,558 1,100 584,011
Foreign debt
securities........ 344,218 15,585 565 359,238
Other debt
securities........ 49,093 106 49,199
Other equity
securities........ 9,572 60 500 9,132
---------- ------- ------ ----------
$1,497,138 $32,309 $5,711 $1,523,736
========== ======= ====== ==========

On December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." In connection with the
adoption of this new standard, certain debt and equity securities, principally
venture capital and mezzanine securities with a cost and related unrealized gain
of $309 million and $16 million, respectively, were transferred from securities
held to maturity to securities available for sale. In addition, in accordance
with the new standard, all debt securities, and those equity securities with a
readily determinable fair value, were reported at fair value. The excess of fair
value over cost, which amounted to $42 million, net of tax, was reported as a
separate component of stockholders' equity. The remaining equity securities,
with a cost of $116 million, which are not traded on established exchanges, were
reported at cost. However, in accordance with SFAS No. 107, "Disclosures About
Fair Values of Financial Instruments," fair values were estimated for these
securities. These fair values exceeded cost by $45 million and $58 million at
December 31, 1993 and 1992, respectively. Further information with respect to
the fair value of these securities is included in Note 28.

A summary of debt securities held to maturity by contractual maturity is as
follows:

1993 1992
DECEMBER 31 FAIR FAIR
(IN MILLIONS) COST VALUE COST VALUE

Within one
year.......... $ 397.6 $ 398.4 $ 422.4 $ 423.8
After one but
within five
years......... 167.8 167.9 328.7 342.6
After five but
within ten
years......... 92.9 93.8 377.8 389.8
After ten
years......... 842.7 840.7 1,282.4 1,300.1
-------- -------- -------- --------
$1,501.0 $1,500.8 $2,411.3 $2,456.3
======== ======== ======== ========

A summary of debt securities available for sale by contractual maturity is as
follows:

1993 CARRYING 1992
DECEMBER 31 CARRYING VALUE FAIR
(IN MILLIONS) COST VALUE (COST) VALUE

Within one $ 369.4 $ 272.1
year.......... $ 362.6 $ 273.9
After one but 351.9 678.4
within five
years......... 317.0 684.6
After five but 114.1 119.9
within ten
years......... 105.0 127.9
After ten 412.5 417.2
years......... 407.7 428.2
-------- -------- -------- --------
$1,192.3 $1,247.9 $1,487.6 $1,514.6
======== ======== ======== ========

Certain securities, such as mortgage-backed securities, may not become due at a
single maturity date. Such securities have been classified within the category
that encompasses the due dates for the majority of the instrument.

Included in 1993's securities gains were gross gains of $39 million and gross
losses of $.7 million related to the sale of debt securities. Total proceeds
from such sales amounted to $4,247 million. For 1992, securities gains included
gross gains of $51 million and gross losses of $16 million related to securities
sales. Total proceeds from securities sales in 1992 amounted to $5,675 million.
For 1991, securities gains included gross gains of $30 million and gross losses
of $2.8 million related to securities sales. Total

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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

proceeds from securities sales in 1991 amounted to $3,159 million.

6 LOANS AND LEASE FINANCING

The following are the details of loan and lease financing balances:

DECEMBER 31 1993 1992

(IN THOUSANDS)
United States Operations:
Commercial, industrial and
financial.......................... $ 11,991,440 $ 10,328,473
Real estate:
Secured by 1-4 family residential
properties....................... 4,159,069 3,630,181
Construction....................... 617,426 854,395
Other commercial................... 3,123,024 3,202,114
Loans to individuals................. 1,609,566 1,436,451
Lease financing...................... 1,263,267 1,213,851
Unearned income...................... (203,598) (205,394)
------------- ------------
22,560,194 20,460,071
------------- ------------
International Operations:
Commercial and industrial............ 4,650,227 3,645,799
Banks and other financial
institutions. . 602,287 385,054
Governments and official
institutions....................... 22,069 53,474
Lease financing...................... 264,597 218,442
All other............................ 790,957 721,237
Unearned income...................... (108,357) (84,745)
------------- ------------
6,221,780 4,939,261
------------- ------------
$ 28,781,974 $ 25,399,332
============= ============

In 1993, in response to guidance issued by banking regulators, the Corporation
reclassified loans which met the definition of ISRs from OREO to loans. In
addition, valuation adjustments to write down the loans to the fair value of the
underlying collateral are treated as credit losses and charged to the reserve
for credit losses rather than OREO expense. All prior periods have been
reclassified for comparative purposes.

The application of this treatment resulted in $189 million of ISRs, previously
classified as OREO, being classified as other commercial real estate loans, and
reported as nonaccrual loans, at December 31, 1992. In addition, valuation
adjustments related to ISRs amounting to $37 million and $54 million for the
years ended December 31, 1992 and 1991, respectively, which had previously been
reported as OREO expense, have been reclassified to the provision for credit
losses, with corresponding amounts recorded as credit losses. These
reclassifications had no effect on net income or the ending balance of the
reserve for credit losses for any period.

Renegotiated loans that are performing in accordance with their new terms are
classified as accruing loans. Such loans amounted to $225 million and $401
million at December 31, 1993 and 1992, respectively. The average yield on these
loans was approximately 8% at December 31, 1993 and 1992. At December 31, 1993,
there were no material commitments to lend additional funds to customers whose
loans have been renegotiated. For the years ended December 31, 1993 and 1992,
interest income that would have been recognized if the loans had been current at
their original contractual rates amounted to $21 million and $37 million,
respectively, while the amount recognized as interest income in the same periods
amounted to $18 million and $21 million, respectively. In connection with the
restructuring of loans, the Corporation may also obtain equity interests in the
borrower. When the Corporation's equity interest exceeds twenty percent of the
company, the fair value of the Corporation's investment in and loans to the
borrower is transferred to other assets and accounted for as an investment. Such
equity interests amounted to $41 million at December 31, 1993 and $30 million at
December 31, 1992.

In May 1993, SFAS No. 114, "Accounting by Creditors for Impairment of a Loan,"
was issued. This standard requires that impaired loans, including loans
restructured in a troubled debt restructuring involving a modification of terms,
be evaluated based on the present value of expected future cash flows discounted
at the loan's effective interest rate or, if the loan is collateral dependent,
based on the fair value of the collateral. This standard is effective for fiscal
years beginning after December 15, 1994. The Corporation is currently evaluating
this new standard, which will be adopted prospectively, and has not yet
determined its potential effect.

7 RESERVE FOR CREDIT LOSSES

An analysis of changes in the reserve for credit losses is as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Balance, January 1......... $ 923,120 $1,051,209 $1,022,625
Provision.................. 70,126 180,567 518,656
Credit losses.............. (273,101) (412,036) (597,240)
Recoveries................. 50,134 103,380 107,168
---------- ---------- ----------
Net credit losses.......... (222,967) (308,656) (490,072)
---------- ---------- ----------
Balance, December 31....... $ 770,279 $ 923,120 $1,051,209
========== ========== ==========

8 OTHER ASSETS

Other assets consisted of the following:

DECEMBER 31 1993 1992

(IN THOUSANDS)
Accounts receivable..................... $ 445,394 $ 744,228
Purchased and excess mortgage servicing
assets................................. 272,776 318,517
Prepaid pension cost.................... 173,659 168,482
Excess of cost over assigned value of
net assets acquired.................... 127,383 139,636
Precious metal assets................... 151,078 110,015
Investments in limited partnerships..... 123,369 91,219
Equity investments in affiliates........ 76,698 74,382
Refundable income taxes................. 42,739 44,970
Other prepaid expenses.................. 33,474 37,716
Equity investments from loan
restructurings......................... 41,369 30,256
All other............................... 160,335 207,689
------------ -----------
$ 1,648,274 $ 1,967,110
============ ===========

9 CHANGE IN ACCOUNTING FOR PURCHASED MORTGAGE SERVICING RIGHTS

Effective January 1, 1993, the Corporation elected to change its method of
accounting for PMSR to conform its financial reporting to regulatory accounting
rules adopted by the banking regulators in the first quarter of 1993. Under
these new rules, the carrying value of PMSR is recorded at the lesser of
amortized cost or the estimated aggregate recoverable amount determined by
applying the discount rate in effect at the time the servicing portfolios were
purchased to the estimated future net cash flows from servicing the underlying
mortgages. Prior to 1993, this valuation was performed on an undiscounted basis.

The cumulative effect to January 1, 1993 of adopting this change in accounting
principle was a decrease in income of $53 million (net of taxes of $32 million),
or $.50 per common share on a primary basis and $.48 per common share on a fully
diluted basis. If this new accounting method had been applied during 1992,
income before extraordinary items would have been reduced by approximately $19
million, or $.19 per common share on a primary basis and $.18 per common share
on a fully diluted basis. Determination of the effect of retroactive application
of the new accounting method during 1991 on results of that period was not
practicable.

10 FUNDS BORROWED

Funds borrowed consisted of the following:

DECEMBER 31 1993 1992

(IN THOUSANDS)
Federal funds purchased................. $ 417,107 $ 468,138
Term federal funds purchased............ 2,150,000 280,000
Securities sold under agreements to
repurchase............................. 798,842 1,121,655
Short-term bank notes................... 350,000
Demand notes issued to the U.S.
Treasury............................... 117,359 106,253
Federal Home Loan Bank borrowings....... 80,000 205,000
All other............................... 1,061,272 765,781
------------ -----------
$ 4,974,580 $ 2,946,827
============ ===========

All other funds borrowed include long-term borrowings of $327 million at
December 31, 1993 and $395 million at December 31, 1992. At December 31, 1993
and 1992, the Corporation had availability under various borrowing arrangements
of $1,949 million and $763 million, respectively.

11 NOTES PAYABLE

Notes payable consisted of the following:

DECEMBER 31 1993 1992

(IN THOUSANDS)
PARENT COMPANY
Floating rate subordinated equity
commitment notes, due February
1996 (issued February 1984)..... $ 87,960
Subordinated equity contract
notes, due August 1997 (issued
August 1987).................... $ 129,255 129,255
Floating rate subordinated equity
commitment notes, 3.55% at
December 31, 1993, due August
1998 (issued August 1986)....... 106,400 106,400
Floating rate notes, 6.00% at
December 31, 1993, due September
2000 (issued September 1985).... 178,500 178,500
Subordinated notes, due September
2000 (issued August 1988)....... 150,000 150,000
Floating rate subordinated notes,
5.00% at December 31, 1993, due
February 2001 (issued February
1986)........................... 186,100 186,100
Subordinated notes, $100 million
principal, due July 2003 (issued
June 1993)...................... 99,873
Subordinated notes, $350 million
principal, due December 2005
(issued November 1993).......... 348,723
7.75% convertible subordinated
debentures, due June 2011
(issued January 1986)........... 94,396 94,660
---------- ----------
1,293,247 932,875
---------- ----------
SUBSIDIARIES
Medium term notes, weighted
average effective interest rate
of 8.88% at December 31, 1993,
due 1994........................ 108,300 113,137
8.375% subordinated capital notes,
due December 15, 1998........... 15,264 15,264
8.375% subordinated notes, $200
million principal, due December
2002 (issued December 1992)..... 198,835 198,705
Other notes, weighted average
effective interest rate of 8.26%
at December 31, 1993, due 1994
through 2001.................... 357,112 426,056
---------- ----------
679,511 753,162
---------- ----------
$1,972,758 $1,686,037
========== ==========

Notes payable are unsecured obligations of the Corporation or its subsidiaries.
Certain of the indentures under which these notes were issued prohibit the
Corporation from making any payment or other distribution in the stock of FNBB
unless FNBB unconditionally guarantees payment of principal and interest on the
notes.

The Corporation's equity commitment and equity contract notes were designed to
qualify as capital under prior regulatory capital rules as a result of the
Corporation's commitment under the terms of the agreements to issue equity
securities equal to the principal amount of the notes on or before their
maturity. These notes continue to qualify as a component of total capital under
the current risk-based capital regulations. The Corporation's equity contract
notes bear interest at 9.50%. At the time of the issuance of these notes, the
Corporation entered into an interest rate swap agreement, which effectively
converted this fixed rate

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36

obligation into a floating rate obligation. Such interest rate was 3.58% at
December 31, 1993. In December 1993, the Corporation redeemed its equity
commitment notes due February 1996 at the principal amount plus accrued
interest.

The Corporation's subordinated notes due September 2000 are redeemable at par in
1995 and bear interest at 10.30%. When the notes were issued, the Corporation
entered into an interest rate swap agreement which, for the first seven years,
effectively converted the fixed rate obligation to a floating rate obligation.
At December 31, 1993, such interest rate was 3.85%.

The 7.75% convertible subordinated debentures are convertible at the option of
the holder into 4,030,586 shares of common stock of the Corporation at any time
on or before June 15, 2011, at a conversion price of $23.42 per share, subject
to certain adjustments. The debentures are redeemable at the option of the
Corporation, in whole or in part, at any time, at prices ranging from 101.55% in
1994 to 100% in 1995 of the principal amount plus accrued interest.

In June 1993, the Corporation issued $100 million of 6 7/8% Subordinated Notes,
due 2003. The subordinated notes are not subject to redemption prior to
maturity. The subordinated notes were issued by the Corporation as part of its
commitment to the Federal Reserve Board to raise regulatory capital in
connection with its merger with Multibank, as described in Note 2. When the
notes were issued, the Corporation entered into an interest rate swap agreement
which effectively converted the fixed rate obligation to a floating rate
obligation. At December 31, 1993, such interest rate was 4.14%.

In November 1993, the Corporation issued $350 million of 6 5/8% Subordinated
Notes, due 2005. The subordinated notes are not subject to redemption prior to
maturity. When the notes were issued, the Corporation entered into an interest
rate swap agreement which effectively converted the fixed rate obligation to a
floating rate obligation. At December 31, 1993, such interest rate was 3.87%.

Included in other notes at December 31, 1993 and 1992 were $266 million and $315
million, respectively, of senior notes issued by a nonbanking subsidiary of the
Corporation. The notes, due in installments through 1998, bear interest at rates
ranging from 6.67% to 9.50%. The notes can be prepaid at various dates at the
option of the issuer, with the payment of predetermined prepayment penalties.

During 1991, the Corporation repurchased and retired $15 million of its notes
payable at a gain. The gain, which amounted to $7.8 million or $.08 per common
share, net of taxes of $.8 million, is presented as an extraordinary item in the
consolidated statement of income.

Notes payable maturing during the next five years amount to: $133 million in
1994, $72 million in 1995, $39 million in 1996, $258 million in 1997 and $214
million in 1998.

In January 1994, the Corporation issued $300 million of 6 5/8% Subordinated
Notes, due 2004. When the notes were issued, the Corporation entered into an
interest rate swap agreement that effectively converted the fixed rate
obligation to a floating rate obligation. The subordinated notes are not subject
to redemption prior to maturity. In February 1994, the Corporation notified the
holders of its floating rate notes due September 2000 that it would redeem those
notes in March 1994 at the principal amount plus accrued interest.

12 PREFERRED STOCK

On August 13, 1992, the Corporation sold 9.2 million depositary shares. Each
depositary share represents a one-tenth interest in a share of the Corporation's
8.60% Cumulative Preferred Stock, Series E, with a liquidation preference of
$250 per preferred share (Series E Preferred Stock). In June 1993, the
Corporation sold 2.8 million depositary shares. Each depositary share represents
a one-tenth interest in a share of the Corporation's 7 7/8% Cumulative Preferred
Stock, Series F, with a liquidation preference of $250 per preferred share
(Series F Preferred Stock). Each depositary share entitles the holder to a
proportional interest in all rights and preferences of a share of Series E or
Series F Preferred Stock, including dividend, voting, redemption and liquidation
rights. Both the Series E and Series F Preferred Stock have no preemptive or
general voting rights. The Series E and Series F Preferred Stock will not be
redeemable prior to September 15, 1997 and July 15, 1998, respectively. On and
after those dates, the Series E and Series F Preferred Stock will be redeemable
at the option of the Corporation, in whole or in part, at the liquidation
preference of $250 per share (equivalent to $25 per depositary share), plus
dividends accrued and unpaid at the respective redemption date. The depositary
shares with respect to the Series F Preferred Stock were issued by the
Corporation as part of its commitment to the Federal Reserve Board to raise
regulatory capital in connection with its merger with Multibank, as described in
Note 2.

A summary of the Corporation's Adjustable Rate Cumulative Preferred Stock
(Adjustable Rate Preferred Stock) issued and outstanding is as follows:

SERIES A SERIES B SERIES C

Outstanding at December 31,
1993 and 1992:
Shares....................... 1,044,843 1,574,315 774,783
Amount (in thousands)......... $ 52,242 $ 78,716 $ 77,478
Liquidation preference per
share......................... $ 50 $ 50 $ 100
Dividend rates:
At December 31, 1993......... 6.00% 6.00% 5.50%
Minimum....................... 6.00% 6.00% 5.50%
Maximum....................... 13.00% 13.00% 12.50%
Dividends per share:
1993......................... $ 3.01 $ 3.01 $ 5.51
1992.......................... $ 3.13 $ 3.04 $ 5.54
1991.......................... $ 3.37 $ 3.25 $ 5.96

Dividends on all series of preferred stock are cumulative and, when declared,
are payable quarterly. The dividend rates for the Adjustable Rate Preferred
Stock are determined according to a formula based upon the highest of three

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37
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

interest rate benchmarks. The Adjustable Rate Preferred Stock has no preemptive
or general voting rights, and is redeemable, in whole or in part, at the option
of the Corporation. Series A Preferred Stock is redeemable at $51.50 per share
through March 29, 1994 and at $50 per share thereafter; Series B Preferred Stock
is redeemable at $51.50 per share through June 19, 1995 and at $50 per share
thereafter; and Series C Preferred Stock is redeemable at $103 per share through
November 13, 1995 and at $100 per share thereafter.

13 STOCKHOLDER RIGHTS PLAN

In 1990, the Board of Directors of the Corporation adopted a stockholder rights
plan. The plan provides for the distribution of one preferred stock purchase
right for each outstanding share of common stock of the Corporation. Each right
entitles the holder, following the occurrence of certain events, to purchase a
unit, consisting of one-thousandth of a share of Junior Participating Preferred
Stock, Series D, at a purchase price of $50 per unit, subject to adjustment. The
rights will not be exercisable or transferable apart from the common stock
except under certain circumstances in which a person or group of affiliated
persons acquires, or commences a tender offer to acquire, 15% or more of the
Corporation's common stock. Rights held by such an acquiring person or persons
may thereafter become void. Under certain circumstances, a right may become a
right to purchase common stock or assets of the Corporation or common stock of
an acquiring corporation at a substantial discount. Under certain circumstances,
the Corporation may redeem the rights at $.01 per right. The rights will expire
in July 2000 unless earlier redeemed or exchanged by the Corporation.

14 DIVIDENDS AND LOAN RESTRICTIONS

Bank regulations require the approval of bank regulatory authorities if the
dividends declared by banking subsidiaries exceed certain prescribed limits. For
1994, aggregate dividend declarations by the Corporation's banking subsidiaries
without prior regulatory approval are limited to approximately $503 million of
their undistributed earnings at December 31, 1993, plus an additional amount
equal to their net profits for 1994, as defined, up to the date of any dividend
declaration. However, for any dividend declaration, the Corporation's banking
subsidiaries, as well as the Corporation itself, must consider additional
factors such as: the amount of current period net income, liquidity, asset
quality profile, capital adequacy and economic conditions. It is likely that
these factors would further limit the amount of dividends which the banking
subsidiaries could declare. In addition, banking regulators have authority to
prohibit banks and bank holding companies from paying dividends if they deem
such payment to be an unsafe or unsound practice.

Each banking subsidiary is also prohibited by the bank regulatory authorities
from granting loans and advances to the Parent Company that exceed certain
limits. Assuming declaration of the maximum amount of dividends under the
regulations described above, any such loans and advances would be limited to an
aggregate of approximately $322 million and would be subject to specific
collateral requirements.

Under the foregoing regulations, an aggregate of approximately $2,350 million of
the Parent Company's investment in banking subsidiaries of $3,175 million, which
includes bank holding companies and their subsidiaries, was restricted from
transfer to the Parent Company at December 31, 1993.

15 OTHER INCOME

The components of other income were as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Mezzanine/venture capital
profits, net................. $ 38,066 $ 16,904 $ 40,908
Net foreign exchange trading
profits...................... 45,322 40,952 40,886
Precious metal income......... 9,326 10,664 18,990
Net gains from sales of
mortgage inventories......... 7,497 2,763 4,700
Gains from sales of mortgage
servicing rights............. 651 14,768 34,045
Recognition of deferred gain
from 1984 sale of the
headquarters building........ 16,200
Net translation/hedge results
from Brazilian currency
position..................... (174,000) (50,000)
Gain on sale of assets
received in connection with
lending activities........... 2,741 10,605 10,747
Equity in undistributed
earnings of affiliates....... 15,923 11,493 9,832
Gains on sales of branches and
other operations............. 8,403
All other..................... 42,678 57,291 28,620
-------- --------- ---------
$(11,796) $ 131,640 $ 197,131
======== ========= =========

During 1993 and 1992, the Corporation maintained a currency position in Brazil
in order to take advantage of the spread between local Brazilian interest rates
and devaluation of Brazil's local currency. This position significantly affected
the levels of consolidated net interest revenue, noninterest income and net
interest margin in both periods. For the years ended December 31, 1993 and 1992,
this position resulted in net interest revenue of $192 million and $67 million,
respectively, and net translation/hedge losses, a component of noninterest
income, of $174 million and $50 million, respectively. The impact on 1991
results was not significant.

16 EMPLOYEE BENEFITS

The Corporation maintains non-contributory defined benefit pension plans (the
Plans) covering substantially all domestic employees. The Corporation funds the
Plans in compliance with the requirements of the Employee Retirement Income
Security Act.

The principal plan is an account balance defined benefit plan in which each
employee has an account to which amounts are allocated based on level of pay and
years of service and which grows at a specific rate of interest. Benefits
accrued

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prior to 1989 are based on years of service, highest average compensation and
social security benefits.

Employee benefits expense was reduced by net pension income of the Plans, which
included the following:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Service cost (benefits earned
during the period).......... $17,695 $ 15,405 $ 15,154
Interest cost on projected
benefit obligation........... 19,719 18,045 16,642
Return on plan assets:
Actual...................... (42,978) (29,449) (58,386)
Actuarial deferral of gains
(losses)................... 3,833 (4,339) 25,224
Amortization:
Unrecognized net asset...... (4,065) (4,066) (4,065)
Unrecognized prior service
cost....................... 2,974 2,974 3,177
Other, net................... (2,080) (439) (1,898)
------- -------- --------
Net pension income............ $(4,902) $ (1,869) $ (4,152)
======= ======== ========

The following table sets forth the funded status of the Plans:

DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Projected benefit obligation:
Vested benefits............ $ 182,918 $155,379 $104,712
Nonvested benefits......... 29,184 26,088 22,806
--------- -------- --------
Accumulated benefit
obligation................. 212,102 181,467 127,518
Effect of projected future
compensation levels........ 62,010 64,952 63,838
--------- -------- --------
Projected benefit
obligation.................. $ 274,112 $246,419 $191,356
========= ======== ========
Plan assets at fair value
(primarily listed stocks and
fixed income securities).... $ 443,601 $395,655 $363,762
========= ======== ========
Plan assets in excess of
projected benefit
obligation.................. $ 169,489 $149,236 $172,406
Unrecognized net (gain)
loss........................ (96) 17,274 (5,413)
Unrecognized prior service
cost....................... 21,238 23,009 24,479
Unrecognized net asset....... (16,972) (21,037) (25,103)
--------- -------- --------
Prepaid pension cost......... $ 173,659 $168,482 $166,369
========= ======== ========
Assumptions used in actuarial
computations were:
Weighted average discount
rate....................... 7.5% 8.0-10.0% 8.0-10.0%
Rate of increase in future
compensation levels......... 4.5% 5.0-6.0% 5.0-7.0%
Expected long-term rate of
return on assets............ 9.5% 7.6-10.0% 9.5-11.0%

The Corporation also maintains nonqualified deferred compensation and retirement
plans for certain officers. All benefits provided under these plans are unfunded
and any payments to plan participants are made by the Corporation. As of
December 31, 1993 and 1992, approximately $14 million was included in accrued
expenses and other liabilities for these plans. For the years ended December 31,
1993, 1992 and 1991, expense related to these plans was $1.4 million, $1.6
million, and $1.5 million, respectively.

The Corporation provides certain health and life insurance benefits for certain
retired employees. Eligible domestic employees currently receive credits, up to
$10,000, based on years of service which are used to purchase postretirement
health care coverage through the Corporation. Prior to 1993, the costs of these
health and life insurance benefits, which included the costs of current and
prior plans, were expensed currently as paid. Effective January 1, 1993, the
Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," which requires the recognition of postretirement
benefits over the service lives of the employees rather than on a cash basis.
The Corporation elected to recognize its accumulated benefit obligation of $82
million at January 1, 1993 on a straight-line basis over a 20-year transition
period. The adoption of the new standard resulted in an increase in 1993
employee benefits expense of approximately $4 million. The components of
postretirement benefits expense for the year ended December 31, 1993 were as
follows:

(IN THOUSANDS)

Service cost (benefits earned during the
period)......................................... $ 942
Interest cost on projected benefit obligation..... 5,712
Amortization:
Unrecognized transition obligation.............. 4,062
Unamortized gain................................ (340)
--------
Net postretirement benefits expense............. $ 10,376
========

The following table sets forth the status of the Corporation's accumulated
postretirement benefit obligation, which was unfunded, as of December 31, 1993
and January 1, 1993:

DECEMBER 31 JANUARY 1
1993 1993

(IN THOUSANDS)
Accumulated benefit obligation:
Retirees...................... $ 61,874 $ 69,159
Actives -- eligible to
retire...................... 4,974 4,533
Actives -- not eligible to
retire...................... 9,824 8,000
-------- --------
Accumulated postretirement
benefit obligation............ $ 76,672 $ 81,692
Unrecognized net gain........... 4,615
Unrecognized transition
obligation.................... (77,188) (81,692)
-------- --------
Postretirement benefit
liability..................... $ 4,099 $ 0
======== ========

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%. The assumed weighted average health
care cost trend rate was 12% for 1994. Such rate decreases gradually to 5%
through the year 2001 and remains level thereafter. The assumed rate of increase
in future compensation levels used was 4.5%.

An increase of 1% in the assumed health care cost trend rate would result in
increases of 4.8% in the accumulated postretirement benefit obligation and 4.1%
in annual postretirement benefits expense. Actual cash payments of
postretirement benefits other than pensions were $6.3 million, $4.1 million and
$4.2 million in the years ended December 31, 1993, 1992 and 1991, respectively.

The Corporation maintains thrift incentive plans covering the majority of
domestic employees. Under these plans, employer contributions are generally
based on the amount of eligible employee contributions. The amounts charged to
operating expense for these plans were $10 million in 1993, $8 million in 1992
and $9 million in 1991.

The Financial Accounting Standards Board has issued SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," to be effective for years beginning
after December 15, 1993, which requires accruing the expected cost of providing
postemployment benefits, such as salary continua-

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39

tion, severance benefits, continuation of health care benefits and life
insurance coverage, to former or inactive employees, after employment but before
retirement, if certain conditions are met. This new standard is not expected to
have a material effect on the Corporation's financial statements.

17 STOCK OPTIONS AND AWARDS

The Corporation's stock incentive plans include the 1991 Long-Term Stock
Incentive Plan (the 1991 Plan), the 1986 and 1982 Stock Option Plans (the 1986
and 1982 Plans), the Multibank 1982 Employee Stock Option Plan (the Multibank
Plan) and the Society for Savings 1983 Stock Incentive Program (the Society
Plan). The 1991 Plan provides for the award of stock options, restricted stock
and stock appreciation rights (SARs) to key employees. Awards may be made under
the 1991 Plan until December 31, 1996. No additional grants may be made under
the 1982, 1986, Society, or Multibank Plans. Shares reserved under these plans
may be authorized but unissued shares, treasury shares or shares purchased on
the open market.

Options under the above plans are granted at prices not less than the fair
market value of the common stock on the date of grant. Stock options under the
1991 Plan are generally exercisable in equal installments on the date of grant
and the first anniversary of the grant date. Under the 1986 and 1982 Plans,
options granted are generally exercisable in equal installments on the date of
grant and each of the three anniversary dates thereafter. Options under the
Multibank and Society Plans are fully vested, with the exception of 334 options,
which will fully vest in 1994. All options expire not later than 10 years after
the date of grant. The 1986 Plan allowed for the granting of rights to receive
Tax Offset Payments with respect to Non-Qualified Stock Options, which are
intended to compensate the participant for the difference in tax treatment of
Incentive Stock Options and Non-Qualified Stock Options. At December 31, 1993,
Tax Offset Payments with respect to 115,294 options, granted in 1987, were
outstanding. There was no compensation expense for Tax Offset Payments for the
years ended December 31, 1993, 1992 and 1991.

A total of 8,064,351 shares of common stock were reserved for issuance under the
above plans at December 31, 1993. Options outstanding at December 31, 1993 were
at prices ranging from $5.63 to $30.50 per share.

The following is a summary of the changes in options outstanding:

1993 1992 1991

Options outstanding,
January 1............. 3,705,690 3,733,165 2,813,052
Granted ($5.63 to $25.50
per share)............ 445,103 857,408 1,332,756
Exercised ($5.63 to
$24.63 per share)..... (800,524) (783,227) (20,546)
Canceled................ (373,518) (101,656) (392,097)
--------- --------- ---------
Options outstanding,
December 31........... 2,976,751 3,705,690 3,733,165
========= ========= =========
Options exercisable,
December 31........... 2,731,896 3,020,511 2,633,378
========= ========= =========
Shares available for
future grants......... 5,087,600 2,309,692 3,327,251
========= ========= =========

Generally, SARs entitle the holder to receive an amount equal to the excess of
the fair market value of a share of common stock on the exercise date over the
fair market value at the date of grant. SARs are available under the 1991 Plan
and the 1988 Stock Appreciation Rights Plan (the 1988 SARs Plan). At December
31, 1993, 42,950 SARs were outstanding under the 1988 SARs Plan, at a grant
price of $24.63. At December 31, 1992 and 1991, 68,174 SARs were outstanding at
prices ranging from $22.75 to $24.63. No SARs have been granted under the 1991
Plan at December 31, 1993. Compensation expense (income) related to outstanding
SARs was $(30) thousand and $115 thousand for the years ended December 31, 1993
and 1992, respectively. There was no compensation expense for SARs in 1991.

The 1991 Plan also provides for the granting of restricted stock. Employees are
generally required to maintain employment with the Corporation for a period of
five years after the grant in order to become fully vested in the shares
granted. Restricted stock issued under the 1991 Plan is recorded at the fair
market value of the shares on the date of grant. The resulting unearned
compensation is recorded as a reduction of retained earnings and is amortized as
compensation expense over the restriction period. During 1993, 111,100 shares of
restricted stock were awarded, 87,360 shares were forfeited and 10,675 shares
were released from restrictions. At December 31, 1993, there were 509,490
restricted shares outstanding with associated unearned compensation, recorded as
a reduction of retained earnings, of $5.2 million. Compensation expense recorded
in the years ended December 31, 1993, 1992 and 1991 with respect to restricted
stock was $1.3 million, $1.2 million and $.3 million, respectively.

18 MERGER AND RESTRUCTURING EXPENSE

In 1993 and 1991, the Corporation recorded merger and restructuring charges of
$85 million and $54 million, respectively. The merger and restructuring charges
recorded in 1993 were primarily in connection with the Corporation's mergers
with Bancorp and Multibank. Such charges consisted of investment banking and
other professional fees, stock issuance costs, estimated facilities and
operations consolidation costs and severance costs associated with

69
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

expected reorganization following the mergers. The charges also included the
cost of expense reduction initiatives undertaken by the Corporation. The 1991
restructuring charges were recorded primarily in connection with the
Corporation's plans for consolidating and downsizing various domestic and
international operations and facilities and reducing the number of employees.

19 OTHER EXPENSE

The components of other expense were as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
FDIC deposit insurance.......... $ 61,942 $ 56,390 $ 55,945
Professional:
Legal fees..................... 26,441 31,280 41,975
Consulting and other
professional fees............ 29,166 36,616 37,659
Communications.................. 59,307 57,895 55,580
Advertising..................... 37,572 29,492 20,527
Forms and supplies.............. 24,343 23,356 23,447
Travel and customer contact..... 22,018 24,944 23,198
Acquisition-related, evaluation
and bid costs.................. 19,801
Software costs.................. 19,154 17,645 17,175
Write off of real estate, bank
premises and computer
equipment...................... 16,519
Other staff costs............... 14,661 13,502 12,896
Amortization of excess of cost
over assigned value of net
assets acquired................ 11,961 11,373 10,910
Property and casualty
insurance...................... 6,759 8,872 7,365
Insurance claims and policy
reserves of insurance
subsidiary..................... 7,742 6,934 6,570
Non-income taxes................ 4,942 7,210 11,159
Regulatory examination fees..... 4,423 4,326 4,806
All other....................... 76,775 78,601 84,417
---------- --------- ---------
$ 407,206 $ 408,436 $ 449,949
========== ========= =========

20 INCOME TAXES

Effective January 1, 1993, the Corporation adopted prospectively SFAS No. 109,
"Accounting for Income Taxes," which principally affects accounting for deferred
income taxes. The cumulative effect to January 1, 1993 of adopting this new
standard was an increase to net income of $77 million, or $.74 per common share
on a primary basis and $.70 per common share on a fully diluted basis. The
cumulative effect principally reflected the recognition of previously unrecorded
tax benefit carryforwards. Under this new standard, deferred tax assets and
liabilities are recognized for the estimated future income tax consequences
attributable to tax benefit carryforwards and to temporary differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are required to be
measured using enacted tax rates. The effect of enacted changes in tax law,
including changes in tax rates, on these deferred tax assets and liabilities is
recognized in income in the period that includes the enactment date. During
1993, the Corporation's federal income tax rate was increased to 35%; the effect
of this change was not significant to the deferred tax balance.

The new standard also requires that a valuation reserve be established if it is
more likely than not that all or a portion of the deferred tax asset will not be
realized. At December 31, 1993, the Corporation had a $56 million valuation
reserve, which had decreased $5 million during 1993. This reserve has been
established for certain future state and federal tax benefits which may not be
fully utilized. It is expected that the deferred tax assets, net of the
valuation reserve, will be realized from the reversal of existing deferred tax
liabilities and from the recognition of future taxable income, without relying
on tax planning strategies that the Corporation ordinarily might not follow.

The components of the net deferred tax liability at December 31, 1993 were as
follows:

(IN THOUSANDS)

Deferred tax assets:
Federal and state tax benefit carryforwards........ $ 282,537
Reserve for credit losses.......................... 330,753
Interest on nonaccrual loans....................... 80,747
Purchased mortgage servicing rights................ 21,085
Deferred credit related fees....................... 19,956
Other.............................................. 56,982
---------
Deferred tax assets.............................. 792,060
Valuation reserve................................... (56,000)
---------
Deferred tax assets, net of reserve.............. 736,060
---------
Deferred tax liabilities:
Leasing operations................................. 615,443
Pension obligations................................ 74,989
Foreign operations................................. 14,600
Other.............................................. 48,180
---------
Deferred tax liabilities......................... 753,212
---------
Net deferred tax liability.......................... $ 17,152
=========

At December 31, 1993, the Corporation's federal tax benefit carryforwards were
as follows:

(IN MILLIONS)

ALTERNATIVE
FOREIGN MINIMUM INVESTMENT
YEAR OF TAX TAX TAX
EXPIRATION CREDIT CREDIT CREDIT TOTAL

1994................... $ 70.3 $ 1.3 $ 71.6
1995................... 34.4 1.9 36.3
1996................... 10.9 4.5 15.4
1997................... 25.0 7.3 32.3
1998................... 26.3 2.4 28.7
1999-2004.............. 62.1 62.1
None................... $19.9 19.9
------- ----- ----- -------
Total.................. $ 166.9 $19.9 $79.5 $ 266.3
======= ===== ===== =======

In addition, at December 31, 1993, the Corporation had state tax benefit
carryforwards, net of federal tax effects, of $16.2 million that expire in 1994
through 1998.

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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

The components of the provision for (benefit from) income taxes were as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Current tax provision
(benefit):
Federal..................... $ 15,591 $ 9,374 $ (139,939)
Foreign:
Based on income........... 26,918 14,941 15,750
Withheld on interest and
dividends............... 8,499 4,663 5,593
State and local............. 44,857 13,869 (41,030)
--------- --------- ----------
95,865 42,847 (159,626)
--------- --------- ----------
Deferred tax provision
(benefit):
Federal..................... 106,439 75,723 23,784
State and local............. 12,379 34,211 13
Reduction of net deferred
tax asset................. 77,839
--------- --------- ----------
118,818 109,934 101,636
--------- --------- ----------
Income tax provision
(benefit) before
extraordinary items and
cumulative effect of changes
in accounting principles.... 214,683 152,781 (57,990)
Income taxes applicable to
extraordinary items and
changes in accounting
principles:
Recognition of prior year
tax benefit
carryforwards........... (72,968)
Gain from early
extinguishment of
debt.................... 815
Change in accounting for
purchased mortgage
servicing rights........ (32,362)
Change in accounting for
income taxes............ (77,163)
--------- --------- ----------
$ 105,158 $ 79,813 $ (57,175)
========= ========= ==========

Not included in the above table were the tax effects related to certain items
which were recorded directly in stockholders' equity, including foreign currency
translation, market value adjustments related to securities available for sale,
stock options and restricted stock. Net tax effects recorded directly in
stockholders' equity amounted to a $26 million charge in 1993 and a $2.5 million
benefit in 1992. There were no such tax effects in 1991. The income tax
provision (benefit) included tax provisions related to securities gains of $13
million in 1993, $15 million in 1992 and $3.9 million in 1991.

During 1991, the Corporation recorded a $52 million state tax benefit as a
result of reaching a settlement with The Commonwealth of Massachusetts (the
Commonwealth) of tax claims by FNBB covering tax years 1976 through 1990. The
claims were based on FNBB's position that the exercise of the Commonwealth's
taxing authority over FNBB's income from sources outside Massachusetts,
including foreign countries, violated the federal and Massachusetts
constitutions. Under the terms of the settlement, the Commonwealth refunded $37
million in taxes paid by FNBB. The settlement also specified the Massachusetts
tax treatment associated with any federal tax adjustments subsequently
determined to affect FNBB's returns for tax years 1982 through 1990, which
resulted in a $15 million reduction in FNBB's state tax accruals.

The current federal income tax benefit for 1991 reflected the Corporation's
decision to carryback its 1990 net operating loss to recover taxes paid in prior
years, including a $25 million refund of federal minimum taxes. This decision
also resulted in the elimination of a majority of the Corporation's remaining
deferred tax asset in 1991, and changed the composition of the Corporation's tax
benefit carryforwards.

The components of the deferred tax provision before extraordinary items and
cumulative effect of changes in accounting principles were as follows:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Reserve for credit losses..... $ 51,859 $ 51,162 $ (8,850)
Leasing operations............ 14,422 32,333 49,402
Interest on nonaccrual
loans........................ 12,375 52,009 5,714
Deferred credit related
fees......................... (3,833) (2,713) 2,652
Unremitted earnings of foreign
equity subsidiaries.......... 5,433 2,925 2,158
Foreign operations............ (12,888) (2,205) 1,247
Sale of headquarters
building..................... 7,113 3,160
Purchased mortgage servicing
rights....................... (7,861) (14,239) 3,715
Depreciation and
amortization................. 1,082 1,108 (2,648)
Net tax benefit carryforwards
realized (generated)......... 74,158 (33,808) (26,824)
Net unrecognized tax
benefits..................... 355 39,966
Other, net.................... (15,929) 15,894 31,944
-------- --------- ---------
$118,818 $ 109,934 $ 101,636
======== ========= =========

The following table reconciles the expected federal tax provision (benefit)
before extraordinary items and cumulative effect of changes in accounting
principles, based on the federal statutory tax rate of 35% in 1993 and 34% in
1992 and 1991, to the actual consolidated tax provision before extraordinary
items and cumulative effect of changes in accounting principles:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN MILLIONS)
Expected tax provision (benefit)
applicable to income (loss) before
extraordinary items and cumulative
effect of changes in accounting
principles......................... $171.3 $ 122.0 $ (60.8)
Effect of:
State and local income taxes, net
of federal tax benefit.......... 37.2 31.8 7.3
State tax case settlement, net of
federal tax provision............ (34.3)
Tax-exempt income.................. (2.8) (4.1) (9.4)
Minimum tax refund................. (24.6)
Foreign tax credit carryforward.... 19.4
Non-creditable foreign taxes....... 4.7 2.0 1.9
Tax benefits of net operating loss
not recognized................... 41.7
Other, net......................... 4.3 1.1 .8
-------- ------- -------
Actual tax provision (benefit)
before extraordinary items and
cumulative effect of changes in
accounting principles.............. $ 214.7 $ 152.8 $ (58.0)
======== ======= =======

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NOTES TO FINANCIAL STATEMENTS
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CONTINUED

Domestic pre-tax income (loss) was $279 million in 1993, $251 million in 1992,
and $(261) million in 1991. Foreign pre-tax income, defined as income generated
from operations that are located outside the United States, was $125 million in
1993, $108 million in 1992, and $82 million in 1991.

21 FINANCIAL INSTRUMENTS WITH OFF-
BALANCE-SHEET RISK

Financial instruments with off-balance-sheet risk represent various degrees and
types of risk to the Corporation including credit, interest rate, foreign
exchange rate and liquidity risk. Interest rate and foreign exchange rate
contracts are entered into in connection with the Corporation's trading
activities, including providing certain of these products to its customers, and
to manage its own interest rate and foreign exchange exposure. The Corporation
enters into offsetting contracts or employs other hedging techniques in an
effort to limit its exposure to interest rate and foreign exchange rate risk.

CREDIT-RELATED INSTRUMENTS
A commitment to extend credit is a legally binding agreement to lend to a
customer in the future that generally expires within a specified period of time.
The extension of a commitment, which is subject to the Corporation's credit
review and approval policies, gives rise to credit exposure when certain
borrowing conditions are met and it is drawn upon. Until such time, it
represents only potential exposure. In connection with entering into a
commitment, the Corporation may obtain collateral if deemed necessary, based
upon the Corporation's credit evaluation. Such collateral varies but may include
securities, receivables, inventory, fixed assets, personal property and real
estate. The obligation to lend may be voided if the customer's financial
condition deteriorates or if the customer fails to meet certain covenants.
Commitments to extend credit do not reflect the actual demand on liquidity that
the Corporation will be subjected to in the future, since historical experience
with loan commitments indicates that a large portion generally expire without
being drawn upon.

Standby letters of credit and foreign office guarantees are commitments that are
primarily issued to a third party to guarantee an obligation by the
Corporation's customers. Standby letters of credit may be issued as credit
enhancements for corporate customers' commercial paper, bond issuances by
municipalities or other debt obligations, and to guarantee other financial
performance of a customer. The Corporation has a current exposure only to the
extent that a customer may default on the underlying transaction. The risks
involved in the issuance of standby letters of credit and foreign office
guarantees are primarily credit risks. Again, the Corporation's credit review
and approval policies and practices are adhered to when evaluating issuances of
standbys or guarantees for customers. Similar to commitments to extend credit,
the Corporation may obtain various types of collateral, if deemed necessary,
based upon the Corporation's credit evaluation.

FINANCIAL MARKETS INSTRUMENTS
The principal or notional value of commitments related to various financial
markets instruments should not be taken as the measure of credit, interest rate,
liquidity or foreign exchange risk, since these values do not represent the cost
of replacing the contracts at current rates. In addition, the principal or gross
notional values do not reflect the effect of hedges or other offsetting
positions. Except for instruments used to manage the Corporation's own balance
sheet interest rate and foreign exchange risk, gains and losses stemming from
changes in the market values of the financial markets instruments described
below are recognized currently as part of trading profits and commissions or
foreign exchange profits. The majority of the Corporation's off-balance-sheet
financial markets instruments not used in managing balance sheet, interest rate
or foreign exchange risk are hedged with other such instruments. The Corporation
has historically experienced minimal credit loss with respect to its capital
markets instruments.

The Corporation enters into foreign exchange contracts and foreign currency
options primarily in connection with its trading activities and to hedge foreign
currency risk. In addition, the Corporation uses foreign exchange contracts to
hedge a portion of its exposure to translation gains and losses from overseas
branches and foreign subsidiaries. Foreign exchange contracts include such
commitments as foreign currency spot, forward, futures, option and swap
contracts. The risks in these transactions arise from the ability of the
counterparties to deliver under the terms of the contract and the risk of
trading a volatile commodity. The Corporation actively monitors all transactions
and positions against predetermined limits assigned to business units and types
of currency to ensure reasonable risk taking.

The Corporation also enters into interest rate swap agreements in connection
with its trading activities, including offering these agreements to its
customers, and to manage its own interest rate risk. These agreements generally
involve the exchange of fixed and variable rate interest payments between two
parties based on a common notional principal amount and maturity date. The
notional value is the basis for calculating payment streams and is never
exchanged. The primary risks associated with swaps are the exposure to movements
in interest rates and the ability of the counterparties to meet the terms of the
contracts.

The Corporation uses futures and forward contracts, including future rate
agreements, in connection with its trading activities and to manage its own
interest rate exposure. Futures and forward contracts generally are contracts
for the delayed delivery of securities or money market instruments in which the
buyer agrees to purchase and the seller agrees to make delivery of a specific
instrument at a predetermined date for a specific price. These contracts also
include agreements which are settled between counterparties based on a notional
principal value and do not involve an actual movement of principal. Risks on
both types of agreements stem from market movements in the underlying
securities' values and interest rates and from the ability of the counterparties
to meet the terms of the contracts.

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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

The Corporation purchases and writes interest rate options in connection with
its trading and risk management activities, including providing these products
to its customers, and to manage its own interest rate exposure. Interest rate
options are contracts that allow the holder of the option to receive cash,
purchase, sell or enter into a financial instrument at a specified price within
a specified period of time. Options include interest rate caps and floors, which
are types of interest rate protection instruments involving potential payment
between seller and buyer of an interest differential. In addition, other types
of option products provide the holder with the right to enter into interest rate
swap, cap, and floor agreements with the "writer." The primary risks associated
with all types of options are the exposure to current and expected movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts.

A summary of the principal or notional amounts of significant financial
instruments with off-balance-sheet risk is as follows:

YEARS ENDED DECEMBER 31 1993 1992

(IN MILLIONS)
Fee based or otherwise legally binding
commitments to extend credit(1)............ $ 17,391 $ 15,034
Standby letters of credit, foreign office
guarantees and similar instruments(2)...... 2,344 2,144
Commercial letters of credit................ 1,033 726
Foreign exchange rate contracts:
Commitments to purchase foreign currencies
and U.S. dollar exchange................ 22,148 19,696
Notional value of options:
Written or sold......................... 613 772
Purchased................................ 691 754
Notional value of cross currency interest
rate swaps............................... 57 145
Interest rate contracts:
Futures and forwards...................... 18,607 13,287
Notional value of interest rate swaps...... 10,195 9,595
Notional value of options:
Written or sold......................... 5,783 5,289
Purchased................................ 5,336 5,085
Residential mortgage loans sold with
recourse................................... 119 205
<FN>
(1) Net of participations conveyed to others of $549 million in 1993 and $664
million in 1992.

(2) Net of participations conveyed to others of $293 million in 1993 and $292
million in 1992.

The Corporation's off-balance-sheet financial instruments entered into in
connection with its trading activities include both foreign exchange rate and
interest rate contracts, which are valued at current market rates, with
unrealized gains and losses recorded on a net basis in the accompanying
consolidated balance sheet. These amounts represent the current cost of
replacing the outstanding contracts. The Corporation's credit exposure on these
contracts can be estimated as the gross aggregate unrealized gains, which
represent the maximum possible loss the Corporation would incur if all related
counterparties failed completely to perform according to the terms of their
contracts. At December 31, 1993, gross unrealized gains recorded in the
accompanying consolidated balance sheet were $190 million and $267 million on
interest rate and foreign exchange rate contracts, respectively. Included in the
above table are interest rate swap agreements used to manage interest rate
exposure, which are not valued at current market rates, and accordingly, are not
reflected in the $190 million discussed above, that have gross unrealized gains
at December 31, 1993. The notional value of these swaps was $1,350 million and
the gross unrealized gains were approximately $70 million.

In March 1992, Financial Accounting Standards Board Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts," was issued. The
interpretation, which is required to be adopted by the Corporation at the
beginning of 1994, will require the reporting of gross unrealized gains and
gross unrealized losses on the Corporation's foreign exchange and interest rate
contracts separately as assets and liabilities, respectively, unless a right of
setoff exists, including a right of setoff resulting from contracts executed
with the same counterparty under a master netting arrangement.

Through December 31, 1993, the Corporation reported unrealized gains and losses
related to forward foreign exchange rate contracts, interest rate swap
agreements and similar contracts on a net basis, which the Corporation believes
was consistent with banking industry practice. The adoption of this
interpretation for balance sheet presentation purposes will not affect the net
income or capital of the Corporation, and will not affect the Corporation's
risk-based capital ratios, which have historically incorporated the gross
unrealized gains on these contracts. If this interpretation was currently
effective, the Corporation's assets and liabilities as of December 31, 1993
would have each increased by approximately $421 million.

22 CONCENTRATIONS OF CREDIT RISK

Credit risk associated with concentrations is impacted when changes in economic,
industry or geographic factors affect groups of counterparties with similar
economic characteristics, whose aggregate credit exposure is significant to the
Corporation's total credit exposure. Nearly half of the Corporation's business
activity is with customers located within New England. Information with respect
to the Corporation's overseas business activities and its geographic
concentrations is included in Note 26. As of December 31, 1993, the
Corporation's loans and commitments to lend collateralized by commercial real
estate properties were approximately $4 billion, of which two-thirds was related
to properties in New England. There were no other significant concentrations of
credit risk.

73
44

23 LEASE COMMITMENTS

Rental expense for leases of real estate and equipment is summarized below:

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
Rental expense................. $93,819 $ 97,318 $ 104,398
Less sublease rental income.... 12,302 12,842 13,289
------- -------- ---------
Net rental expense............. $81,517 $ 84,476 $ 91,109
======= ======== =========

The Corporation has obligations under noncancelable operating leases for real
estate and equipment which include renewal options and escalation clauses. The
Corporation's minimum future rentals under its leases, exclusive of executory
costs and net of sublease rental income, for the years 1994 through 1998 are $66
million, $61 million, $57 million, $52 million and $51 million, respectively,
and $439 million for 1999 and later. Capital leases, the minimum rentals of
which are included in the preceding amounts, are not significant.

24 CONTINGENCIES

The Corporation and its subsidiaries are defendants in a number of legal
proceedings arising in the normal course of business, including claims that
borrowers or others have been damaged as a result of the lending practices of
the Corporation's subsidiaries. One of these actions, commonly referred to as
lender liability claims, has resulted in a judgment against a Corporation
subsidiary, which is being appealed.

Management, after reviewing all actions and proceedings pending against or
involving the Corporation and its subsidiaries, considers that the aggregate
loss, if any, resulting from the final outcome of these proceedings will not be
material.

25 REGULATORY MATTERS

From 1989 through 1993, each of the Corporation, Bancorp and Multibank, as well
as each of their banking subsidiaries, operated at various times under a
regulatory agreement or order. At December 31, 1993, all such agreements or
orders had been terminated, except for those with Connecticut, South Shore Bank,
Multibank West and Mechanics Bank; the latter three are banking subsidiaries of
Multibank. The agreement with Mechanics Bank was terminated in January 1994.

The agreements with respect to Connecticut and South Shore Bank address certain
areas, including management, asset quality, reserves, profitability, capital
ratios and dividends. In addition, South Shore Bank is subject to certain
ongoing conditions of an approval order of the Federal Deposit Insurance
Corporation (the FDIC) relating to the merger of Durfee Attleboro Bank and
Falmouth National Bank into South Shore Bank. The conditions of the FDIC
approval order require, among other things, that a plan to reduce classified
asset levels and maintain certain capital ratios be implemented. Each of the
banks is required to file periodic progress reports with its regulator. Both
Connecticut and South Shore Bank are in compliance with the capital ratio
aspects of, and have adopted or are implementing improvements in various areas
addressed in, their respective agreements.

Multibank West is subject to an FDIC approval order resulting from the merger of
First Agricultural Bank and Multibank National of Western Massachusetts, in
which the resulting bank was named Multibank West. The approval order addresses,
among other things, uniform policies and procedures, risk ratings, asset
quality, reserves and funds management, and the maintenance of certain capital
ratios. Multibank West, who is required to file periodic progress reports with
the FDIC, has complied with all of the aspects of its approval order.

26 SEGMENT INFORMATION

The Corporation operates within the financial services industry segment.
Services are provided through a network of offices located both in the United
States and overseas. Geographic segment information for the Corporation for the
years ended December 31, 1993, 1992 and 1991 is presented in the Consolidated
Statistical Information section, under the caption Geographic Segment
Information, on pages 84 and 85.

27 PARENT COMPANY CONDENSED FINANCIAL STATEMENTS

The following is a condensed balance sheet of the Corporation (Parent Company
only) at December 31, 1993 and 1992:

DECEMBER 31 1993 1992

(IN THOUSANDS)
ASSETS
Cash and short term investments in
bank subsidiary.................... $ 206,920 $ 288,026
Advances to subsidiaries:
Bank subsidiaries.................. 63,709 83,510
Nonbank subsidiaries................ 226,203 57,197
Subordinated notes receivable from
bank subsidiary..................... 400,000 400,000
Investments in subsidiaries:
Bank subsidiaries.................. 3,175,274 2,541,645
Nonbank subsidiaries................ 134,751 122,331
Other assets......................... 22,846 17,460
------------ ----------
TOTAL ASSETS......................... $ 4,229,703 $3,510,169
============ ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

1993 1992
Commercial paper due to nonbank
subsidiary.......................... $ 10,200 $ 10,000
Notes payable........................ 1,293,247 932,875
Other liabilities.................... 14,587 13,764
------------ ----------
Total liabilities.................... 1,318,034 956,639
------------ ----------
Total stockholders' equity........... 2,911,669 2,553,530
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.............................. $ 4,229,703 $3,510,169
============ ==========

45
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

The following is a condensed income statement of the Corporation (Parent Company
only):

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
OPERATING INCOME
Dividend from bank
subsidiary............... $ 6,986
Interest from subsidiaries:
Bank subsidiaries...... 37,064 $ 27,866 $ 40,184
Nonbank subsidiaries... 3,159 4,605 6,787
--------- --------- ----------
Total operating income..... 47,209 32,471 46,971
--------- --------- ----------
OPERATING EXPENSE
Interest expense........... 51,075 48,943 65,952
Other expense, net......... 3,997 4,125 38,127
--------- --------- ----------
Total operating expense.... 55,072 53,068 104,079
--------- --------- ----------
Loss before income taxes,
equity in undistributed
net income (loss) of
subsidiaries,
extraordinary item and
cumulative effect of
change in accounting
principle................ (7,863) (20,597) (57,108)
Benefit from income
taxes.................... (6,191) (2,555) (5,921)
--------- --------- ----------
Loss before equity in
undistributed net income
(loss) of subsidiaries,
extraordinary item and
cumulative effect of
change in accounting
principle................ (1,672) (18,042) (51,187)
Equity in undistributed net
income (loss) of
subsidiaries............. 302,411 296,923 (69,726)
--------- --------- ----------
Income (Loss) before
extraordinary item and
cumulative effect of
change in accounting
principle................ 300,739 278,881 (120,913)
Extraordinary gain from
early extinguishment of
debt, net of tax......... 7,758
Cumulative effect of change
in accounting for income
taxes.................... (1,713)
--------- --------- ----------
NET INCOME (LOSS).......... $ 299,026 $ 278,881 $ (113,155)
========= ========= ==========

During 1991, the Corporation forgave $15 million of debt from BancBoston
Financial Company, a secured finance and factoring nonbank subsidiary of FNBB,
thereby providing additional capital to FNBB. The forgiveness of debt is
reported in the Parent Company's other expense and is offset by a reduction in
the Parent Company's equity in undistributed loss of subsidiaries.

The following is a condensed statement of cash flows of the Corporation (Parent
Company only):

YEARS ENDED DECEMBER 31 1993 1992 1991

(IN THOUSANDS)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss)....... $ 299,026 $ 278,881 $ (113,155)
Reconciliation of net
income (loss) to net
cash used for
operating activities:
Cumulative effect of
change in accounting
for income taxes.... 1,713
Extraordinary gain
from early
extinguishment of
debt, net of tax.... (7,758)
Equity in
undistributed net
(income) loss of
subsidiaries........ (302,411) (296,923) 69,726
Net change in interest
receivables and
payables............ 5,676 (906) 1,173
Other, net............ (12,379) (8,611) 1,529
---------- ---------- ----------
Net cash used for
operating
activities........ (8,375) (27,559) (48,485)
---------- ---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES
Net cash provided from
(used for) short-term
investments in banking
subsidiary............ 81,420 (135,590) 192,800
Net cash provided from
(used for) advances to
subsidiaries.......... (149,205) 129,130 100,257
Investments in
subsidiaries.......... (299,000) (164,133) (62,431)
Purchase of subordinated
note receivable from
bank subsidiary....... (150,000)
---------- ---------- ----------
Net cash provided
from (used for)
investing
activities........ (366,785) (320,593) 230,626
---------- ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES
Net cash provided from
(used for) commercial
paper................. 200 (3,029) (131,499)
Repayments/repurchases
of notes payable...... (88,224) (31,167)
Net proceeds from
issuance of notes
payable............... 448,596
Net proceeds from
issuance of common
stock................. 19,883 155,418 7,887
Net proceeds from
issuance of preferred
stock................. 67,595 222,401
Dividends paid.......... (72,576) (27,504) (28,083)
---------- ---------- ----------
Net cash provided
from (used for)
financing
activities........ 375,474 347,286 (182,862)
---------- ---------- ----------
Net change in cash and
due from banks........ 314 (866) (721)
Cash and due from banks
at January 1.......... 236 1,102 1,823
---------- ---------- ----------
Cash and due from banks
at December 31........ $ 550 $ 236 $ 1,102
========== ========== ==========
Interest payments
made.................. $ 45,918 $ 50,004 $ 70,726
Income tax payments made
(refunds received).... $ (1,500) $ (253) $ 4,696

In 1992, the Corporation transferred BancBoston Leasing Services, Inc. (BBLSI),
a nonbank project finance leasing

75
46
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

subsidiary, to FNBB. The transfer was accomplished by a capital contribution of
all of the shares of BBLSI from the Corporation to FNBB. The capital
contribution, reported in the Parent Company only financial statements, amounted
to $45 million.

28 FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
that the Corporation disclose estimated fair values for certain of its financial
instruments. Financial instruments include such items as loans, deposits,
securities, interest rate and foreign exchange rate contracts, swaps and other
instruments as defined by the standard.

Fair value estimates are generally subjective in nature and are dependent upon a
number of significant assumptions associated with each instrument or group of
similar instruments, including estimates of discount rates, risks associated
with specific financial instruments, estimates of future cash flows and relevant
available market information. Fair value information is intended to represent an
estimate of an amount at which a financial instrument could be exchanged in a
current transaction between a willing buyer and seller engaging in an exchange
transaction. However, since there are no established trading markets for a
significant portion of the Corporation's financial instruments, the Corporation
may not be able to immediately settle its financial instruments; as such, the
fair values are not necessarily indicative of the amounts that could be realized
through immediate settlement. In addition, the majority of the Corporation's
financial instruments, such as loans and deposits, are held to maturity and are
realized or paid according to the contractual agreement with the customer.

Where available, quoted market prices are used to estimate fair values. However,
due to the nature of the Corporation's financial instruments, in many instances
quoted market prices are not available. Accordingly, the Corporation has
estimated fair values based on other valuation techniques, such as discounting
estimated future cash flows using a rate commensurate with the risks involved or
other acceptable methods. Fair values are estimated without regard to any
premium or discount that may result from concentrations of ownership of a
financial instrument, possible income tax ramifications, or estimated
transaction costs. Fair values are also estimated at a specific point in time
and are based on interest rates and other assumptions at that date. As events
change the assumptions underlying these estimates, the fair values of financial
instruments will change.

Disclosure of fair values is not required for certain items such as lease
financing, investments accounted for under the equity method of accounting,
obligations for pensions and other postretirement benefits, premises and
equipment, OREO, prepaid expenses, PMSR, core deposit intangibles and other
customer relationships, other intangible assets and income tax assets and
liabilities. Accordingly, the aggregate fair value amounts presented do not
purport to represent and should not be considered representative of the
underlying "market" or franchise value of the Corporation.

Because the standard permits many alternative calculation techniques and because
numerous assumptions have been used to estimate the Corporation's fair values,
reasonable comparisons of the Corporation's fair value information with other
financial institutions' fair value information cannot necessarily be made.

The methods and assumptions used to estimate the fair values of each class of
financial instruments are as follows:

Cash and due from banks, interest-bearing deposits in other banks, federal funds
sold and securities purchased under agreements to resell, funds borrowed, due
from customers on acceptances and acceptances outstanding. These items are
generally short-term in nature and, accordingly, the carrying amounts reported
in the balance sheet are reasonable approximations of their fair values.

Trading securities. Trading securities are carried at fair value on the balance
sheet. Such values are generally based on quoted market prices.

Mortgages held for sale. Fair values are based on the estimated value at which
the loans could be sold in the secondary market, considering the fair value of
commitments to issue mortgage loans, net of forward contracts to sell mortgage
loans.

Securities available for sale and securities held to maturity. Fair values are
principally based on quoted market prices. For certain debt and equity
investments made in connection with the Corporation's venture capital and
mezzanine financing business that do not trade on established exchanges and for
which markets do not exist, estimates of fair value are based upon management's
review of the investee's financial results, condition and prospects.

Loans. The fair value of accruing consumer mortgage loans is estimated using
market quotes or by discounting contractual cash flows, adjusted for credit risk
and prepayment estimates. Discount rates are obtained from secondary market
sources. The fair values of accruing home equity loans are estimated using
comparable market information adjusted for credit and other relevant
characteristics. The fair value of all other accruing loans is estimated by
discounting cash flows, using interest rates that consider the credit and
interest rate risks inherent in the loans, and current economic and lending
conditions.

The fair value of nonaccrual loans is estimated by discounting management's
estimate of future cash flows using a rate commensurate with the risks involved.

Accrued interest receivable and other assets. The carrying amount of accrued
interest receivable approximates its fair value. Financial instruments
classified as other assets subject to the disclosure requirements of the
standard consist principally of accounts receivable, EMSR and investments in
limited partnerships. The carrying amounts of short-term receivables are
considered to approximate their fair value. For longer-term receivables, fair
value is estimated by discounting expected future cash flows using a discount
rate commensurate with the risks involved. The fair value of EMSR is based on
the present value of expected future cash flows and the estimated servicing
life. Estimates of fair value of investments in limited partnerships are based
upon management's review of the investee's financial results, condition and
prospects.

76
47
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

Deposits. The fair values of deposits subject to immediate withdrawal such as
interest and noninterest bearing checking, passbook savings and money market
deposit accounts are equal to their carrying amounts. The carrying amounts for
variable-rate certificates of deposit and other time deposits approximate their
fair values at the reporting date. Fair values for fixed-rate certificates of
deposit and other time deposits are estimated by discounting future cash flows
using interest rates currently offered on time deposits with similar remaining
maturities.

Accrued expenses and other liabilities. Financial instruments classified as
accrued expenses and other liabilities subject to the disclosure requirements of
the standard consist principally of short-term liabilities and the carrying
amounts approximate their fair values.

Notes payable. The fair value of long-term borrowings is estimated using
secondary market prices and does not include the fair values of related interest
rate swap agreements, which are presented separately.

Foreign exchange rate and interest rate financial instruments. The fair values
of foreign exchange rate and interest rate contracts, including contracts used
to manage interest rate exposure and market risks, are estimated based on market
information adjusted for credit and other relevant characteristics using pricing
models, including option models.

Other unrecognized financial instruments. The fair value of commitments to
extend credit is estimated using the fees charged to enter into similar legally
binding agreements, taking into account the remaining terms of the agreements
and customers' credit ratings. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair values of foreign office guarantees and letters of
credit are based on fees charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the counterparties at
the reporting date.

77
48
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINUED

The estimated fair values of the Corporation's financial instruments at December
31, 1993 and 1992 are presented in the following tables. The estimated fair
value of loans exceeded their carrying amount, net of the reserve for credit
losses, principally because the estimated fair values under the standard do not
take into account concentrations of credit risk, including the size of credits
and other factors considered by management in its determination of the level of
the reserve for credit losses. In addition, the reserve for credit losses is
established on an undiscounted basis and, also, considers credit losses related
to other financial instruments, principally commitments to lend and letters of
credit. Further, the total estimated fair value of loans increased over the
related carrying amount as a result of the low interest rate environment.

DECEMBER 31 1993 1992
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
(IN MILLIONS) AMOUNT VALUE AMOUNT VALUE

ASSETS
Cash and due from
banks............... $ 2,539 $ 2,539 $ 1,936 $ 1,936
Interest bearing
deposits in other
banks............... 991 991 1,307 1,307
Federal funds sold and
securities purchased
under agreements to
resell.............. 1,454 1,454 1,187 1,187
Trading securities.... 306 306 192 192
Mortgages held for
sale................ 1,322 1,324 922 922
Securities(1):
Available for
sale.............. 1,438 1,483 1,497 1,524
Held to maturity.... 1,569 1,569 2,635 2,755
Loans................. 27,254 23,967
Reserve for credit
losses(2)........... (770) (923)
------- -------
26,484 27,200 23,044 23,600
Due from customers on
acceptances......... 391 391 229 229
Accrued interest
receivable.......... 287 287 288 288
Financial instruments
included in other
assets.............. 596 626 861 877
LIABILITIES
Deposits.............. 29,614 29,736 29,102 29,274
Funds borrowed........ 4,975 4,975 2,947 2,947
Acceptances
outstanding......... 391 391 229 229
Financial instruments
included in accrued
expenses and other
liabilities......... 398 398 532 532
Notes payable......... 1,973 2,024 1,686 1,709

<FN>
(1) For investments made in connection with the Corporation's venture capital
and mezzanine financing business that do not trade on established exchanges,
and for which no markets exist, fair values were estimated, based on
management's review of the investee's financial results, condition and
prospects. At December 31, 1993 these investments were classified as
securities available for sale, and their estimated fair value exceeded the
related carrying amount by $45 million. At December 31, 1992, these
investments were classified as securities held to maturity, and their
estimated fair value exceeded the related carrying amount by $58 million.

(2) The reserve for credit losses is established for future charge-offs arising
from all extensions of credit. The Corporation has not made a specific
allocation of the reserve to other instruments such as leases, commitments
to extend credit, standby letters of credit and interest rate contracts.
Accordingly, a separate determination of the reserve allocable to loans is
not made.

DECEMBER 31 1993 1992
ESTIMATED ESTIMATED
FAIR FAIR
(IN MILLIONS) VALUE VALUE

OTHER FINANCIAL INSTRUMENTS CARRIED AT
FAIR VALUE
Interest rate contracts:
Futures and forwards(3)
Interest rate swaps:
In a net receivable position........ $160 $147
In a net payable position........... (76) (107)
Options:
Written or sold..................... (14) (69)
Purchased........................... 30 62
Foreign exchange rate contracts:
Commitments to purchase foreign
currencies and U.S. dollar exchange:
In a receivable position............ 246 310
In a payable position............... (243) (212)
Options:
Written or sold..................... (22) (45)
Purchased........................... 21 28
Cross-currency interest rate swaps.... (1) (3)
UNRECOGNIZED SWAPS USED TO MANAGE
INTEREST RATE EXPOSURE(4)
Interest rate swaps:
In a net receivable position........ 70 125
In a net payable position........... (23) (19)
OTHER UNRECOGNIZED FINANCIAL INSTRUMENTS
Fee based or otherwise legally binding
commitments to extend credit.......... (27) (45)
Standby and commercial letters of
credit, foreign office guarantees and
similar instruments................... (42) (55)
<FN>
(3) These contracts generally settle daily; as a result, fair value approximates
zero.
(4) Information with respect to the accounting for these instruments is included
in Note 1.

49
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CONSOLIDATED STATISTICAL INFORMATION
- --------------------------------------------------------------------------------
The following three tables present average balance and interest rate information
for the Corporation on a consolidated basis and separately for its United States
and International Operations. Incorporated in these tables is an adjustment of
tax exempt income to a fully taxable equivalent basis. This adjustment is
calculated assuming a 35% federal income tax in 1993 and a 34% federal income
tax rate in 1992 and 1991 adjusted for applicable state and local income taxes
net of the related federal tax benefit. Data for loans includes nonaccrual and
renegotiated balances as well as fees earned on loans. Average rates for
interest bearing deposits of United States Operations have been calculated after
deducting applicable reserve requirements from average balances shown in the
table. Interest rates in International Operations reflect the Corporation's
operations in highly inflationary economies and include the effect of the
currency position maintained in Brazil, which is discussed in Management's
Financial Review on page 33.

AVERAGE BALANCES AND INTEREST RATES -- CONSOLIDATED

YEARS ENDED DECEMBER 31 1993 1992 1991
AVERAGE AVERAGE Average Average Average Average
(DOLLARS IN MILLIONS) BALANCE INTEREST RATE Balance Interest Rate Balance Interest Rate

ASSETS
Interest bearing deposits in
other banks.................. $ 1,293 $1,064.7 82.35% $1,246 $ 779.4 62.57% $1,267 $ 494.1 39.03%
Federal funds sold and resale
agreements................... 1,444 1,569.6 108.68 1,039 516.4 49.68 1,349 115.7 8.57
Trading securities............. 281 10.2 3.65 227 8.9 3.95 261 17.1 6.54
Mortgages held for sale........ 1,071 75.6 7.06 683 57.9 8.47 421 38.7 9.19
Securities:
U.S. Treasury................ 580 22.8 3.94 1,537 84.6 5.50 2,491 163.6 6.57
U.S. government agencies and
corporations............... 2,085 115.8 5.56 2,237 149.9 6.70 1,669 141.9 8.50
States and political
subdivisions............... 45 3.6 7.85 66 5.7 8.56 95 9.4 9.88
Other........................ 914 929.9 101.75 864 328.5 38.04 843 137.9 16.37
Loans and lease financing(1)... 26,586 3,039.5 11.43 25,330 3,186.2 12.58 26,167 3,357.3 12.83
------- -------- ------- ------- ------- ------- ------ ------- -------
Total earning assets --
interest income.............. 34,299 6,831.7 19.92 33,229 5,117.5 15.40 34,563 4,475.7 12.95
------- -------- ------- ------- ------- ------- ------ ------- -------
Cash and due from banks........ 1,790 1,596 1,485
Other assets................... 2,278 2,030 1,867
------- ------- -------
Total assets................... $38,367 $36,855 $37,915
======= ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits:
Savings...................... $ 9,367 211.9 2.30 $ 9,461 303.0 3.28 $ 9,596 482.9 5.14
Time......................... 9,199 425.2 4.62 11,159 638.0 5.72 12,601 943.7 7.52
International Operations..... 5,118 2,948.9 57.62 4,238 1,830.9 43.20 3,781 1,305.0 34.52
Federal funds purchased and
repurchase agreements........ 2,816 303.0 10.76 1,877 183.4 9.77 2,322 166.7 7.18
Other borrowed funds........... 1,533 1,302.5 84.97 1,608 772.0 47.99 1,222 313.4 26.02
Notes payable.................. 1,743 113.6 6.52 1,197 73.6 6.15 1,552 128.4 8.27
------- -------- ------- ------- ------- ------- ------ ------- -------
Total interest bearing funds --
interest expense............. 29,776 5,305.1 17.90 29,540 3,800.9 12.97 31,074 3,340.1 10.84
------- -------- ------- ------- ------- ------- ------ ------- -------
Demand and other noninterest
bearing deposits............. 4,855 4,170 3,883
Other liabilities.............. 1,017 919 1,014
Stockholders' equity........... 2,719 2,226 1,944
------- ------- -------
Total liabilities and
stockholders' equity......... $38,367 $36,855 $37,915
======= ======= =======
Net Interest Revenue........... $1,526.6 $1,316.6 $1,135.6
======= ======= =======
Interest Rate Spread(2)........ 2.02% 2.43% 2.11%
Interest Rate Margin(3)........ 4.45% 3.96% 3.29%
<FN>
(1) Interest on loans and lease financing includes net fees earned of $56
million in 1993, $49 million in 1992, and $42 million in 1991. Net fees from
International Operations were not significant in 1993, 1992 and 1991.

(2) Interest rate spread is the average rate earned on total average earning
assets less the average rate paid for average interest bearing funds.

(3) Interest rate margin is calculated by dividing net interest revenue by total
average earning assets.

79
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CONTINUED

AVERAGE BALANCES AND INTEREST RATES -- UNITED STATES OPERATIONS

1993 1992 1991
YEARS ENDED DECEMBER 31 AVERAGE AVERAGE Average Average Average Average
(DOLLARS IN MILLIONS) BALANCE INTEREST RATE Balance Interest Rate Balance Interest Rate

ASSETS
Interest bearing deposits in
other banks................ $ 341 $ 11.0 3.22% $ 350 $ 12.6 3.60% $ 479 $ 29.6 6.17%
Federal funds sold and resale
agreements................. 962 29.5 3.07 913 32.3 3.54 1,322 79.3 6.00
Trading securities........... 152 6.1 4.03 169 7.4 4.43 234 14.8 6.34
Mortgages held for sale...... 1,071 75.6 7.06 683 57.9 8.47 421 38.7 9.19
Securities:
U.S. Treasury.............. 580 22.8 3.94 1,537 84.6 5.50 2,491 163.6 6.57
U.S. government agencies
and corporations......... 2,085 115.8 5.56 2,237 149.9 6.70 1,669 141.9 8.50
States and political
subdivisions............. 45 3.6 7.85 66 5.7 8.56 95 9.4 9.88
Other...................... 443 45.4 10.23 458 60.7 13.27 603 51.8 8.60
Loans and lease financing.... 21,063 1,601.6 7.60 20,892 1,712.2 8.20 22,729 2,130.2 9.37
-------- -------- -------- -------- -------- --------
Total earning assets --
interest income............ 26,742 1,911.4 7.15 27,305 2,123.3 7.78 30,043 2,659.3 8.85
-------- ------ -------- -------- -------- ------
Cash and due from banks...... 1,458 1,319 1,297
Other assets................. 1,518 1,371 1,463
-------- -------- --------
Total assets................. $ 29,718 $ 29,995 $ 32,803
======== ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits:
Savings.................... $ 9,367 211.9 2.30 $ 9,461 303.0 3.28 $ 9,596 482.9 5.14
Time....................... 9,199 425.2 4.62 11,159 638.0 5.72 12,601 943.7 7.52
Federal funds purchased and
repurchase agreements...... 2,697 81.5 3.02 1,764 53.4 3.02 2,220 119.1 5.36
Other borrowed funds......... 879 49.2 5.59 1,161 72.9 6.28 941 58.0 6.29
Notes payable................ 1,654 104.5 6.32 1,087 61.8 5.69 1,446 117.4 8.12
Intersegment funding, net.... (1,754) (56.5) (1,303) (50.4) (404) (33.8)
-------- -------- -------- -------- -------- --------
Total interest bearing funds
-- interest expense........ 22,042 815.8 3.73 23,329 1,078.7 4.67 26,400 1,687.3 6.46
-------- ------ -------- -------- -------- ------
Demand and other noninterest
bearing deposits........... 4,470 3,847 3,592
Other liabilities(1)......... 1,100 1,008 1,120
Stockholders' equity......... 2,106 1,811 1,691
-------- -------- --------
Total liabilities and
stockholders' equity....... $ 29,718 $ 29,995 $ 32,803
======== ======= =======
Net Interest Revenue......... $1,095.6 $1,044.6 $ 972.0
======== ======= =======
Interest Rate Spread(2)...... 3.42% 3.11% 2.39%
Interest Rate Margin(3)...... 4.10% 3.83% 3.24%
<FN>
(1) Other liabilities includes net noninterest bearing intersegment funding.

(2) Interest rate spread is the average rate earned on total average earning
assets less the average rate paid for average interest bearing funds.

(3) Interest rate margin is calculated by dividing net interest revenue by total
average earning assets.

80
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CONTINUED

AVERAGE BALANCES AND INTEREST RATES -- INTERNATIONAL OPERATIONS

1993 1992 1991
YEARS ENDED DECEMBER 31 AVERAGE AVERAGE Average Average Average Average
(DOLLARS IN MILLIONS) BALANCE INTEREST RATE Balance Interest Rate Balance Interest Rate

ASSETS
Interest bearing
deposits in other
banks................. $ 952 $1,053.7 110.64% $ 896 $ 766.8 85.59% $ 788 $ 464.5 58.99%
Resale agreements....... 482 1,540.1 319.08 126 484.1 384.13 27 36.4 133.42
Trading securities...... 129 4.1 3.19 58 1.5 2.54 27 2.3 8.29
Securities -- other..... 471 884.5 188.04 406 267.8 65.98 240 86.1 35.90
Loans and lease
financing............. 5,523 1,437.9 26.03 4,438 1,474.0 33.21 3,438 1,227.1 35.69
--------- -------- ------- -------- ------ --------
Total earning assets --
interest income....... 7,557 4,920.3 65.11 5,924 2,994.2 50.54 4,520 1,816.4 40.19
-------- ------- -------- ------ -------- ------
Cash and due from
banks................. 332 277 188
Other assets............ 760 659 404
--------- ------- ------
Total assets............ $8,649 $ 6,860 $5,112
========= ======= ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Banks in foreign
countries........... $1,461 722.2 49.44 $ 1,479 534.2 36.12 $1,641 430.2 26.21
Other foreign savings
and time............ 3,657 2,226.7 60.89 2,759 1,296.7 47.00 2,140 874.8 40.89
--------- -------- ------- ------- -------- ------ ------ -------- ------
Total............... 5,118 2,948.9 57.62 4,238 1,830.9 43.20 3,781 1,305.0 34.52
Repurchase agreements... 119 221.5 184.67 113 130.0 115.76 102 47.6 46.71
Other borrowed funds.... 654 1,253.3 191.66 447 699.1 156.32 281 255.4 90.76
Notes payable........... 89 9.1 10.22 110 11.8 10.75 106 11.0 10.32
Intersegment funding,
net................... 1,754 56.5 1,303 50.4 404 33.8
--------- -------- ------- -------- ------ --------
Total interest bearing
funds -- interest
expense............... 7,734 4,489.3 58.05 6,211 2,722.2 43.83 4,674 1,652.8 35.36
-------- ------- -------- ------ -------- ------
Noninterest bearing
deposits.............. 385 323 291
Other liabilities(1).... (83) (89) (106)
Stockholders' equity.... 613 415 253
--------- ------- ------
Total liabilities and
stockholders'
equity................ $8,649 $ 6,860 $5,112
========= ======= ======
Net Interest Revenue.... $ 431.0 $ 272.0 $ 163.6
======== ======= ======
Interest Rate
Spread(2)............. 7.06% 6.71% 4.83%
Interest Rate
Margin(3)............. 5.70% 4.59% 3.62%
<FN>
(1) Other liabilities includes net noninterest bearing intersegment funding.

(2) Interest rate spread is the average rate earned on total average earning
assets less the average rate paid for average interest bearing funds.

(3) Interest rate margin is calculated by dividing net interest revenue by total
average earning assets.

AVERAGE ASSET AND LIABILITY RATIOS

YEAR ENDED DECEMBER 31 1993 1992 1991

Average assets of International Operations to average consolidated assets........................ 23% 19% 13%
Average liabilities of International Operations to average consolidated liabilities.............. 23% 19% 14%

81
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CONTINUED

CHANGE IN NET INTEREST REVENUE -- VOLUME AND RATE ANALYSIS
1993 Compared with 1992

The following table presents, on a fully taxable equivalent basis, an analysis
of the effect on net interest revenue of volume and rate changes for 1993 as
compared with 1992. The change due to the volume/rate variance has been
allocated to volume, and the change because of the difference in the number of
days in the periods has been allocated to rate.

Consolidated United States International
Increase Increase Increase
(Decrease) (Decrease) (Decrease)
Due to Change in Net Due to Change in Net Due to Change in Net
(IN MILLIONS) Volume Rate Change Volume Rate Change Volume Rate Change

EARNING ASSETS
Interest bearing
deposits in other
banks............. $ 39.0 $ 246.3 $ 285.3 $ (.3) $ (1.3) $ (1.6) $ 62.4 $ 224.5 $ 286.9
Federal funds sold
and resale
agreements........ 440.0 613.2 1,053.2 1.4 (4.2) (2.8) 1,138.0 (82.0) 1,056.0
Trading
securities........ 2.0 (.7) 1.3 (.6) (.7) (1.3) 2.2 .4 2.6
Mortgages held for
sale.............. 27.4 (9.7) 17.7 27.4 (9.7) 17.7
Securities:
U.S. Treasury..... (37.8) (24.0) (61.8) (37.8) (24.0) (61.8)
U.S. government
agencies and
corporations.... (8.5) (25.6) (34.1) (8.5) (25.6) (34.1)
States and
political
subdivisions.... (1.6) (.5) (2.1) (1.6) (.5) (2.1)
Other............. 51.3 550.1 601.4 (1.4) (13.9) (15.3) 121.4 495.3 616.7
Loans and lease
financing......... 143.7 (290.4) (146.7) 13.0 (123.6) (110.6) 282.4 (318.5) (36.1)
Adjustment(1)....... (442.3) 442.3 (31.9) 31.9 (543.2) 543.2
-------- -------- -------- ------ -------- -------- -------- -------- --------
Interest income..... 213.2 1,501.0 1,714.2 (40.3) (171.6) (211.9) 1,063.2 862.9 1,926.1
-------- -------- -------- ------ -------- -------- -------- -------- --------
INTEREST BEARING FUNDS
Deposits:
Savings........... (.3) (90.8) (91.1) (.3) (90.8) (91.1)
Time.............. (90.6) (122.2) (212.8) (90.6) (122.2) (212.8)
International
Operations...... 507.0 611.0 1,118.0 507.0 611.0 1,118.0
Federal funds
purchased and
repurchased
agreements........ 101.1 18.5 119.6 28.1 28.1 14.1 77.4 91.5
Other borrowed
funds............. (64.4) 594.9 530.5 (15.7) (8.0) (23.7) 396.2 158.0 554.2
Notes payable....... 35.5 4.5 40.0 35.8 6.9 42.7 (2.1) (.6) (2.7)
Intersegment
funding, net...... (14.5) 8.4 (6.1) 14.5 (8.4) 6.1
Adjustments(1)...... (322.8) 322.8 40.0 (40.0) 40.4 (40.4)
-------- -------- -------- ------ -------- -------- -------- -------- --------
Interest expense.... 165.5 1,338.7 1,504.2 (17.2) (245.7) (262.9) 970.1 797.0 1,767.1
-------- -------- -------- ------ -------- -------- -------- -------- --------
Net Interest
Revenue........... $ 47.7 $ 162.3 $ 210.0 $(23.1) $ 74.1 $ 51.0 $ 93.1 $ 65.9 $ 159.0
======= ======= ======= ===== ======= ======= ======= ======= =======
<FN>
(1) Adjustment to reflect the effect on total volume and rate changes of the
differences in the component mix of earning assets and interest bearing
liabilities from year to year.

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CONTINUED

CHANGE IN NET INTEREST REVENUE -- VOLUME AND RATE ANALYSIS
1992 Compared with 1991

The following table presents, on a fully taxable equivalent basis, an analysis
of the effect on net interest revenue of volume and rate changes for 1992 as
compared with 1991. The change due to the volume/rate variance has been
allocated to volume, and the change because of the difference in the number of
days in the periods has been allocated to rate.

EARNING ASSETS
Interest bearing
deposits in
other banks..... $ (12.8) $ 298.1 $ 285.3 $ (4.7) $ (12.3) $ (17.0) $ 92.8 $ 209.5 $ 302.3
Federal funds sold
and resale
agreements...... (153.9) 554.6 400.7 (14.5) (32.5) (47.0) 379.3 68.4 447.7
Trading
securities...... (1.4) (6.8) (8.2) (2.9) (4.5) (7.4) .8 (1.6) (.8)
Mortgages held for
sale............ 22.2 (3.0) 19.2 22.2 (3.0) 19.2
Securities:
U.S. Treasury... (52.4) (26.6) (79.0) (52.4) (26.6) (79.0)
U.S. government
agencies and
corporations... 38.0 (30.0) 8.0 38.0 (30.0) 8.0
States and
political
subdivisions... (2.5) (1.2) (3.7) (2.4) (1.3) (3.7)
Other........... 7.9 182.7 190.6 (19.2) 28.1 8.9 109.5 72.2 181.7
Loans and lease
financing....... (105.2) (65.9) (171.1) (150.6) (267.4) (418.0) 332.3 (85.4) 246.9
Adjustment(1)..... 54.7 (54.7) (26.5) 26.5 (205.0) 205.0
-------- -------- -------- -------- -------- -------- -------- -------- --------
Interest income... (205.4) 847.2 641.8 (213.0) (323.0) (536.0) 709.7 468.1 1,177.8
-------- -------- -------- -------- -------- -------- -------- -------- --------
INTEREST BEARING
FUNDS
Deposits:
Savings......... (5.5) (174.4) (179.9) (5.5) (174.4) (179.9)
Time............ (79.6) (226.1) (305.7) (79.6) (226.1) (305.7)
International
Operations.... 197.5 328.4 525.9 197.5 328.4 525.9
Federal funds
purchased and
repurchase
agreements...... (43.5) 60.2 16.7 (13.7) (52.0) (65.7) 12.0 70.4 82.4
Other borrowed
funds........... 194.1 264.5 458.6 15.0 (.1) 14.9 259.2 184.5 443.7
Notes payable..... (21.9) (32.9) (54.8) (20.4) (35.2) (55.6) .4 .4 .8
Intersegment
funding, net.... (34.8) 18.2 (16.6) 34.8 (18.2) 16.6
Adjustment(1)..... (393.7) 393.7 30.9 (30.9) 141.3 (141.3)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Interest
expense......... (152.6) 613.4 460.8 (108.1) (500.5) (608.6) 645.2 424.2 1,069.4
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Interest
Revenue......... $ (52.8) $ 233.8 $ 181.0 $ (104.9) $ 177.5 $ 72.6 $ 64.5 $ 43.9 $ 108.4
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
(1) Adjustment to reflect the effect on total volume and rate changes of the
differences in the component mix of earning assets and interest bearing
liabilities from year to year.

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CONTINUED

GEOGRAPHIC SEGMENT INFORMATION

The following tables present geographic segment information for the Corporation
for each of the three years ended December 31, 1993. This geographic segment
information presents assets and income segregated into regional locations based
upon the domicile of the customer or borrower, but without regard to such
factors as method of funding (i.e., local vs. non-local currency) or location of
any cash collateral or guarantees. As a result of the inter-relationships that
exist within the Corporation's worldwide network, allocations of certain income
and expense items are necessarily based on assumptions and subjective criteria.
Interest expense allocations, for example, are based on an assumed average money
market rate. Corporate capital is allocated based primarily on geographic
location of average assets. Additionally, certain allocations have been made
among units based upon the Corporation's management accounting system whereby
noninterest income and noninterest expenses are adjusted to reflect the cost of
services provided by one unit to another, including corporate overhead.

The Corporation has a large branch network in Latin America, mainly in Argentina
and Brazil. Argentina continues to experience declining inflation and an
improving economy. The Corporation's Argentine operation has strategically grown
in line with the overall business expansion leading to an increase in indigenous
dollar lending. Brazil continues to be subject to hyperinflation and political
uncertainty. During 1993, the Corporation continued its strategy of maintaining
a currency position in Brazil that is designed to capitalize on the spread
between local Brazilian interest rates and devaluation. This has led to the
increase in net interest revenue offset by a decline in noninterest income
reported in Latin America for 1993 (See Management's Financial Review -- Results
of Operations on pages 33 and 34). While the Corporation has operated in Brazil
for many years and management is monitoring the situation in Brazil closely,
there can be no assurance that these conditions will not have an adverse effect
on future earnings and nonaccrual levels. For purposes of evaluating the
potential of certain risks associated with the Corporation's cross-border
outstandings (see pages 86 and 87), factors such as method of funding and
location of any cash collateral or guarantees should be taken into account.

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CONTINUED

Total
All Inter- United
FOR THE YEAR ENDED Latin Asia/ Other national States
DECEMBER 31, 1993 America Europe Pacific Regions Operations Operations Consolidated

(IN MILLIONS)
Net interest revenue.... $389.9 $ 24.6 $10.9 $ 5.6 $431.0 $1,087.8 $1,518.8
Provision for credit
losses................ 5.9 1.9 13.0 5.4 26.2 43.9 70.1
Net interest revenue
after provision for
credit losses......... 384.0 22.7 (2.1) .2 404.8 1,043.9 1,448.7
Noninterest income...... (48.4) 41.9 34.6 13.3 41.4 530.2 571.6
Noninterest expense..... 230.1 39.7 33.5 18.1 321.4 1,209.4 1,530.8
Noninterest allocations,
net charge (credit)... 5.8 12.0 1.1 18.9 (18.9)
Income (Loss) before
income taxes and
cumulative effect of
changes in accounting
principles............ 99.7 12.9 (2.1) (4.6) 105.9 383.6 489.5
Cumulative effect of
changes in accounting
principles(1)......... 24.2 24.2
NET INCOME (LOSS)....... 74.2 9.5 (1.7) (3.3) 78.7 220.3 299.0
TOTAL ASSETS AT DECEMBER
31.................... 6,630 1,546 976 234 9,386 31,202 40,588
TOTAL AVERAGE ASSETS.... 5,911 1,513 930 295 8,649 29,718 38,367
FOR THE YEAR ENDED
DECEMBER 31, 1992
Net interest revenue.... $232.6 $ 20.7 $12.6 $ 6.1 $272.0 $1,033.8 $1,305.8
Provision for credit
losses................ (33.0) 39.0 8.0 (2.0) 12.0 168.6 180.6
Net interest revenue
after provision for
credit losses......... 265.6 (18.3) 4.6 8.1 260.0 865.2 1,125.2
Noninterest income...... 68.7 19.0 36.5 11.6 135.8 571.8 707.6
Noninterest expense..... 195.4 42.1 31.6 17.0 286.1 1,188.0 1,474.1
Noninterest allocations,
net charge (credit)... 16.1 20.5 .8 .1 37.5 (37.5)
Income (Loss) before
income taxes and
extraordinary item.... 122.8 (61.9) 8.7 2.6 72.2 286.5 358.7
NET INCOME (LOSS)....... 106.8 (63.3) 6.5 2.6 52.6 226.3 278.9
TOTAL ASSETS AT DECEMBER
31.................... 4,954 1,539 902 211 7,606 29,709 37,315
TOTAL AVERAGE ASSETS.... 4,101 1,624 886 249 6,860 29,995 36,855
FOR THE YEAR ENDED
DECEMBER 31, 1991
Net interest revenue.... $116.0 $ 32.3 $ 9.6 $ 5.7 $163.6 $ 951.2 $1,114.8
Provision for credit
losses................ (5.0) 5.0 3.0 (4.0) (1.0) 519.7 518.7
Net interest revenue
after provision for
credit losses......... 121.0 27.3 6.6 9.7 164.6 431.5 596.1
Noninterest income...... 98.5 26.0 27.5 12.7 164.7 598.2 762.9
Noninterest expense..... 169.4 36.2 27.2 19.9 252.7 1,285.2 1,537.9
Noninterest allocations,
net charge (credit)... (9.8) 16.8 (.6) 6.4 (6.4)
Income (Loss) before
income taxes and
extraordinary item.... 59.9 .3 7.5 2.5 70.2 (249.1) (178.9)
NET INCOME (LOSS)....... 41.6 .3 5.3 1.8 49.0 (162.1) (113.1)
TOTAL ASSETS AT DECEMBER
31.................... 2,871 1,719 879 230 5,699 32,610 38,309
TOTAL AVERAGE ASSETS.... 2,525 1,623 756 208 5,112 32,803 37,915
<FN>
(1) Represents the change in accounting for purchased mortgage servicing rights
attributable to United States Operations and the change in accounting for
income taxes that, for purposes of this analysis only, has been allocated to
United States Operations.

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CONTINUED

CROSS-BORDER OUTSTANDINGS

At December 31, 1993, total cross-border outstandings represented 14% of
consolidated total assets, while representing 15% at December 31, 1992 and 13%
at December 31, 1991. Cross-border outstandings are presented on a regulatory
basis and are defined as amounts payable to the Corporation in U.S. dollars or
other non-local currencies, plus amounts payable in local currency but funded
with U.S. dollars or other non-local currencies. Included in these outstandings
are deposits in other banks, resale agreements, securities available for sale,
securities held to maturity, trading securities, loans and lease financing,
amounts due from customers on acceptances and accrued interest receivable.

Excluded from the computation of cross-border outstandings for a given country
are local currency outstandings funded with local currency. Also excluded are
local currency transactions funded with non-local currency where the provider of
funds agrees that, in the event their claim cannot be repaid in U.S. dollars or
other non-local currency due to a situation unrelated to a normal credit risk,
they will either accept payment in local currency or wait to receive the
non-local currency until such time as it becomes available. In addition, U.S.
dollar or other non-local currency outstandings reallocated as a result of
external guarantees and cash collateral are also excluded.

Cross-border outstandings in countries which individually amounted to 1.0% or
more of consolidated total assets at December 31, 1993, 1992 and 1991 were
approximately as follows:

Percentage
of
Consolidated
Public Banks Other Total Total Assets Commitments(2)

(DOLLARS IN MILLIONS)
DECEMBER 31, 1993(1)
Argentina............................. $255 $225 $1,025 $1,505 3.7% $ 40
Brazil................................ 110 695 805 2.0 20
United Kingdom........................ 15 565 580 1.4 145
DECEMBER 31, 1992(1)
Argentina............................. $ 90 $ 5 $ 845 $ 940 2.5% $ 40
Brazil................................ 20 540 560 1.5 20
Japan................................. 465 50 515 1.4 20
United Kingdom........................ 35 555 590 1.6 130
DECEMBER 31, 1991(1)
Argentina............................. $ 65 $ 470 $ 535 1.4% $ 20
Canada................................ $145 335 480 1.3 60
Japan................................. 670 25 695 1.8
United Kingdom........................ 150 645 795 2.1 75
<FN>
(1) Cross-border outstandings in countries which fell within .75% and 1% of
consolidated total assets at December 31, 1993, 1992 and 1991 were
approximately as follows: 1993, Canada $315 million, Chile $395 million and
Korea $310 million; 1992, Canada $285 million, Chile $360 million and Korea
$330 million; 1991, Brazil $305 million and Korea $310 million.

(2) Included within commitments are letters of credit and guarantees and the
undisbursed portion of loan commitments. Amounts presented are net of
reallocations.

All of the overseas activities of the Corporation's subsidiaries and their
branches are subject to the political conditions in, and regulatory policies of,
the governments of the countries in which the activities are conducted,
including the policies of such governments toward indebtedness to foreign
lenders, private business and the United States. In addition, high rates of
inflation and local, regional and worldwide economic conditions affect local
economies and governments in varying degrees of severity and, accordingly, may
also affect the Corporation's overseas activities. The Corporation routinely
assesses the risks associated with all of its cross-border outstandings. This
process includes management's review of various factors affecting each country
and results in the establishment of individual country exposure limits. From
time to time, due to foreign exchange liquidity problems, currency restrictions
or other situations unrelated to normal credit risk, conditions in a country may
be such that non-local currency debt service payments are not made as originally
scheduled. This has occurred in many less developed countries (LDC) and debt,
which could not be serviced, had to be rescheduled. At December 31, 1993,
however, only $5 million of the Corporation's cross-border outstandings were
subject to country debt rescheduling agreements.

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CONTINUED

At December 31, 1993, the Corporation had $3.2 billion of total LDC cross-border
outstandings, of which approximately $1,505 million, or 47%, related to
Argentina and $805 million, or 25%, related to Brazil. Changes in aggregate
cross-border outstandings to Argentina and Brazil since December 31, 1992 were
approximately as follows:

(IN MILLIONS) Argentina Brazil

Cross-border outstandings as of December 31, 1992............................................. $ 940 $560
Increase in non-trade related loans and leases not subject to country debt rescheduling....... 318 139
Net change in trade-related cross-border outstandings, primarily short-term................... 82 (1)
Increase in securities........................................................................ 153 110
Interest income accrued....................................................................... 99 50
Collections of interest....................................................................... (84) (43)
Other......................................................................................... (3) (10)
----- ----
Cross-border outstandings as of December 31, 1993............................................. $1,505(1) $805(2)
===== ====
<FN>
(1) Approximately 33% are trade-related outstandings and approximately 45% are
non-trade-related local-dollar loans funded by locally generated dollar
liabilities.

(2) Approximately 66% are trade-related outstandings.

During 1993, the Argentine economy continued to stabilize, resulting in a
further decline in the country's inflation rate. Argentina's inflation, which
was at hyperinflationary levels in the late 1980's, has declined to
approximately 7% in 1993. As a result, the Corporation has strategically grown
its Argentine operation and, in turn, its cross-border outstandings, as credit
demand has increased and markets such as the retail segment have grown. The
growth in Argentine cross-border outstandings mainly reflected increases in
non-trade-related local-dollar loans funded by locally generated dollar
liabilities, securities available for sale and trade-related outstandings.

The increase in Brazilian cross-border outstandings reflected a higher level of
securities available for sale and non-trade-related loans. Contributing to this
increase was the Corporations's strategy to take a currency position by funding
local currency assets with capital and non-local currency liabilities, as local
currency interest rates continued to exceed the rate of devaluation. This
position, which leaves the Corporation "underhedged" and exposed to losses
should devaluation exceed local interest rates, is discussed further in
Management's Financial Review on page 33. The Brazilian economy continues to
experience difficulties and hyperinflationary conditions. Also, in 1994 there
will be a presidential election, which may result in changes in economic policy
both before and after the election. Management continues to monitor its position
in Brazil closely.

The Corporation has not experienced and does not expect to experience any
collection problems, stemming from currency restrictions or foreign exchange
liquidity problems, on its current portfolio of LDC cross-border outstandings,
except as such problems relate to its remaining $5 million portfolio of
non-trade-related cross-border outstandings, which is subject to country debt
rescheduling agreements. There can be no assurance, however, that such problems
will not occur.

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CONTINUED

LOANS AND LEASE FINANCING

The loan and lease financing portfolio is diversified both in terms of
geography, industry and product. The only category of loans and leases which
exceeded 10% of the portfolio was loans collateralized by real estate. For a
discussion of the Corporation's domestic commercial real estate and highly
leveraged transaction portfolios, refer to Management's Financial Review on
pages 40 to 43. The following table presents details of consolidated loan and
lease financing balances outstanding on the dates indicated.

1993 1992 1991 1990 1989
DECEMBER 31 BALANCE PERCENT Balance Percent Balance Percent Balance Percent Balance Percent

(DOLLARS IN
MILLIONS)
UNITED STATES
OPERATIONS
Commercial,
industrial and
financial...... $11,991.4 41.7% $10,328.5 40.7% $10,345.4 40.8% $11,413.8 43.5% $13,335.7 43.3%
Real Estate:
Secured by 1-4
family
residential
properties... 4,159.1 14.5 3,630.2 14.3 3,884.4 15.3 3,505.4 13.4 4,002.7 13.0
Construction.... 617.4 2.1 854.4 3.4 1,027.9 4.1 1,520.0 5.8 2,657.7 8.6
Other
commercial.... 3,123.0 10.8 3,202.1 12.6 3,587.3 14.2 3,863.6 14.7 4,407.9 14.3
Loans to
individuals..... 1,609.6 5.6 1,436.4 5.6 1,506.3 5.9 1,663.5 6.3 2,203.2 7.2
Lease
financing....... 1,263.3 4.4 1,213.9 4.7 1,277.0 5.0 1,380.5 5.3 1,556.6 5.1
Unearned
income.......... (203.6) (.7) (205.4) (.8) (243.0) (1.0) (395.1) (1.5) (550.3) (1.8)
--------- ----- -------- ---- -------- ---- -------- ---- -------- ----
22,560.2 78.4 20,460.1 80.5 21,385.3 84.3 22,951.7 87.5 27,613.5 89.7
========= ===== ======== ==== ======== ==== ======== ==== ======== ====
INTERNATIONAL
OPERATIONS
Commercial and
industrial..... 4,650.2 16.2 3,645.8 14.4 2,928.1 11.5 2,193.0 8.4 2,229.2 7.3
Banks and other
financial
institutions.... 602.3 2.1 385.0 1.5 152.0 .6 154.5 .6 46.3 .2
Governments and
official
institutions.... 22.1 .1 53.5 .2 140.7 .6 209.2 .8 251.6 .8
Lease
financing....... 264.6 .9 218.4 .9 241.8 1.0 142.1 .5 186.1 .6
All other........ 791.0 2.7 721.2 2.8 608.7 2.4 641.8 2.5 530.2 1.7
Unearned
income.......... (108.4) (.4) (84.7) (.3) (88.9) (.4) (72.5) (.3) (85.3) (.3)
--------- ----- -------- ---- -------- ---- -------- ---- -------- ----
6,221.8 21.6 4,939.2 19.5 3,982.4 15.7 3,268.1 12.5 3,158.1 10.3
--------- ----- -------- ---- -------- ---- -------- ---- -------- ----
$28,782.0 100.0% $25,399.3 100.0% $25,367.7 100.0% $26,219.8 100.0% $30,771.6 100.0%
========= ===== ======== ==== ======== ==== ======== ==== ======== ====

The Corporation does not have an automatic renewal policy for maturing loans.
Rather, loans are renewed at the maturity date only at the request of those
customers who are deemed to be creditworthy by the Corporation. Additionally,
the Corporation reviews such requests in substantially the same manner as
applications by new customers for extensions of credit. The maturity dates and
interest terms of renewed loans are based, in part, upon the needs of the
individual customer and the Corporation's credit review and evaluation of
current and future economic conditions. Since these factors have varied
considerably, and will most likely continue to do so, the Corporation believes
it is impracticable to estimate the amount of loans in the portfolio which may
be renewed in the future.

The following table presents the maturities and interest rate sensitivity, based
on original contractual terms, of the Corporation's loans at December 31, 1993,
exclusive of domestic office loans secured by 1-4 family residential properties,
domestic office loans to individuals and lease financing.

AFTER
ONE
BUT
WITHIN AFTER
WITHIN FIVE FIVE
(IN MILLIONS) ONE YEAR YEARS YEARS TOTAL

Commercial, industrial and financial....................................... $ 5,520.0 $3,938.6 $2,320.8 $11,779.4
Real estate:
Construction........................................................... 329.7 218.7 62.2 610.6
Other commercial....................................................... 1,389.4 1,513.4 214.4 3,117.2
Overseas offices........................................................... 5,786.5 429.7 74.0 6,290.2
-------- ------- ------- --------
$13,025.6 $6,100.4 $2,671.4 $21,797.4
======== ======= ======= ========
Loans with predetermined interest rates.................................... $ 3,103.7 $2,208.0 $ 436.6 $ 5,748.3
Loans with floating interest rates......................................... 9,921.9 3,892.4 2,234.8 16,049.1
-------- ------- ------- --------
$13,025.6 $6,100.4 $2,671.4 $21,797.4
======== ======= ======= ========

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CONTINUED

NONACCRUAL LOANS AND LEASES

The Corporation's policy for nonaccrual loans and leases is discussed in Note 1
to the Financial Statements under the caption Loans and Lease Financing.

The following is a summary of nonaccrual loans and leases by type and as a
percentage of the related consolidated loan category:

DECEMBER 31 1993 1992 1991 1990 1989
PERCENT Percent Percent Percent Percent
(DOLLARS IN OF LOAN of Loan of Loan of Loan of Loan
MILLIONS) BALANCE CATEGORY Balance Category Balance Category Balance Category Balance Category

UNITED STATES
OPERATIONS
Commercial,
industrial and
financial...... $118.8 1.0% $200.7 1.9% $ 385.0 3.7% $ 419.4 3.7% $ 252.7 1.9%
Real Estate:
Secured by
1-4 family
residen-
tial
properties... 63.9 1.5 58.6 1.6 69.4 1.8 60.1 1.7 36.6 .9
Construction... 30.1 4.9 80.9 9.5 122.7 11.9 288.0 18.9 339.2 12.8
Other
commercial... 230.7 7.4 344.7 10.8 739.8 20.6 899.7 23.3 699.0 15.9
Loans to
individuals.... 10.0 .6 26.4 1.8 32.2 2.1 41.7 2.5 31.1 1.4
Lease
financing...... 1.0 .1 1.6 .2 5.3 .5 5.8 .6 1.1 .1
------ ------ ------- ------- -------
454.5 2.0 712.9 3.5 1,354.4 6.3 1,714.7 7.5 1,359.7 4.9
------ ------ ------- ------- -------
INTERNATIONAL
OPERATIONS
Commercial and
industrial..... 63.0 1.4 53.7 1.5 56.2 1.9 80.7 3.7 126.6 5.7
Banks and other
financial
institutions... .7 .2 2.3 1.5 6.3 4.1 10.4 22.5
Governments and
official
institutions... 2.6 11.8 4.3 8.0 52.7 37.5 81.9 39.1 144.4 57.4
Lease
financing...... 1.5 1.1 2.1 1.4 2.9 4.2 3.9 3.9
All other........ 31.3 4.0 5.8 .8 45.2 7.4 10.6 1.7 1.5 .3
------ ------ ------- ------- -------
96.9 1.6 66.0 1.3 158.5 4.0 182.4 5.6 286.8 9.1
------ ------ ------- ------- -------
$551.4 1.9% $778.9 3.1% $1,512.9 6.0% $1,897.1 7.2% $1,646.5 5.4%
====== ====== ======= ======= =======

In addition to nonaccrual loans and leases, the Corporation had other real
estate owned that, at December 31, amounted to $108 million in 1993, $170
million in 1992, $326 million in 1991, $244 million in 1990 and $188 million in
1989. At December 31, 1993, 1992, 1991, 1990 and 1989, $7.2 million, $5.6
million, $2.5 million, $53 million and $5.9 million, respectively, of loans and
leases were over ninety days past due and still on accrual status.

The following is an analysis of interest income related to loans and leases on
nonaccrual status:

DECEMBER 31, 1993 United States International
(IN MILLIONS) Operations Operations Consolidated

Interest income that would have been recognized if the loans had been
current at original contractual rates................................ $44.5 $8.8 $53.3
Amount recognized as interest income................................... 12.0 3.0 15.0
----- ---- -----
Difference............................................................. $32.5 $5.8 $38.3
===== ==== =====

89
60
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CONSOLIDATED STATISTICAL INFORMATION
- --------------------------------------------------------------------------------
continued

RESERVE FOR CREDIT LOSSES

The Corporation's reserve for credit losses is available for future chargeoffs
of extensions of credit. The provision for credit losses, added to the reserve
by charges to income, is based upon management's estimation of the amount
necessary to maintain the reserve at an adequate level, considering evaluations
of individual credits and concentrations of credit risk, net losses charged to
the reserve, changes in the quality of the credit portfolio, levels of
nonaccrual loans and leases, current economic conditions, international transfer
risks, changes in the size and character of the credit risks and other pertinent
factors warranting current recognition. The Corporation charges all or a portion
of a loan or lease receivable against the reserve when a probability of loss has
been established, with consideration given to such factors as the customer's
financial condition, underlying collateral and guarantees. The Corporation uses
a loan rating system in its United States and International Operations to assist
management in its evaluation of the loan portfolio. At least annually,
individual loans are reviewed and ratings adjusted, if applicable, based upon
potential risk. If indicated by the assigned rating, particular loans are
reviewed more frequently.

Allocation of Reserve for Credit Losses
The Corporation's reserve for credit losses is a general reserve available for
all categories of prospective credit loss. The Corporation has made an
allocation of its reserve giving consideration to management's evaluation of
risk in the portfolios. The following table presents the allocation of the
reserve by loan and lease financing category. For the percentage of loans
outstanding in each category to total loans, refer to the "Loans and Lease
Financing" table on page 88.

DECEMBER 31 1993 1992 1991
PERCENT Percent Percent
OF of of
(DOLLARS IN MILLIONS) AMOUNT TOTAL Amount Total Amount Total

UNITED STATES OPERATIONS
Commercial, industrial and
financial....................... $245.6 31.9% $273.3 29.5% $ 428.7 40.9%
Real Estate:
Secured by 1-4 family
residential properties........ 24.8 3.2 26.9 2.9 21.4 2.0
Commercial including
construction................... 233.7 30.3 319.9 34.7 297.7 28.3
Loans to individuals.............. 61.4 8.0 59.9 6.5 79.0 7.5
Lease financing................... 18.3 2.4 4.2 .5 5.6 .5
------ ----- ----- ---- ------- ----
583.8 75.8 684.2 74.1 832.4 79.2
INTERNATIONAL OPERATIONS.......... 86.2 11.2 120.0 13.0 102.0 9.7
------ ----- ----- ---- ------- ----
670.0 87.0 804.2 87.1 934.4 88.9
Unallocated....................... 100.3 13.0 118.9 12.9 116.8 11.1
------ ----- ----- ---- ------- ----
$770.3 100.0% $923.1 100.0% $1,051.2 100.0%
======= ===== ===== ===== ======= =====

DECEMBER 31 1990 1989
Percent Percent
of of
(DOLLARS IN MILLIONS) Amount Total Amount Total

UNITED STATES OPERATIONS
Commercial, industrial and
financial....................... $ 392.3 38.3% $217.8 22.2%
Real Estate:
Secured by 1-4 family
residential properties........ 10.1 1.0 8.2 .8
Commercial including
construction................... 409.2 40.0 451.6 45.9
Loans to individuals.............. 49.7 4.9 29.1 3.0
Lease financing................... 5.8 .6 5.3 .5
---- ---- ----- ----
867.1 84.8 712.0 72.4
INTERNATIONAL OPERATIONS.......... 125.0 12.2 200.0 20.4
----- ---- ----- ----
992.1 97.0 912.0 92.8
Unallocated....................... 30.5 3.0 71.0 7.2
----- ---- ----- ----
$1,022.6 100.0% $983.0 100.0%
======= ===== ===== =====

90
61
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CONSOLIDATED STATISTICAL INFORMATION
- --------------------------------------------------------------------------------
CONTINUED

Analysis of Reserve for Credit Losses
The following table presents a five year analysis of the Corporation's reserve
for credit losses:

DECEMBER 31 1993 1992 1991 1990 1989

(DOLLARS IN MILLIONS)
DOMESTIC OPERATIONS(1)
BALANCE, JANUARY 1.............................................. $ 803.1 $ 949.2 $ 897.6 $ 783.0 $ 375.9
Provision....................................................... 43.9 149.9 522.8 784.9 845.7
Domestic credit losses:
Commercial, industrial and financial.......................... (55.1) (98.0) (163.8) (255.8) (157.7)
Real estate:
Construction................................................ (18.5) (58.8) (108.0) (140.6) (187.9)
1-4 family................................................... (21.9) (24.0) (17.4) (7.6) (5.7)
Other........................................................ (63.3) (128.8) (187.5) (242.2) (73.0)
Loans to individuals........................................... (47.4) (46.3) (64.8) (66.3) (63.1)
Lease financing................................................ (.9) (.9) (1.8) (1.8) (1.1)
-------- ------- -------- -------- -------
Total domestic credit losses.................................... (207.1) (356.8) (543.3) (714.3) (488.5)
Domestic recoveries:
Commercial, industrial and financial.......................... 15.1 31.7 43.6 18.4 28.2
Real estate:
Construction................................................ 2.0 4.1 4.4 3.8 2.3
1-4 family................................................... 4.2 3.2 1.7 1.3 1.0
Other........................................................ 6.4 2.3 3.9 5.0 1.5
Loans to individuals........................................... 16.5 19.3 18.4 15.3 16.7
Lease financing................................................ .2 .1 .2 .2
-------- ------- -------- -------- -------
Total domestic recoveries....................................... 44.2 60.8 72.1 44.0 49.9
-------- ------- -------- -------- -------
Net domestic credit losses...................................... (162.9) (296.0) (471.2) (670.3) (438.6)
-------- ------- -------- -------- -------
BALANCE, DECEMBER 31............................................ 684.1 803.1 949.2 897.6 783.0
-------- ------- -------- -------- -------
INTERNATIONAL OPERATIONS
BALANCE, JANUARY 1.............................................. 120.0 102.0 125.0 200.0 389.0
Provision....................................................... 26.2 12.0 (1.0) (27.5) (72.0)
International credit losses..................................... (65.9) (55.3) (53.9) (82.2) (114.5)
International recoveries........................................ 5.9 42.6 35.0 27.8 24.1
-------- ------- -------- -------- -------
Net international credit losses................................. (60.0) (12.7) (18.9) (54.4) (90.4)
-------- ------- -------- -------- -------
Transfer to (from) unallocated reserve and domestic
operations..................................................... 18.7 (3.1) 6.9 (26.6)
-------- ------- -------- -------- -------
BALANCE, DECEMBER 31............................................ 86.2 120.0 102.0 125.0 200.0
-------- ------- -------- -------- -------
TOTAL DOMESTIC AND INTERNATIONAL RESERVE FOR
CREDIT LOSSES, DECEMBER 31..................................... $ 770.3 $ 923.1 $1,051.2 $1,022.6 $ 983.0
======= ====== ======= ======= ======
Loans and lease financing at December 31........................ $ 28,782 $25,399 $ 25,368 $ 26,210 $30,762
======= ====== ======= ======= ======
Average loans and lease financing............................... $ 26,586 $25,330 $ 26,167 $ 28,949 $32,061
======= ====== ======= ======= ======
Ratios:
Reserve for credit losses to loans and lease financing at
December 31................................................. 2.68% 3.63% 4.14% 3.90% 3.20%
Net credit losses to average loans and lease financing......... .84 1.22 1.87 2.50 1.65
Net credit losses to provision for credit losses............... 317.95 170.94 94.49 94.82 70.82
Total recoveries to total credit losses........................ 18.36 25.09 17.94 9.01 12.26
<FN>
(1) For basis of presentation only, in this analysis the unallocated reserve for
credit losses previously discussed has been included in Domestic Operations.
However, the unallocated reserve is part of the general reserve of the
Corporation and, as such, is available for both Domestic and International
credit losses.

62
- --------------------------------------------------------------------------------
CONSOLIDATED STATISTICAL INFORMATION
- --------------------------------------------------------------------------------
CONTINUED

SECURITIES

On December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." Notes 1 and 5 to the
Financial Statements describe the effect of the adoption of this standard on the
classification and carrying value of securities.

The following table sets forth the carrying values of securities held to
maturity of the Corporation on the dates indicated:

DECEMBER 31 1993 1992 1991

(IN MILLIONS)
U.S. Treasury.................................................................. $ 317.4 $ 285.2 $ 331.6
U.S. government agencies and corporations--
Mortgage-backed securities................................................. 1,045.6 1,774.7 1,908.5
States and political subdivisions.............................................. 29.5 51.1 60.5
Foreign debt securities........................................................ 108.5 125.2 104.7
Other debt securities.......................................................... 175.1 207.1
Marketable equity securities................................................... 31.0 21.8
Other equity securities........................................................ 67.8 192.9 179.6
--------- -------- --------
$ 1,568.8 $2,635.2 $2,813.8
========= ======== ========

The following table sets forth the carrying values of securities available for
sale of the Corporation on the dates indicated:

DECEMBER 31 1993 1992 1991

(IN MILLIONS)
U.S. Treasury.................................................................. $ 109.6 $ 525.7 $2,828.1
U.S. government agencies and corporations--
Mortgage-backed securities................................................. 498.2 568.5 514.0
States and political subdivisions.............................................. .5 14.4
Foreign debt securities........................................................ 490.0 344.2 178.5
Other debt securities.......................................................... 149.6 49.1 .5
Marketable equity securities................................................... 74.3
Other equity securities........................................................ 115.7 9.6 5.6
--------- -------- --------
$ 1,437.9 $1,497.1 $3,541.1
========= ======== ========

The following table sets forth the relative maturities and weighted average
interest rates of securities both available for sale and held to maturity at
December 31, 1993, excluding equity securities. Certain securities, such as
mortgage-backed securities, may not become due at a single maturity date. Such
securities have been classified within the category that represents the due
dates for the majority of the instrument. Rates for states and political
subdivisions are stated on a fully taxable equivalent basis assuming a 35%
federal income tax rate, adjusted for applicable state and local income taxes
net of the related federal tax benefit.

AFTER ONE BUT
WITHIN FIVE AFTER FIVE BUT
WITHIN ONE YEAR YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE

(DOLLARS IN
MILLIONS)
U.S. Treasury.... $394.8 3.2% $ 26.9 7.6% $ 5.3 6.0% $ 427.0 3.5%
U.S. government
agencies and
corporations--
Mortgage-backed
securities... 5.0 8.3 170.1 5.0 115.2 6.3 $1,253.5 5.7% 1,543.8 5.7
States and
political
subdivisions.... 17.4 5.8 8.9 9.2 2.4 10.4 1.3 8.8 30.0 7.3
Foreign debt
securities...... 305.0 125.5 226.4 7.8 66.7 7.7 .4 3.3 598.5 67.7
Other debt
securities...... 44.8 12.7 87.4 13.5 17.4 12.0 149.6 13.1
------ ------ ------ -------- --------
Total
carrying
value...... $767.0 52.5 $519.7 7.9 $207.0 7.3 $1,255.2 5.7 $2,748.9 19.3
====== ====== ====== ======== ========

DEPOSITS
The aggregate amount of deposits by foreign depositors in domestic offices
averaged $876 million in 1993, $1,298 million in 1992 and $1,922 million in
1991. The following table presents the maturities of time certificates of
deposit and other time deposits issued by domestic offices in denominations of
$100,000 or more, at December 31, 1993:

CERTIFICATES TIME
OF DEPOSIT DEPOSITS TOTAL

(IN MILLIONS)
Maturing within three months.......................................................... $1,621.0 $ 6.4 $1,627.4
After three but within six months..................................................... 313.4 6.8 320.2
After six but within twelve months.................................................... 164.5 8.5 173.0
After twelve months................................................................... 616.0 134.4 750.4
-------- ----- -------
$2,714.9 $156.1 $2,871.0
======== ====== ========

The majority of foreign office deposits are in denominations of $100,000 or
more.

92
63

SHORT-TERM BORROWINGS

Daily Weighted
Maximum Average Average
Amount Amount Interest
Weighted Outstanding Outstanding Rate
Balance Average During During During
(DOLLARS IN MILLIONS) at End of Interest the the the
CATEGORY OF AGGREGATE SHORT-TERM BORROWINGS Period Rate(1) Period Period Period

FOR THE YEAR ENDED DECEMBER 31, 1993
Federal funds purchased(2).......................... $ 417.1 3.02% $ 783.4 $ 700.7 3.01%
Term federal funds purchased(2)..................... 2,150.0 3.36 2,325.2 1,283.8 3.34
Securities sold under agreements to repurchase(3)... 798.8 39.45 1,001.7 832.2 28.73
Commercial paper(4)................................. 34.5 14.9 3.59
Demand notes issued to the U.S. Treasury(5)......... 117.4 2.73 1,219.4 400.2 2.81
All other(6)........................................ 1,164.1 171.5 1,164.1 707.5 169.37
FOR THE YEAR ENDED DECEMBER 31, 1992
Federal funds purchased(2).......................... $ 468.1 3.05% $ 729.0 $ 555.9 3.41%
Term federal funds purchased(2)..................... 280.0 3.78 360.0 67.8 3.81
Securities sold under agreements to repurchase(3)... 1,121.7 14.23 2,116.8 1,253.3 12.91
Commercial paper(4)................................. 41.5 13.7 3.63
Demand notes issued to the U.S. Treasury(5)......... 106.3 3.00 1,551.7 508.8 3.49
All other(6)........................................ 576.0 108.30 673.9 503.8 131.54
FOR THE YEAR ENDED DECEMBER 31, 1991
Federal funds purchased(2).......................... $ 503.6 4.19% $ 630.8 $ 566.8 5.63%
Term federal funds purchased(2)..................... 8.5 5.15 76.0 33.6 6.76
Securities sold under agreements to repurchase(3)... 2,058.7 4.88 2,930.4 1,721.8 7.68
Commercial paper(4)................................. 13.0 9.74 199.7 81.7 6.43
Demand notes issued to the U.S. Treasury(5)......... 1,315.9 4.07 1,330.8 557.5 5.49
All other(6)........................................ 544.8 96.07 551.4 359.4 63.05
<FN>
(1) The weighted average interest rates at year-end are not necessarily
indicative of the Corporation's normal borrowing rates since interest rates
for certain categories of borrowing are subject to abnormal short-term
movements.

(2) Federal funds purchased are overnight transactions while term federal funds
purchased have maturities in excess of one day. A large portion of federal
funds purchased arise because of money market activity in federal funds for
regional correspondent banks.

(3) Securities sold under agreements to repurchase by domestic offices mature
within one year and are collateralized by U.S. Treasury and U.S. government
agencies and corporations securities. The majority of securities sold under
agreements to repurchase by overseas offices in 1993 and 1992 related to the
Brazilian operation of FNBB for which various Brazilian government
securities served as collateral. The majority of securities sold under
agreements to repurchase by overseas offices in 1991 related to the Chilean
operations of FNBB for which various Chilean government securities served as
collateral.

(4) Commercial paper represents unsecured obligations with maximum maturities of
nine months.

(5) Demand notes issued to the U.S. Treasury represent depository liabilities
that are not subject to reserve requirements and bear interest at
one-quarter of one percent below the weekly average federal funds effective
interest rate as published by the Federal Reserve.

(6) The majority of other short-term borrowings represent secured and unsecured
obligations of the Corporation's overseas branches and subsidiaries.

93
64

- --------------------------------------------------------------------------------
SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL
INFORMATION AND COMMON STOCK DATA
- --------------------------------------------------------------------------------

In the opinion of management, all adjustments which include only normal
recurring adjustments necessary to present fairly the the results of operations
for each of the following quarterly periods, have been made.

1993 1992
(IN MILLIONS, EXCEPT SHARE AND PER SHARE FOURTH THIRD SECOND FIRST Fourth Third Second First
AMOUNTS) QUARTER QUARTER QUARTER QUARTER Quarter Quarter Quarter Quarter

INCOME STATEMENT DATA(1)
Interest income....................... $2,225.2 $1,858.2 $1,434.0 $1,306.5 $1,283.2 $1,296.1 $1,276.8 $1,250.6
Interest expense...................... 1,792.5 1,487.0 1,066.6 959.0 933.7 959.6 954.9 952.7
------- ------- ------- ------- ------- ------- ------- -------
Net interest revenue(2)............... 432.7 371.2 367.4 347.5 349.5 336.5 321.9 297.9
Provision for credit losses........... 10.0 10.0 27.6 22.5 23.0 44.5 45.2 67.9
------- ------- ------- ------- ------- ------- ------- -------
Net interest revenue after provision for
credit losses....................... 422.7 361.2 339.8 325.0 326.5 292.0 276.7 230.0
Noninterest income(2)(3).............. 105.6 160.8 154.1 151.1 165.4 168.7 173.8 199.7
Noninterest expense(4)................ 346.6 440.2 368.3 375.7 387.0 365.5 361.0 360.6
------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes, extraordinary
item, and cumulative effects of changes
in accounting principles............ 181.7 81.8 125.6 100.4 104.9 95.2 89.5 69.1
Provision for income taxes............ 79.2 40.4 54.2 40.9 42.7 40.3 41.6 28.2
------- ------- ------- ------- ------- ------- ------- -------
Income before extraordinary item and
cumulative effect of changes in
accounting principles............... 102.5 41.4 71.4 59.5 62.2 54.9 47.9 40.9
Recognition of prior year tax benefit
carryforwards....................... 17.3 19.0 18.4 18.3
Cumulative effect of changes in
accounting
principles, net..................... 24.2
------- ------- ------- ------- ------- ------- ------- -------
Net Income............................ $ 102.5 $ 41.4 $ 71.4 $ 83.7 $ 79.5 $ 73.9 $ 66.3 $ 59.2
======= ======= ======= ======= ======= ======= ======= =======
AVERAGE BALANCE SHEET DATA(1)
Loans and lease financing............. $ 28,172 $ 26,953 $ 25,854 $ 25,224 $ 25,269 $ 25,577 $25,248 $ 25,198
Securities............................ 3,194 3,561 3,838 3,909 4,907 4,521 4,232 5,156
Other earning assets.................. 4,763 4,306 3,731 3,543 3,164 3,187 3,168 3,263
------- ------- ------- ------- ------- ------- ------- -------
Total earning assets.............. 36,129 34,820 33,423 32,676 33,340 33,285 32,648 33,617
Cash and due from banks............... 1,924 1,845 1,716 1,672 1,734 1,534 1,612 1,503
Other assets.......................... 2,350 2,403 2,362 2,103 2,222 2,055 1,980 1,874
------- ------- ------- ------- ------- ------- ------- -------
Total Average Assets.............. $ 40,403 $ 39,068 $ 37,501 $ 36,451 $ 37,296 $ 36,874 $36,240 $ 36,994
======= ======= ======= ======= ======= ======= ======= =======
Deposits.............................. $ 29,247 $ 28,543 $ 28,194 $ 28,162 $ 28,880 $ 29,011 $29,106 $ 29,114
Funds borrowed........................ 5,390 4,915 3,921 3,141 3,714 3,421 2,998 3,809
Other liabilities..................... 1,073 1,085 1,022 886 957 919 865 930
Notes payable......................... 1,876 1,752 1,670 1,669 1,223 1,186 1,187 1,192
Stockholders' equity.................. 2,817 2,773 2,694 2,593 2,522 2,337 2,084 1,949
------- ------- ------- ------- ------- ------- ------- -------
Total Average Liabilities and
Stockholders' Equity............ $ 40,403 $ 39,068 $ 37,501 $ 36,451 $ 37,296 $ 36,874 $36,240 $ 36,994
======= ======= ======= ======= ======= ======= ======= =======
PER COMMON SHARE(1)
Income before extraordinary item and
cumulative effect of changes in
accounting principles:
Primary............................. $ .88 $ .30 $ .60 $ .49 $ .52 $ .47 $ .43 $ .60
Fully diluted....................... $ .85 $ .30 $ .59 $ .48 $ .50 $ .46 $ .42 $ .59
Net Income:
Primary............................. $ .88 $ .30 $ .60 $ .72 $ .68 $ .65 $ .61 $ .60
Fully diluted....................... $ .85 $ .30 $ .59 $ .70 $ .66 $ .63 $ .59 $ .59
Cash dividends declared............... $ .10 $ .10 $ .10 $ .10 $ .10
Market value:
High................................. 25 5/8 25 7/8 28 3/8 28 7/8 26 25 24 7/8 20
Low................................. 21 3/8 23 1/2 20 1/2 24 19 3/8 18 7/8 16 1/4 11 5/8
AVERAGE NUMBER OF COMMON SHARES
(IN THOUSANDS)
Primary............................... 105,644 105,443 105,285 104,962 104,548 104,407 104,118 95,408
Fully diluted......................... 110,308 110,446 110,077 110,079 109,531 109,281 109,302 100,132
<FN>
(1) Quarterly consolidated financial information and common stock data for each of the quarters in the periods ended December
31, 1993 and 1992 have been restated, except for cash dividends declared, to reflect the Corporation's mergers with Bancorp and
Multibank, which were completed in July 1993 and accounted for as poolings of interests.

(2) The levels of consolidated net interest revenue and noninterest income in 1993 and 1992 are affected by the Corporation's
currency position in Brazil, which is maintained to take advantage of the spread between local Brazilian interest rates and
devaluation of Brazil's local currency. A detailed discussion of the Brazilian currency position is discussed in Management's
Financial Review on page 33.

(3) Includes a $17 million charge to net mortgage servicing fees in the first quarter of 1993 from applying the new method of
accounting for PMSR and $16 million in the first quarter of 1992 from the recognition of the remaining unamortized gain from
the 1984 sale of the Corporation's headquarters building following the termination of the original lease agreement and
subsequent entry into a new lease of the building.

(4) Includes $85 million in the third quarter of 1993 of merger and restructuring charges, primarily in connection with the
Corporation's mergers with Bancorp and Multibank, as well as other expense reduction initiatives of the Corporation.

The common stock of the Corporation, which is the only class of its securities
entitled to vote at the Annual Meeting, is listed and traded on the New York and
Boston Stock Exchanges.