<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
(Mark One)
 
(X)            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the Quarterly Period Ended March 31, 1999
 
                                      OR
 
( )            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from          to
 
                         Commission file number 1-6522
 
                            BANKBOSTON CORPORATION
            (Exact name of Registrant as specified in its charter)
 
            Massachusetts                         04-2471221
   (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)             Identification No.)
 
         100 Federal Street,                         02110
        Boston, Massachusetts                     (Zip Code)
   (Address of principal executive
               office)
 
      Registrant's telephone number, including area code  (617) 434-2200
 
   Former name, former address and former fiscal year, if changed since last
                            report: Not Applicable
 
  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes  X   No
 
  Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1999:
 
  Common Stock, $1.00 par value                                     296,776,982
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
CONSOLIDATED SELECTED FINANCIAL DATA......................................   3
PART I  FINANCIAL INFORMATION
     Management's Discussion and Analysis of Financial Condition and
      Results of Operations...............................................   4
     Financial Statements
     BankBoston Corporation
      Consolidated Balance Sheet..........................................  32
      Consolidated Statement of Income....................................  34
      Consolidated Statement of Changes in Stockholders' Equity...........  35
      Consolidated Statement of Cash Flows................................  36
     Notes to Financial Statements........................................  37
PART II  OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders................  46
Item 6.Exhibits and Reports on Form 8-K...................................  47
Signatures................................................................  48
LIST OF TABLES
  Consolidated Average Balance Sheet--Nine Quarters.......................  42
  Consolidated Statement of Income--Nine Quarters.........................  43
  Average Balances and Interest Rates--Quarter............................  44
  Change in Net Interest Revenue--Volume and Rate Analysis................  45
</TABLE>
 
                                       2
<PAGE>
 
                            BANKBOSTON CORPORATION
 
                     CONSOLIDATED SELECTED FINANCIAL DATA
 
                (dollars in millions, except per share amounts)
 
<TABLE>
<CAPTION>
                                                        1999        1998
Quarters Ended March 31                                -------     -------
<S>                                                    <C>         <C>
Income Statement Data
Net interest revenue.................................. $   635     $   603
Provision for credit losses...........................      70         140
Noninterest income....................................     595         589
Noninterest expense...................................     806         661
Net income............................................     223         238
Per common share(1)
  Basic...............................................     .75         .80
  Diluted.............................................     .75         .79
Return on average common equity.......................   18.54%      21.31%
Return on average total assets........................    1.19        1.39

At March 31
Balance Sheet Data
Loans and lease financing............................. $42,775     $43,822
Total assets..........................................  75,708      71,428
Deposits..............................................  48,468      46,397
Total stockholders' equity............................   4,963       4,807
Book value per common share(1)........................   16.73       15.44
Market value per common share(1)
  High................................................     47 1/16     55 15/16
  Low.................................................     34 1/2      43 15/16
Regulatory capital ratios
 Risk-based capital ratios
  Tier 1..............................................     7.2%        7.9%
  Total...............................................    11.5        12.3
 Leverage ratio.......................................     6.9         7.3
</TABLE>
--------
(1) Per share information for 1998 has been adjusted to reflect the
    Corporation's two-for-one stock split effected in June 1998.
 
                                       3
<PAGE>
 
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
                             RESULTS OF OPERATIONS
 
  This discussion and analysis updates, and should be read in conjunction
with, Management's Discussion and Analysis included in the 1998 Annual Report
to Stockholders of BankBoston Corporation (the Corporation), which is
incorporated by reference into its 1998 Annual Report on Form 10-K.
 
  On March 14, 1999, the Corporation and Fleet Financial Group, Inc. (Fleet)
entered into an Agreement and Plan of Merger pursuant to which the Corporation
will merge with Fleet. Under the terms of this agreement, each outstanding
share of the Corporation's common stock will be converted into the right to
receive 1.1844 shares of Fleet common stock. The merger is intended to
constitute a tax-free reorganization for federal income tax purposes and to be
accounted for as a pooling of interests. At March 31, 1999, Fleet had total
assets of $106 billion and total stockholder's equity of $9.6 billion. The
transaction, which is subject to stockholder and regulatory approval, is
expected to be completed in the latter half of 1999. In conjunction with the
merger, it is expected that the combined organization will be required to
divest approximately $13 billion of deposits. Additional information with
respect to this merger can be found in Note 2 to the Financial Statements.
 
First Quarter 1999 Financial Highlights
 
  .  The Corporation's net income for the quarter ended March 31, 1999 was
     $223 million, compared with $238 million for the same period in 1998.
     Net income per common share and diluted net income per common share were
     both $.75 in 1999, compared with $.80 and $.79, respectively, in 1998.
     All per common share amounts reflect the Corporation's two-for-one stock
     split effected in June 1998.
 
  .  On a consolidated basis, taxable equivalent net interest revenue in the
     first quarter of 1999 increased $32 million, or 5 percent, from the same
     period in 1998. Consolidated net interest margin for the first quarter
     of 1999 was 4.03 percent, compared with 4.07 percent for the same period
     in 1998.
 
  .  Noninterest income in the first quarter of 1999 increased $6 million,
     compared with the same period in 1998. Financial service fees and
     commissions increased $169 million, mainly as a result of 1998 expansion
     activities, including the acquisition of Robertson Stephens, an
     investment bank with equity underwriting and research capabilities
     acquired from BankAmerica Corporation in the third quarter of 1998, as
     well as acquisitions and branch expansion programs in Latin America.
     This increase was largely offset by the absence of a $165 million gain
     from the Corporation's first quarter 1998 sale of its 26 percent
     interest in HomeSide, Inc. (HomeSide), an independent mortgage banking
     company.
 
  .  For the quarter ended March 31, 1999, the Corporation's Brazilian and
     Argentine operations reported increases in net income of 38 and 25
     percent, respectively, from the first quarter of 1998. Both operations
     benefited from wider spreads and other fee opportunities arising from
     market volatility, as well as from higher fee income due to 1998
     expansion activities. Additionally, the Corporation's Wholesale Bank
     reported an increase in net income of 32 percent from the first quarter
     of 1998. This improvement was driven by an increase in net interest
     revenue, mainly reflecting growth in average loans and lease financing,
     as well as a higher level of fee income, primarily related to the
     acquisition of Robertson Stephens.
 
  .  Noninterest expense for the first quarter of 1999 increased $145
     million, or 22 percent, from the same period in 1998. This increase was
     primarily driven by 1998 expansion activities, including the acquisition
     of Robertson Stephens and the expansion programs in Argentina and
     Brazil.
 
  .  The provision for credit losses was $70 million in the first quarter of
     1999, compared with $140 million in the first quarter of 1998. Net
     credit losses were $66 million, compared with $141 million for the first
     quarter of 1998. The lower net credit losses in 1999 reflect the absence
     of one significant
 
                                       4
<PAGE>
 
     international private banking chargeoff that occurred in the first
     quarter of 1998. On an annualized basis, net credit losses as a
     percentage of average loans and lease financing were .63 percent in the
     first quarter of 1999, compared with 1.30 percent in the same period of
     1998.
 
  .  Total nonaccrual loans and leases and OREO at March 31, 1999 decreased
     $20 million to $382 million from $402 million at December 31, 1998.
     Nonaccrual loans and leases and OREO represented .9 percent of related
     assets at both March 31, 1999 and December 31, 1998.
 
  .  Return on average common equity was 18.54 percent for the first quarter
     of 1999, compared with 21.31 percent in the first quarter of 1998.
     Return on average assets was 1.19 percent in the first quarter of 1999,
     compared with 1.39 percent in the same quarter of 1998.
 
Forward-Looking Statements
 
  The Corporation may from time to time make written or oral statements that
are considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements may
include financial projections, statements of plans and objectives for future
operations, estimates of future economic performance and assumptions relating
thereto.
 
  The Corporation may include forward-looking statements in its filings with
the Securities and Exchange Commission, in its reports to stockholders,
including this Quarterly Report, in other written materials, and in statements
made by senior management to analysts, rating agencies, institutional
investors, representatives of the media and others.
 
  By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risk exists that predictions,
forecasts, projections and other estimates contained in forward-looking
statements will not be achieved. The following factors, among others, could
cause actual results to differ materially from any forward-looking statements:
significant changes and developments in world financial markets, particularly
in Latin America and Asia; the ability of various countries in Asia and Latin
America, particularly in Brazil, to institute timely and effective economic
policies; the uses of monetary, fiscal and tax policy by various governments;
political developments in the United States and other countries; developments
in general economic conditions, both domestic and international, including
interest rate and currency fluctuations, market fluctuations and perceptions,
and inflation; demand for various forms of credit; legislative or regulatory
developments, including changes in laws concerning taxes, banking, securities,
insurance and other aspects of the financial services industry; changes in the
competitive environment for financial services organizations and the
Corporation's responses to those changes; the Corporation's ability to retain
key personnel; the Corporation's ability and resources in both its domestic
and international operations to effectively execute its articulated business
strategies and manage risks associated with the integration of acquisitions
and expansion plans; changes in technology and the successful allocation of
technology resources across multiple projects, including efforts to address
the Year 2000 issue and demands for greater automation; and the ability of the
Corporation's competitors, credit customers, wholesale fund providers,
treasury and capital markets counterparties and vendors and service providers
to respond effectively to the Year 2000 issue. When relying on forward-looking
statements to make decisions with respect to the Corporation, investors and
others are cautioned to consider these and other risks and uncertainties.
 
            NET INTEREST REVENUE--(Fully Taxable Equivalent Basis)
 
  This discussion of net interest revenue should be read in conjunction with
Average Balances and Interest Rates and Change in Net Interest Revenue--Volume
and Rate Analysis, presented elsewhere in this report. For this review of net
interest revenue, 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 percent, plus applicable state and local taxes, net of related
federal tax benefits.
 
 
                                       5
<PAGE>
 
  The following table presents a summary of consolidated net interest revenue,
on a fully taxable equivalent basis, and related average loans and lease
financing and average earning asset balances and net interest margin.
 
<TABLE>
<CAPTION>
                                                      1999     1998    Change
Quarters Ended March 31                              -------  -------  -------
                                                      (dollars in millions)
<S>                                                  <C>      <C>      <C>
Net interest revenue................................ $   639  $   607  $    32
Average loans and lease financing...................  42,536   43,706   (1,170)
Average earning assets..............................  64,280   60,487    3,793
Net interest margin.................................    4.03%    4.07%    (.04)%
</TABLE>
 
  On a consolidated basis, taxable equivalent net interest revenue increased
$32 million in the first quarter of 1999, compared with the same quarter in
1998. This improvement was primarily driven by Argentine operations, which
benefited from wider spreads combined with growth in average earning assets of
$1.6 billion. The latter of these factors reflected 1998 expansion efforts in
Argentina, including the acquisition of Deutsche Bank Argentina, S.A.
(Deutsche Argentina) and the opening of 64 new branches. Additionally, the
increase in net interest revenue reflected over $2.5 billion of growth in
average loans and lease financing from the Wholesale Bank. These improvements
were partially offset by a decline in Brazil as wider spreads were more than
offset by lower Brazilian average earning assets, reflecting the current
recessionary environment, as well as the impact of recent fiscal reforms
passed by the Brazilian government, including certain tax measures. The
increase in net interest revenue was also offset, in part, by the
Corporation's divestiture of its national credit card portfolio in the first
quarter of 1998, which contributed approximately $9 million to net interest
revenue during the same period of 1998, as well as by narrower domestic
spreads in the first quarter of 1999.
 
  Consolidated net interest margin remained relatively flat during the quarter
ended March 31, 1999 compared with the same period in 1998. Margin was
positively influenced by wider spreads in Argentina and Brazil, as well as by
the $2.2 billion domestic commercial loan securitization that occurred in the
fourth quarter of 1998. These benefits to margin were substantially offset by
a significant increase in liquid, lower-yielding assets in the Corporation's
Section 20 subsidiary, due to the acquisition of Robertson Stephens, and by an
increase in investment securities used to manage the Corporation's interest
rate risk. Margin was further reduced by a higher level of investment in bank-
owned life insurance and the issuances of guaranteed preferred beneficial
interests in the Corporation's junior subordinated debentures, both of which
were accomplished in 1998 and are discussed in the Corporation's 1998 Annual
Report to Stockholders, which is incorporated by reference into its 1998
Annual Report on Form 10-K.
 
                          PROVISION FOR CREDIT LOSSES
 
  The provision for credit losses was $70 million in the first quarter of
1999, compared with $140 million in the first quarter of 1998. The provision
for credit losses reflects management's assessment of the adequacy of the
reserve for credit losses, considering the current risk characteristics of the
loan portfolio and economic conditions. The level of provision in the first
quarter of 1998 reflected the impact of events in the Corporation's
International Private Bank as discussed in the section entitled "Reserve for
Credit Losses." The amount of future provisions will continue to be a function
of management's assessment of risks based upon its quarterly review of the
reserve for credit losses. These risks include the longer-term impact of
continued economic instability in world financial markets and the status of
implementing necessary economic reforms in various countries. As such, there
can be no assurance as to the level of future provisions. See the "Reserve for
Credit Losses" section for discussion of the reserve for credit losses and net
credit losses.
 
 
                                       6
<PAGE>
 
                              NONINTEREST INCOME
 
  The following table presents the components of noninterest income.
 
<TABLE>
<CAPTION>
                                                              1999  1998 Change
Quarters Ended March 31                                       ----  ---- ------
                                                               (in millions)
<S>                                                           <C>   <C>  <C>
Financial service fees and commissions
  Deposit and electronic banking fees........................ $ 80  $ 70 $  10
  Investment banking fees and commissions....................  135    13   122
  Syndication and agent fees.................................   28    15    13
  Other financial service fees...............................   91    67    24
                                                              ----  ---- -----
                                                               334   165   169
Trust and investment management fees.........................   79    79
Securities gains(losses), net................................   (2)   25   (27)
Trading profits and commissions..............................   39    34     5
Net foreign exchange profits.................................   45    28    17
Net equity and mezzanine profits.............................   34    52   (18)
Gain on sale of business.....................................        165  (165)
Other income.................................................   66    41    25
                                                              ----  ---- -----
                                                              $595  $589 $   6
                                                              ====  ==== =====
</TABLE>
 
Financial Service Fees and Commissions
 
Deposit and Electronic Banking Fees
 
<TABLE>
<CAPTION>
                                                                  1999    1998
Quarters Ended March 31                                          ------  ------
                                                                 (in millions)
<S>                                                              <C>     <C>
  Service charges on deposits................................... $   64  $   57
  Electronic banking fees.......................................     16      13
                                                                 ------  ------
                                                                 $   80  $   70
                                                                 ======  ======
</TABLE>
 
  In the first quarter of 1999, service charges on deposits increased $7
million from the same quarter of 1998. This increase was due, in part, to
growth in Argentine operations, including the acquisition of Deutsche
Argentina. Electronic banking fees increased $3 million from 1998, primarily
due to a higher level of domestic activity and the repricing of certain
domestic services.
 
Investment Banking Fees and Commissions
 
<TABLE>
<CAPTION>
                                                                  1999    1998
Quarters Ended March 31                                          ------- ------
                                                                 (in millions)
<S>                                                              <C>     <C>
  Advisory fees................................................. $    20 $    5
  Brokerage fees and commissions................................      55      3
  Underwriting fees.............................................      60      5
                                                                 ------- ------
                                                                 $   135 $   13
                                                                 ======= ======
</TABLE>
 
  The improvement in each of the above categories was primarily attributable
to the acquisition of Robertson Stephens.
 
                                       7
<PAGE>
 
Syndication and Agent Fees
 
  Compared with the same period in 1998, the increase in syndication and agent
fees was mainly due to a higher level of sales activity arising from more
favorable market conditions after the uncertainties of 1998, and included one
large transaction during the period.
 
Other Financial Service Fees
 
<TABLE>
<CAPTION>
                                                                  1999    1998
Quarters Ended March 31                                          ------  ------
                                                                 (in millions)
<S>                                                              <C>     <C>
  Letter of credit and acceptance fees.......................... $   20  $   18
  Credit card fees..............................................     21      10
  Other loan-related fees.......................................     18      13
  Other.........................................................     32      26
                                                                 ------  ------
                                                                 $   91  $   67
                                                                 ======  ======
</TABLE>
 
  Compared with the first quarter of 1998, the $24 million increase in other
financial service fees was largely attributable to the 1998 expansion in Latin
America. The $11 million improvement in credit card fees was mainly due to fee
growth in Brazil and Uruguay, the latter resulting from the contribution of
the OCA Companies (OCA), a consumer finance company acquired in the third
quarter of 1998. The increase in other loan-related fees and other
miscellaneous financial service fees included a higher level of service fees,
primarily from Argentine operations.
 
Trust and Investment Management Fees
 
<TABLE>
<CAPTION>
                                                                   1999    1998
Quarters Ended March 31                                           ------  ------
                                                                  (in millions)
<S>                                                               <C>     <C>
  Mutual fund fees............................................... $   33  $   31
  Personal trust fees............................................     39      40
  Other agency fees..............................................      7       8
                                                                  ------  ------
                                                                  $   79  $   79
                                                                  ======  ======
</TABLE>
 
  Mutual fund fees increased due to an increase in assets under management by
domestic and Argentine operations. At March 31, 1999, domestic assets under
management were $9.5 billion, reflecting a $1.2 billion increase over March
31, 1998. Argentine assets under management were $1.8 billion at March 31,
1999, reflecting a $.5 billion increase over March 31, 1998.
 
Securities Gains(Losses), Net
 
  Net securities losses in the first quarter of 1999 were $2 million, compared
with gains of $25 million in the same quarter of 1998. Net securities gains in
the first quarter of 1998 reflected gains from the repositioning of the
Corporation's domestic asset and liability management portfolio, as well as
gains from the Corporation's Boston-based emerging markets portfolio.
 
Trading Profits and Commissions and Net Foreign Exchange Profits
 
  The improvement in trading profits and commissions, compared with the first
quarter of 1998, reflected trading profits from Robertson Stephens. These
gains were partially offset by a lower level of trading profits from Brazil
and Argentina, as well as from the high yield trading unit.
 
  In addition, net foreign exchange profits continued to increase due to
higher customer demand for risk management products arising from market
volatility.
 
 
                                       8
<PAGE>
 
Net Equity and Mezzanine Profits
 
  Net equity and mezzanine profits decreased primarily as a result of a lower
level of sales activity, compared with the first quarter of 1998. At March 31,
1999, this portfolio had a carrying value of $1.4 billion, compared with $1.2
billion at March 31, 1998.
 
Other
 
  In the first quarter of 1998, gain on sale of business reflected a $165
million gain recorded in connection with the sale of the Corporation's 26
percent interest in HomeSide.
 
  The increase in other income was largely driven by gains arising from
currency positions maintained in Brazil during the first quarter of 1999.
These positions benefited from the Brazilian currency devaluation that
resulted from the Brazilian government's decision to float its currency freely
against the U.S. dollar. These gains were substantially offset by other
factors, mainly related to various aspects of fiscal reforms recently passed
by the Brazilian government, including certain tax measures. In addition,
other income benefited from a higher level of equity earnings in
unconsolidated subsidiaries, gains on sales of loans and earnings on bank-
owned life insurance, the carrying costs of which were included in net
interest revenue.
 
                                     * * *
 
  The Corporation's capital markets-related businesses, including activity
from its investment banking, syndications, and equity and mezzanine
businesses, are sensitive to volatile market and economic conditions. As such,
it is not possible to predict their levels of revenues in the future.
 
                                       9
<PAGE>
 
                              NONINTEREST EXPENSE
 
  The following table presents the components of noninterest expense.
 
<TABLE>
<CAPTION>
                                                                1999 1998 Change
Quarters Ended March 31                                         ---- ---- ------
                                                                 (in millions)
<S>                                                             <C>  <C>  <C>
Employee costs................................................. $473 $354  $119
Occupancy and equipment........................................  109   94    15
Professional fees..............................................   27   24     3
Advertising and public relations...............................   25   22     3
Communications.................................................   35   30     5
Software costs.................................................   20   19     1
Amortization of goodwill.......................................   13    8     5
Other..........................................................  104  110    (6)
                                                                ---- ----  ----
                                                                $806 $661  $145
                                                                ==== ====  ====
</TABLE>
 
  Compared with the first quarter of 1998, the growth in noninterest expense
was primarily attributable to the Corporation's 1998 expansion activities,
reflecting approximately $120 million from Robertson Stephens, including
goodwill amortization and bonus payments in connection with that acquisition,
and approximately $45 million from Latin America, mainly attributable to
expansion programs in Argentina and Brazil and the acquisition of OCA in
Uruguay. These increases were partially offset by the absence of approximately
$48 million of charges recorded in the first quarter of 1998 in connection
with the realignments of the Corporation's European operations, its private
banking business and the Regional Bank, including costs related to the merger
of Rhode Island Hospital Trust National Bank into BankBoston, N.A. and the
Corporation's redesign project.
 
  At March 31, 1999, the Corporation had approximately 24,700 equivalent full-
time employees, reflecting growth of 2,200 from March 31, 1998. This growth
was primarily driven by the abovementioned 1998 expansion activities,
partially offset by decreases due to initiatives in the Regional Bank,
including the sale of the domestic institutional custody business, as well as
various branch closings during 1998. The remainder of the increase in employee
costs primarily related to a higher level of incentive compensation from
Robertson Stephens and other growth businesses.
 
                          PROVISION FOR INCOME TAXES
 
  The provision for income taxes was $131 million in the first quarter of
1999, compared with $153 million in the first quarter of 1998. The
Corporation's effective tax rates were 37 percent and 39 percent in the first
quarters of 1999 and 1998, respectively. The decrease in the effective tax
rate was primarily attributable to a change in the mix of the Corporation's
tax base.
 
                                      10
<PAGE>
 
                         LINE OF BUSINESS INFORMATION
 
  The Corporation is managed through the Office of the Chief Executive Officer
(the OCEO), which is the senior decision making group in the company. The OCEO
consists of five members, including the Chairman and Chief Executive Officer
(CEO), the President and Chief Operating Officer (COO), the Chief Financial
Officer, the head of the Regional Bank and the head of the Wholesale Bank. The
latter three individuals are also Vice Chairs of the Corporation. The OCEO
meets periodically to discuss important matters of strategy and review the
operating performance of the Corporation's businesses. The group maintains
close contact with key administrative heads and business managers throughout
the Corporation, including the management teams in Argentina and Brazil.
 
  The COO has primary responsibility for the Corporation's revenue producing
businesses. In assessing the performance of the Corporation, the COO divides
the company into four major business lines: the Wholesale Bank, the Regional
Bank, Argentina and Brazil. The Wholesale and Regional Bank lines cover the
vast majority of the Corporation's domestic operations, while the Argentina
and Brazil lines cover the vast majority of the Corporation's international
operations. Operating results and other key financial measures of these four
major business lines for the first quarters of 1999 and 1998 are presented
below. All other businesses not encompassed in the four major lines have been
combined and are presented below in "Other Businesses." Information shown for
the first quarter of 1998 is presented on a basis consistent with the first
quarter of 1999 and, as such, has been restated for changes in the
Corporation's organizational structure and internal management reporting
methodologies implemented during 1999.
 
  The line of business information shown below reflects assignments and
allocations of items made within the Corporation's internal management
reporting process. A discussion of these individual items is included on page
28 of the Corporation's 1998 Annual Report to Stockholders, which is
incorporated by reference into its 1998 Annual Report on Form 10-K.
 
  Certain revenue and expense items, which are not included in the business
line results evaluated by management, are included in Corporate Adjustments. A
summary of the significant items included in Corporate Adjustments follows:
 
  .  Included in net interest revenue for both periods are net funding costs
     for certain noninterest bearing assets and liabilities.
 
  .  Noninterest income in the first quarter of 1998 includes a gain of $165
     million related to the sale of the Corporation's 26 percent interest in
     HomeSide.
 
  .  Net interest revenue has been increased, and noninterest income has been
     decreased, to eliminate transfers between these components related to
     compensating balance arrangements with certain customers.
 
  .  Reductions to consolidated totals for revenue and average loans stemming
     from the fourth quarter 1998 securitization of $2.2 billion of
     commercial loans are included in Corporate Adjustments.
 
  .  The expenses shown in Corporate Adjustments for the first quarter of
     1999 include charges for bonus payments due to employees in connection
     with the Robertson Stephens acquisition, while the first quarter of 1998
     includes costs related to the realignment and downsizing of certain
     businesses. Also included in expenses for both quarters is the
     amortization of goodwill.
 
  Selected financial information for the Corporation's lines of business for
the first quarters of 1999 and 1998 is presented in the table shown below.
This information is presented on a fully taxable equivalent basis.
Consolidated net interest revenue and income tax provision include tax-
equivalent adjustments of $4 million in the first quarters of 1999 and 1998.
Intersegment revenue and expense for the first quarters of 1999 and 1998 were
not significant.
 
 
                                      11
<PAGE>
 
  Line of business selected financial information is as follows:
 
<TABLE>
<CAPTION>
                         Wholesale Regional                      Other     Corporate  Consolidated
Quarter Ended              Bank      Bank    Argentina Brazil  Businesses Adjustments    Totals
 March 31, 1999          --------- --------  --------- ------  ---------- ----------- ------------
                                                  (dollars in millions)
<S>                      <C>       <C>       <C>       <C>     <C>        <C>         <C>
Net interest revenue....  $   162  $   243    $   99   $   74   $    54     $     7     $   639
Noninterest income......      320      109        59       74        59         (26)        595
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........      482      352       158      148       113         (19)      1,234
Noninterest expense.....      251      255       103       96        71          30         806
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      231       97        55       52        42         (49)        428
Provision for credit
 losses.................       28       19        21        5         9         (12)         70
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income (loss)...      203       78        34       47        33         (37)        358
Income tax provision
 (benefit)..............       83       28        14       18         3         (11)        135
                          -------  -------    ------   ------   -------     -------     -------
Net income (loss).......  $   120  $    50    $   20   $   29   $    30     $   (26)    $   223
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing                $24,435  $ 6,856    $6,044   $2,686   $ 4,692     $(2,177)    $42,536
Average assets..........  $35,712  $ 8,528    $9,078   $5,338   $18,503     $(1,049)    $76,110
Average deposits........  $ 5,049  $27,171    $4,875   $1,744   $ 8,496     $    81     $47,416
RAROE...................       22%      23%       14%      32%       22%                     19%
 
Quarter Ended
 March 31, 1998
 
Net interest revenue....  $   134  $   249    $   69   $   83   $    52     $    20     $   607
Noninterest income......      180      113        53       35        71         137         589
                          -------  -------    ------   ------   -------     -------     -------
Total revenue...........      314      362       122      118       123         157       1,196
Noninterest expense.....      131      255        84       75        67          49         661
                          -------  -------    ------   ------   -------     -------     -------
Operating income........      183      107        38       43        56         108         535
Provision for credit
 losses.................       29       23        10        6        24          48         140
                          -------  -------    ------   ------   -------     -------     -------
Pre-tax income..........      154       84        28       37        32          60         395
Income tax provision....       63       32        12       16         5          29         157
                          -------  -------    ------   ------   -------     -------     -------
Net income..............  $    91  $    52    $   16   $   21   $    27     $    31     $   238
                          =======  =======    ======   ======   =======     =======     =======
Average loans and lease
 financing                $21,743  $ 7,502    $5,178   $3,327   $ 6,001     $   (45)    $43,706
Average assets..........  $26,006  $ 9,523    $7,485   $6,503   $18,633     $ 1,560     $69,710
Average deposits........  $ 4,834  $26,811    $4,029   $2,130   $ 7,858     $   112     $45,774
RAROE...................       21%      23%       14%      25%       15%                     21%
</TABLE>
 
Wholesale Bank
 
  The Wholesale Bank provides a full range of commercial and investment
banking products to its predominately middle market, non-investment grade
corporate customer base. The geographic reach of this business is national in
scope, with approximately three quarters of the profits from this business not
dependent on the New England economy. The Wholesale Bank seeks to establish
and maintain lead bank status with its clients by offering a variety of
products and services which cover the full spectrum of a company's needs.
 
  Within the Wholesale Bank there are three major sub-businesses: the
Commercial Bank, the Investment Bank and Private Equity. Each of these sub-
businesses seeks to leverage the strengths of the other two in creating
business opportunities. They also look to leverage the Corporation's
international franchise, particularly in Latin
 
                                      12
<PAGE>
 
America, to attract customers doing business abroad. A detailed discussion of
the products and services offered by these sub-businesses is included on pages
30 and 31 of the Corporation's 1998 Annual Report to Stockholders, which is
incorporated by reference into its 1998 Annual Report on Form 10-K. The
approximate contribution from each sub-business to the Wholesale Bank's
operating income (pre-tax income before provision for credit losses) in the
first quarters of 1999 and 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                                      1999  1998
Quarters Ended March 31                                               ----  ----
<S>                                                                   <C>   <C>
Commercial Bank......................................................  85%   82%
Investment Bank......................................................  10     1
Private Equity.......................................................   5    17
                                                                      ---   ---
  Total Wholesale Bank............................................... 100%  100%
                                                                      ===   ===
</TABLE>
 
  The growth in the contribution to operating income from the Investment Bank
reflects the acquisition of Robertson Stephens. The contribution to operating
income from Private Equity declined due to a lower level of gains from sales
of investments.
 
  Net income from the Wholesale Bank in the first quarter of 1999 was $120
million, which represented an improvement of $29 million, or 32 percent, from
the first quarter of 1998. This improvement was driven by a $28 million
increase in net interest revenue, mainly reflecting growth in average loans
and lease financing of over $2.5 billion. This loan growth came from a variety
of the Commercial Bank's lending divisions including Energy and Utilities,
Media and Communications, Transportation, and Business Credit. Noninterest
income increased $140 million and included approximately $130 million from
Robertson Stephens. Also contributing to the increase in noninterest income
were higher levels of syndication fees and foreign exchange profits, partially
offset by the aforementioned decline in gains related to Private Equity
investments. Noninterest expense grew $120 million, with approximately $100
million of this a result of the acquisition of Robertson Stephens. Quarterly
charges related to goodwill amortization and bonus payments paid annually to
employees in connection with the Robertson Stephens acquisition are, as
mentioned previously, included within Corporate Adjustments. Average assets in
the Wholesale Bank grew nearly $10 billion from the first quarter of last year
due, in part, to the increase in loans noted above and a higher level of
liquid, lower-yielding assets in the Corporation's Section 20 subsidiary,
which includes Robertson Stephens.
 
Regional Bank
 
  The Regional Bank is a New England-based business that provides for the
financial services needs of its three major customer groups: consumers, high
net worth individuals and small businesses. The Regional Bank operates through
franchises in Massachusetts, Rhode Island, Connecticut and New Hampshire. The
Massachusetts banking franchise is the largest in that state.
 
  The major sub-businesses of the Regional Bank are Consumer and Community
Banking, Business Banking, and Private Banking. A detailed discussion of the
Regional Bank's sub-businesses, distribution system and product groups is
included on pages 31 and 32 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K. The approximate contribution from each sub-business to the
Regional Bank's operating income in the first quarters of 1999 and 1998 is as
follows:
 
<TABLE>
<CAPTION>
                                                                     1999  1998
Quarters Ended March 31                                              ----  ----
<S>                                                                  <C>   <C>
Consumer and Community Banking......................................  57%   59%
Business Banking....................................................  23    22
Private Banking.....................................................  20    19
                                                                     ---   ---
  Total Regional Bank............................................... 100%  100%
                                                                     ===   ===
</TABLE>
 
  Net income from the Regional Bank in the first quarter of 1999 was $50
million, compared with $52 million in the first quarter of 1998. The $2
million decline in net income was mainly driven by slightly lower revenue.
 
                                      13
<PAGE>
 
Net interest revenue declined $6 million due to narrower spreads, the
continued runoff of the indirect auto loan portfolio and the fourth quarter
1998 sale of the Berkshire branch network, partially offset by a higher volume
of deposits. Noninterest income declined $4 million primarily due to the
absence of fees from the institutional custody business, which was also sold
in the fourth quarter of 1998. Expenses were flat compared with the first
quarter of 1998, while the provision for credit losses dropped $4 million
primarily due to the lower level of indirect auto loans.
 
Argentina
 
  The Corporation has maintained a presence in Argentina since 1917. As a
result of an expansion program undertaken in 1998, which included the
acquisition of Deutsche Argentina and the opening of 64 new branches in
various parts of the country, the Corporation now operates one of the largest
banks in the country. The expansion effort is the main reason why the
Corporation's total average assets in Argentina grew to approximately $9
billion in the first quarter of 1999, from approximately $7.5 billion in the
first quarter of 1998.
 
  The Corporation's Argentine operations consist of three main sub-businesses:
Corporate Banking, Retail Banking and Treasury/Other. A detailed discussion of
these sub-businesses, as well as the products and services offered by the
Corporation in Argentina, is included on page 32 of the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K. The approximate contribution from each sub-
business to operating income from Argentine operations in the first quarters
of 1999 and 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                                      1999  1998
Quarters Ended March 31                                               ----  ----
<S>                                                                   <C>   <C>
Corporate Banking....................................................  44%   34%
Retail Banking.......................................................  35    58
Treasury/Other.......................................................  21     8
                                                                      ---   ---
  Total Argentina.................................................... 100%  100%
                                                                      ===   ===
</TABLE>
 
  The relative contribution to operating income from Retail Banking declined
from the first quarter of last year primarily due to higher expenses in 1999
related to the branch expansion program. The full expense base from expansion
efforts was fully in place throughout the first quarter of 1999, while it was
still evolving during the first quarter of last year. The relative
contributions from Corporate Banking and Treasury/Other increased as each
benefited from higher levels of net interest revenue.
 
  Net income from Argentine operations was $20 million in the first quarter of
1999, which represented a $4 million, or 25 percent, increase from the first
quarter of 1998. Included in this improvement was a $30 million increase in
net interest revenue, reflecting wider spreads from market volatility and a
$1.6 billion increase in average earning assets, which included a $900 million
increase in average loans and lease financing. Noninterest income improved $6
million due, in part, to an increase in mutual fund, deposit and corporate
banking fees. Partially offsetting the revenue growth were a $19 million
increase in noninterest expense, which was mainly related to the previously
discussed expansion program, and an $11 million increase in the provision for
credit losses. The higher provision for credit losses was mainly related to an
increase in credit losses on consumer loans due, in part, to growth in that
loan portfolio. Consumer loans generally carry wider spreads and a higher loss
rate than loans in the commercial portfolio. Total net credit losses from
Argentine operations were $17 million in the first quarter of 1999, compared
with $8 million in the first quarter of last year, with most of the increase
related to the consumer portfolio. The continued growth in the consumer loan
portfolio, which attracts a higher level of capital allocation under the
Corporation's RAROE methodology, and the net costs related to the expansion
program have combined to leave the risk adjusted return from Argentine
operations unchanged at 14 percent.
 
 
                                      14
<PAGE>
 
Brazil
 
  The Corporation has maintained a presence in Brazil since 1947. While
Brazil's population is much larger than Argentina's, the Corporation's balance
sheet in Brazil is smaller than its balance sheet in Argentina and the branch
network is about half as large. This reflects the Corporation's Brazilian
strategy of operating in very focused and targeted up-tier markets, a strategy
that is not conducive to maintaining a large balance sheet. To further
penetrate this targeted customer base, the Corporation embarked on a branch
expansion program during 1998, which has nearly doubled the size of the branch
network.
 
  The Corporation's Brazilian operations consist of three main sub-businesses:
Corporate Banking, Retail Banking and Treasury. A detailed discussion of these
sub-businesses, as well as the products and services offered by the
Corporation in Brazil is included on page 33 of the Corporation's 1998 Annual
Report to Stockholders, which is incorporated by reference into its 1998
Annual Report on Form 10-K. The approximate contribution from each sub-
business to operating income from Brazilian operations in the first quarters
of 1999 and 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                                      1999  1998
Quarters Ended March 31                                               ----  ----
<S>                                                                   <C>   <C>
Corporate Banking....................................................  51%   41%
Retail Banking.......................................................  20    26
Treasury.............................................................  29    33
                                                                      ---   ---
  Total Brazil....................................................... 100%  100%
                                                                      ===   ===
</TABLE>
 
  Net income from Brazilian operations was $29 million in the first quarter of
1999, which represented an $8 million, or 38 percent, increase from the first
quarter of 1998. Revenue increased $30 million reflecting higher financial
service fees, and gains that arose in Brazil from currency positions
maintained during the first quarter of 1999, as the Brazilian government
devalued its currency by allowing it to float freely against the U.S. dollar.
These gains, however, were substantially offset by other factors, mainly
related to various aspects of fiscal reforms recently passed by the Brazilian
government, including certain tax measures. In addition, the positive impact
of wider spreads and the other improvements in revenue noted above were
partially offset by a decline in average earning assets, reflecting the
current recessionary environment. Noninterest expense increased $21 million,
as costs from expansion and higher incentive compensation were partially
offset by the impact of Brazil's first quarter of 1999 devaluation.
 
Other Businesses
 
  Individual businesses that have been combined in Other Businesses include
Global Treasury, Other Latin America, Asia, the International Private Bank,
Emerging Markets Sales, Trading and Research (EMSTR), and various joint
ventures. In addition, the first quarter of 1998 includes the national credit
card business, which was contributed to a joint venture in January 1998.
Further information on these businesses is included on page 34 of the
Corporation's 1998 Annual Report to Stockholders, which is incorporated by
reference into its 1998 Annual Report on Form 10-K.
 
  Net income from Other Businesses was $30 million in the first quarter of
1999, representing a $3 million increase from last year. This was mainly due
to the absence of a net operating loss in 1998 from the national credit card
business and an improvement from Other Latin America, partially offset by
lower securities gains in Global Treasury. Total revenue from international
operations included in Other Businesses was $97 million in the first quarter
of 1999 and $80 million in the first quarter of 1998.
 
                                      15
<PAGE>
 
                              FINANCIAL CONDITION
                          CONSOLIDATED BALANCE SHEET
 
  At March 31, 1999, the Corporation's total assets were $75.7 billion,
reflecting a $2.2 billion increase from total assets of $73.5 billion at
December 31, 1998. This increase was mainly attributable to a $1.4 billion
increase in available for sale securities, particularly U.S. government agency
mortgage-backed securities used to manage portfolio risk, and a $1.2 billion
increase in federal funds sold and securities purchased under agreements to
resell, mainly related to Robertson Stephens and Brazilian operations.
 
  The increase in assets was primarily funded by interest bearing deposits,
federal funds purchased and securities sold under agreements to repurchase,
mainly related to Robertson Stephens, and notes payable. During the first
quarter of 1999, the Corporation issued $300 million of senior medium-term
notes. This issuance was offset by the maturity of $125 million of senior
medium-term notes previously issued by the Corporation and approximately $152
million of notes issued by the Corporation's overseas offices under various
note programs.
 
  The Corporation's tangible common equity and common equity to total assets
ratios were 5.6 percent and 6.6 percent, respectively, at March 31, 1999,
compared with 5.5 percent and 6.6 percent, respectively, at December 31, 1998.
The Corporation's Tier 1 and total capital ratios were 7.2 percent and 11.5
percent, respectively, at March 31, 1999, compared with 7.1 percent and 11.7
percent, respectively, at December 31, 1998. The Corporation's leverage ratio
at March 31, 1999 was 6.9 percent, compared with 6.7 percent at December 31,
1998.
 
  The Corporation has a capital planning process that is designed to maintain
appropriate regulatory capital levels and ratios. As of March 31, 1999, the
Corporation and its bank subsidiaries met all capital adequacy requirements to
which they are subject.
 
                                RISK MANAGEMENT
 
  The Corporation has a risk management process in place for the
identification, measurement, monitoring and control of the risks inherent in
its business, including credit, liquidity, market, transaction, strategic,
compliance, reputation and transfer risks. One transitory event that continues
to impact these primary risk factors is the Year 2000.
 
                                   Year 2000
 
  The following Year 2000 statements constitute a Year 2000 Readiness
Disclosure within the meaning of the Year 2000 Readiness and Disclosure Act of
1998. This disclosure should be read in conjunction with the Year 2000
disclosure on pages 35 through 37 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K.
 
  The Corporation has implemented a comprehensive and integrated plan designed
to achieve Year 2000 readiness across its critical systems (whether owned or
licensed by the Corporation), and believes it is well positioned to address
the issues associated with the event and to bring its systems and operations
into compliance.
 
Information Technology
 
  The information technology elements of the Corporation's Year 2000 program
have proceeded through the following phases: Awareness, Inventory, Assessment,
Remediation, Certification (including unit, system and interface testing) and
Readiness Testing. As of March 31, 1999, the Corporation met, across all
operations, completion targets for application systems, technology
infrastructure and desktop application systems, as outlined in its 1998 Annual
Report to Stockholders, which is incorporated by reference into its 1998
Annual Report on Form 10-K.
 
                                      16
<PAGE>
 
Readiness Testing
 
  Readiness testing, including application integration testing and external
testing, validates that a business's critical core process, and the
application system, infrastructure and service providers on whom it depends,
will continue to operate beyond 1999. Application systems included in
readiness testing are those which the Corporation has deemed critical, and
which have a significant degree of integrated processing with other
application systems. To date, testing has focused on internal dependencies.
Mission critical application systems have been categorized into five
integrated testing segments, of which three had been completed successfully by
early April 1999. At March 31, 1999, mission critical service provider testing
and external testing with its material third parties was approximately 90
percent complete domestically. Brazil and Southern Cone service provider
testing was well underway. While the Corporation expects to substantially
complete its readiness testing by June 30, 1999, it also anticipates some
continuation of this testing through the end of 1999 since it is deemed a
valuable tool for early detection of potential Year 2000 issues.
 
Customers, Counterparties and Wholesale Funds Providers
 
  The Corporation is working to identify and limit potential credit, liquidity
and operational risks posed by the Corporation's significant customers and
counterparties. In 1998, the Corporation evaluated over 90 percent of its
significant non-consumer credit risk, over 90 percent of its significant
wholesale funds provider risk and over 80 percent of its significant treasury
and capital markets counterparty risk. Results showed that a significant
majority of entities surveyed did not expect a material adverse impact to
their businesses. The results of the Corporation's surveys are being
incorporated into the Corporation's credit risk management processes,
including customer risk ratings, as well as into liquidity and cash settlement
planning strategies to limit exposure around critical dates. Throughout the
remainder of 1999, the Corporation will continue to monitor and assess,
through refined surveys, the potential impact of its customers and
counterparties on the Corporation's Year 2000 readiness.
 
Non-Technology Vendors and Service Providers
 
  The success of the Corporation's Year 2000 efforts depends not only upon the
Year 2000 readiness of its systems but also those of its critical vendors and
service providers. The Corporation's Year 2000 plan includes analyzing the
risk presented by its dependency upon critical vendors and other third parties
and developing contingency plans based upon these assessments. The level of
assessment is dictated by the relative importance of vendors and products to
core business processes, as defined through Year 2000 contingency planning
efforts. Vendor assessments may include reviews of published materials and
websites, discussions about Year 2000 readiness plans and requests for Year
2000 warranties to the Corporation. Additionally, the Corporation is
undergoing a process to identify and certify vendor supplied products. The
Corporation expects this element of the program to remain challenging due to
the complexities of vendor management. Consequently, the Corporation will
continue to monitor and assess, throughout 1999, the potential impact of the
Year 2000 issue on both its vendor supplied products and services.
 
Facilities
 
  In domestic operations, all site and facility vendors have been inventoried
and assessed for criticality. All critical sites are expected to have
completed certification by mid-1999, after component testing, remediation and
site integration testing. Brazilian and Argentine operations currently
anticipate that their facilities will be substantially remediated, tested and
certified by September 1999. The Corporation currently has business resumption
contingency plans in place that have been updated and tested annually, and are
being revised to reflect considerations specific to the Year 2000 issue.
 
 
                                      17
<PAGE>
 
Final Readiness Efforts and Contingency Planning
 
  The Corporation has developed a strategy to combine the various efforts
within the Year 2000 program, and assess and report upon the readiness of
mission critical elements by the core processes of business units. This
strategy includes validating core processes, linking the interdependencies
between critical application systems, technical infrastructure and non-
technology elements, including vendors and service providers, identifying weak
links and planning around known and unknown risks. In this regard, the
Corporation is developing business resumption contingency plans as well as
event plans to prepare for potential systems failures at critical dates,
failures of critical third parties to effectively remediate and certify their
technologies, as well as any other unanticipated events that could arise with
the date change. The development of these plans includes the assessment of
failure scenarios on the core business processes critical to the Corporation's
business and operations. These plans will be subject to independent internal
reviews. The Corporation expects that its contingency planning for the Year
2000 issue will be substantially completed by the end of June 1999.
Additionally, as previously discussed, the Corporation will continue readiness
testing through 1999 to detect currently unknown risks.
 
Risks and Uncertainties
 
  The Corporation expects to successfully complete its Year 2000 program in a
timely and effective manner that mitigates risk. However, the Corporation is
subject to risks and uncertainties due to the uniqueness of the Year 2000
issue, the significant interdependencies in business and financial markets and
the range of activities and events outside of the Corporation's control.
Furthermore, the progress of mission critical elements has been impacted by
resource prioritization within its Year 2000 program and across other business
initiatives, including 1998 acquisitions, as well as by the level of Year 2000
awareness in various countries. As a result of the risks and uncertainties
associated with the Year 2000 issue, particularly with respect to vendors,
service providers and other third parties, the Corporation is unable to
predict with any certainty the extent of potential Year 2000 failures that
could result, nor quantify the potential effect that such failures could have
on the Corporation's operations and financial condition. Those risks and
uncertainties could result in service delays, inaccurate and untimely
information processing, funding delays, contract settlement and counterparty
failures, and increased credit losses.
 
Costs
 
  As of March 31, 1999, the Corporation continues to expect that its total
incremental costs for its Year 2000 program, including costs already incurred,
will be approximately $75 million. It is estimated that these incremental
costs represent over half of the Corporation's total program costs, which
include the redeployment of internal resources from all areas of the
Corporation. The Corporation continues to expect capital expenditures of
approximately $20 million, including costs incurred for accelerated and out of
cycle replacements of technology. As of March 31, 1999, the Corporation had
incurred nearly two-thirds its Year 2000 costs. The Corporation has not
incurred, and is not likely to incur, project costs that are material to any
reporting period. The majority of remaining costs are expected to be directed
to the testing phase as well as final readiness efforts to mitigate both
currently known and subsequently discovered risks. Throughout the remainder of
the project, the Corporation will also continue to allocate internal resources
to address the Year 2000 issue.
 
  The Corporation's estimated costs and expected timetables made with respect
to its Year 2000 initiative represent forward-looking statements that could
differ materially from actual results due to changes in assumptions as the
program evolves and new information becomes available; the Corporation's
ability and resources to effectively execute its Year 2000 program; the impact
of external market pressures on technology resources; the ability of critical
third parties to mitigate their Year 2000 risks; and the extent to which
unanticipated issues arise late in the program.
 
                                      18
<PAGE>
 
                            CREDIT RISK MANAGEMENT
 
  Credit risk is defined as the risk of loss from a counterparty's failure or
inability to meet the payment or performance terms of a contract with the
Corporation. The Corporation's risk management process includes the management
of all forms of credit risk, including balance sheet and off-balance sheet
exposures. A discussion of the Corporation's credit risk management policies
is included on page 37 of the Corporation's 1998 Annual Report to
Stockholders, which is incorporated by reference into its 1998 Annual Report
on Form 10-K.
 
                                CREDIT PROFILE
 
  The components of the lending portfolio are as follows:
 
<TABLE>
<CAPTION>
                                   March 31  Dec. 31  Sept. 30  June 30  March 31
                                     1999     1998      1998     1998      1998
                                   --------  -------  --------  -------  --------
                                                 (in millions)
<S>                                <C>       <C>      <C>       <C>      <C>
United States operations
  Commercial, industrial and
   financial...................... $17,028   $16,294  $18,218   $16,275  $15,887
  Commercial real estate
    Construction..................     228       215      209       219      260
    Other.........................   3,531     3,871    4,089     3,876    3,736
  Consumer-related loans
    Residential mortgages.........   1,840     2,035    2,111     2,229    2,551
    Home equity loans.............   2,325     2,294    2,672     2,871    2,802
    Credit card...................     379       404      393       412      503
    Other.........................   2,433     2,532    2,693     2,753    2,801
  Lease financing.................   1,768     1,801    1,607     1,609    2,017
  Unearned income.................    (291)     (275)    (231)     (232)    (303)
                                   -------   -------  -------   -------  -------
                                    29,241    29,171   31,761    30,012   30,254
                                   -------   -------  -------   -------  -------
International operations
  Commercial and industrial.......   9,288     9,295    9,320     9,065    9,322
  Banks and other financial
   institutions...................     523       597      835       696      766
  Governments and official
   institutions...................     138        95       73        82      102
  Consumer related
    Residential mortgages.........   1,249     1,251    1,383     1,318    1,302
    Credit card...................     327       362      339       248      226
    Other.........................   1,162     1,192    1,164     1,087      987
  Lease financing.................     705       725      652       519      517
  All other.......................     359       369      408       375      492
  Unearned income.................    (217)     (251)    (188)     (148)    (146)
                                   -------   -------  -------   -------  -------
                                    13,534    13,635   13,986    13,242   13,568
                                   -------   -------  -------   -------  -------
      Total loans and lease
       financing.................. $42,775   $42,806  $45,747   $43,254  $43,822
                                   =======   =======  =======   =======  =======
</TABLE>
 
  The composition of the Corporation's credit portfolio remained relatively
unchanged from December 31, 1998, for both domestic and international
operations.
 
  The Corporation's total loan portfolio at both March 31, 1999 and December
31, 1998 included $1.3 billion of highly leveraged transaction (HLT) loans to
110 and 108 customers, respectively. The average HLT loan size at both March
31, 1999 and December 31, 1998 was approximately $12 million. The amount of
unused commitments for HLT's at March 31, 1999 was $856 million, compared with
$765 million at December 31, 1998. The amount of unused commitments does not
necessarily represent the actual future funding requirements of the
Corporation, since a portion can be syndicated or assigned to others or may
expire without being drawn
 
                                      19
<PAGE>
 
upon. At both March 31, 1999 and December 31, 1998, the Corporation had one
nonaccrual HLT loan of approximately $4 million. There were no credit losses
from HLT loans in the first quarters of 1999 and 1998. A discussion of the
Corporation's HLT lending activities and policies, and the effect of these
activities on results of operations, is included on page 39 of the
Corporation's 1998 Annual Report to Stockholders, which is incorporated by
reference into its 1998 Annual Report on Form 10-K.
 
                     NONACCRUAL LOANS AND LEASES AND OREO
 
  The details of consolidated nonaccrual loans and leases and OREO are as
follows:
 
<TABLE>
<CAPTION>
                                     March 31 Dec. 31 Sept. 30 June 30 March 31
                                       1999    1998     1998    1998     1998
                                     -------- ------- -------- ------- --------
                                               (dollars in millions)
<S>                                  <C>      <C>     <C>      <C>     <C>
United States
  Commercial, industrial and
   financial.......................    $ 81    $ 86     $ 71    $ 63     $ 43
  Commercial real estate
    Construction...................       2       2        2       2        3
    Other..........................      17      19       30      33       41
  Consumer-related
    Residential mortgages..........      30      36       36      42       46
    Home equity....................      16      17       18      15       15
    Credit card....................       6       6        6       6        6
    Other..........................      16      20       21      18       20
                                       ----    ----     ----    ----     ----
                                        168     186      184     179      174
                                       ----    ----     ----    ----     ----
International
  Commercial and industrial........      77      86      103     107       97
  Consumer-related
    Residential mortgages..........      56      50       39      36       34
    Credit card....................       8       6        7       6        4
    Other..........................      49      47       33      26       18
                                       ----    ----     ----    ----     ----
                                        190     189      182     175      153
                                       ----    ----     ----    ----     ----
    Total nonaccrual loans and
     leases........................     358     375      366     354      327
OREO...............................      24      27       29      28       42
                                       ----    ----     ----    ----     ----
    Total..........................    $382    $402     $395    $382     $369
                                       ====    ====     ====    ====     ====
Nonaccrual loans and leases and
 OREO as a percent of related asset
 categories........................     0.9%    0.9%     0.9%    0.9%     0.8%
</TABLE>
 
  Total nonaccrual loans and leases and OREO at March 31, 1999 decreased $20
million from December 31, 1998, mainly reflecting an $18 million decrease in
the domestic portfolio. This decrease included an $11 million decrease in
nonaccrual consumer-related loans and a $5 million decrease in nonaccrual
commercial, industrial and financial loans. International nonaccrual loans
remained relatively unchanged from December 31, 1998.
 
  The level of nonaccrual loans and leases and OREO is influenced by the
economic environment, including interest rate trends and other internal and
external factors. As such, no assurance can be given as to future levels of
nonaccrual loans and leases and OREO.
 
 
                                      20
<PAGE>
 
                           RESERVE FOR CREDIT LOSSES
 
  The Corporation determines the level of its reserve for credit losses
considering evaluations of individual credits, 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 credit risks, and other pertinent factors. The
credit risk of off-balance-sheet exposures is managed as part of the overall
extension of credit to individual customers and is considered in assessing the
overall adequacy of the reserve for credit losses. The amount of the reserve
for credit losses associated with off-balance-sheet exposures is not
significant. The amount of the reserve for credit losses is reviewed by
management quarterly.
 
  The reserve for credit losses at March 31, 1999 was $758 million, compared
with $754 million at December 31, 1998. At March 31, 1999, the reserve for
credit losses represented 1.77 percent of outstanding loans and lease
financing, compared with 1.76 percent at December 31, 1998. The reserve for
credit losses was 212 percent of nonaccrual loans and leases at March 31,
1999, compared to 201 percent at December 31, 1998. The future level of the
reserve for credit losses will continue to be a function of management's
evaluation of the Corporation's credit exposures existing at the time, which
will be affected by future events and general economic conditions in the
United States, Latin America, Asia and various other overseas markets; the
impact of the Corporation's strategic decisions on various credit portfolios;
and the potential impact that the Year 2000 issue could have on the ability of
the Corporation's customers to repay their obligations. Therefore, no
assurance can be given as to future levels of the reserve.
 
  Net credit losses were as follows:
 
<TABLE>
<CAPTION>
                                     March 31 Dec. 31 Sept. 30 June 30 March 31
                                       1999    1998     1998    1998     1998
Quarters Ended                       -------- ------- -------- ------- --------
                                                   (in millions)
<S>                                  <C>      <C>     <C>      <C>     <C>
United States
  Commercial, industrial and
   financial........................   $21     $ 38     $ 9      $ 5     $ 13
  Commercial real estate............    (3)              (1)      (1)      (1)
  Consumer-related
    Residential mortgages...........              2       1        1        2
    Home equity.....................     1        2       1        1        2
    Credit card.....................     4        5       6        6       20
    Other...........................    13       13      13       11       19
                                       ---     ----     ---      ---     ----
                                        36       60      29       23       55
                                       ---     ----     ---      ---     ----
International
  Commercial and industrial.........     8       34       7       13       76
  Consumer-related
    Credit card.....................     4        5       6        2        2
    Other...........................    18       14      17       13        8
                                       ---     ----     ---      ---     ----
                                        30       53      30       28       86
                                       ---     ----     ---      ---     ----
    Total...........................   $66     $113     $59      $51     $141
                                       ===     ====     ===      ===     ====
</TABLE>
 
  Net credit losses in the first quarter of 1999 decreased $75 million
compared with the first quarter of 1998 and $47 million compared with the
fourth quarter of 1998. In the first quarter of 1998, net credit losses
reflected a chargeoff in the international commercial portfolio of
approximately $66 million related to a series of loans to related borrowers
that were initiated by a former officer in the Corporation's International
Private Bank, as well as $16 million of losses incurred by the national credit
card portfolio before it was subsequently contributed to a joint venture in
January 1998. The decline in net credit losses from the fourth quarter of 1998
was mainly driven by the absence of one large domestic commercial chargeoff,
as well as a lower level of chargeoffs from the Asian and Latin American
portfolios.
 
 
                                      21
<PAGE>
 
  The future level of chargeoffs will continue to be affected by the impact of
global economic events on various domestic and international portfolios, as
well as the mix and size of various portfolios. As such, there can be no
assurance as to the level of future chargeoffs.
 
                           CROSS-BORDER OUTSTANDINGS
 
  In accordance with bank regulatory rules, cross-border outstandings are
amounts payable to the Corporation by residents of foreign countries
regardless of the currency in which the claim is denominated and local country
claims in excess of local country obligations. Excluded from cross-border
outstandings are the following:
 
  .  Local country claims that are funded by local country obligations
     payable only in the country where issued.
 
  .  Local country claims funded by non-local country obligations (typically
     U.S. dollars or other non-local currency) where the providers of funds
     agree that, in the event their claims cannot be repaid in the designated
     currency due to currency exchange restrictions in a given country, they
     may either accept payment in local currency or wait to receive the non-
     local currency until such time as it becomes available in the local
     market. At March 31, 1999, such outstandings related to emerging markets
     countries totaled $1.9 billion, compared with $2.2 billion at December
     31, 1998.
 
  .  Claims reallocated as a result of external guarantees, cash collateral
     or insurance contracts issued primarily by U.S. government agencies.
 
  Cross-border outstandings include deposits in other banks, resale
agreements, trading securities, securities available for sale, securities held
to maturity, loans and lease financing, amounts due from customers on
acceptances, accrued interest receivable and revaluation gains on trading
derivatives. At both March 31, 1999 and December 31, 1998 total cross border
outstandings were approximately $8.7 billion, which included outstandings to
emerging markets countries of $6.2 billion and $5.9 billion, respectively.
 
  In addition to credit risk, cross-border outstandings have the risk that, as
a result of political or economic conditions in a country, borrowers are
unable to meet their contractual repayment obligations of principal and/or
interest when due because of the unavailability of, or restrictions on,
foreign exchange needed by borrowers to repay their obligations.
 
  The following table summarizes by country the Corporation's approximate
cross-border outstandings to countries that individually amounted to 1 percent
or more of consolidated total assets at March 31, 1999 and December 31, 1998.
 
<TABLE>
<CAPTION>
                                                   Percentage of
                        Public Banks Other  Total  Total Assets  Commitments(1)
                        ------ ----- ------ ------ ------------- -------------
                                        (dollars in millions)
<S>                     <C>    <C>   <C>    <C>    <C>           <C>
March 31, 1999(2)
  Argentina............  $855  $295  $1,155 $2,305      3.0%          $ 5
  Brazil...............   680    10     425  1,115      1.5            25
December 31, 1998(2)
  Argentina............  $775  $ 50  $1,155 $1,980      2.7%          $10
  Brazil...............   405           495    900      1.2            40
</TABLE>
--------
(1) Included within commitments are letters of credit, guarantees and the
    undisbursed portions of loan commitments.
(2) Cross-border outstandings in countries which fell between .75% and 1% of
    consolidated total assets were approximately as follows: March 31, 1999--
    Chile, $590 million; December 31, 1998--Chile, $690 million; United
    Kingdom, $630 million.
 
 
                                      22
<PAGE>
 
Latin America
 
  At March 31, 1999, approximately $5.8 billion, or 66 percent, of total
cross-border outstandings were to countries in Latin America, compared with
$5.3 billion, or 61 percent, at December 31, 1998. Substantially all of these
cross-border outstandings were to customers in countries in which the
Corporation maintained branch networks and/or subsidiaries.
 
  The Corporation's total assets in Argentina at both March 31, 1999 and
December 31, 1998 amounted to approximately $9 billion. Included in these
total assets were the Argentine cross-border outstandings presented in the
table above. At both March 31, 1999 and December 31, 1998, Argentine loans and
lease financing was approximately $6 billion.
 
  The Corporation's nonaccrual Argentine loans were $140 million at both March
31, 1999 and December 31, 1998. The percentage of nonaccrual loans to total
Argentine loans and lease financing was 2.2 percent at March 31, 1999,
compared with 2.3 percent at December 31, 1998.
 
  The Corporation's total assets in Brazil at March 31, 1999 amounted to
approximately $7 billion, compared with approximately $6 billion at December
31, 1998. Included in these total assets were the Brazilian cross-border
outstandings presented in the table above. At both March 31, 1999 and December
31, 1998, Brazilian loans and lease financing was approximately $3 billion.
 
  The Corporation's nonaccrual Brazilian loans were $12 million at March 31,
1999, compared with $18 million at December 31, 1998. The percentage of
nonaccrual loans to total Brazilian loans and lease financing was .5 percent
at March 31, 1999, compared with .6 percent at December 31, 1998.
 
  For additional information on Argentina and Brazil, see the "Line of
Business Information" section. For further discussion of the Corporation's
nonaccrual loans and leases and net credit losses, see the "Nonaccrual Loans
and Leases and OREO" and "Reserve for Credit Losses" sections.
 
  During 1998, world financial markets experienced significant volatility due
to the Asian and Russian crises. These crises also impacted the economies of
Latin America, and, in particular, contributed to the economic instability
recently experienced by Brazil. The financial pressures created by the Asian
and Russian turmoil led to a significant deterioration in the level of
Brazil's foreign currency reserves starting in August 1998. The reduction in
foreign currency reserves and the Brazilian government's need to reduce both
its current account and fiscal deficits led the government to allow Brazil's
currency, the Real, to float freely against the U.S. dollar beginning in mid-
January 1999. This resulted in a significant devaluation of the Real against
the U.S. dollar.
 
  The government's departure from the managed exchange rate policy, which had
been instituted in 1994, led to an expectation that the Brazilian economy
would contract and inflation would rise during 1999. The government passed a
number of fiscal reforms aimed at controlling the public deficit and meeting
the requirements of its agreement with the International Monetary Fund. While
Brazil has been influenced by these events, the extent of contraction and
inflation has been less than expected, particularly with the inflow of foreign
investment into the country in response to the positive actions taken by the
Brazilian government.
 
  The Corporation has not experienced collection problems as a result of world
economic volatility, currency restrictions or foreign exchange liquidity
problems in its current portfolio of cross-border outstandings to Latin
America. However, if actions implemented by the Brazilian government and other
Latin American governments are not effective over time, the Corporation's
operations could experience adverse effects. It is expected that the economic
situation in Latin America, including the effect of world financial markets on
these economies, will continue to be unsettled. The impact that these events
will ultimately have on Latin American economies and, therefore, the
Corporation's operations in that region, is uncertain. The Corporation will
continue to monitor the economies of the Latin American countries in which it
has local operations and cross-border outstandings, as well as the economies
of other emerging markets countries which could impact the performance of the
Corporation, and will take actions as it deems appropriate. Each emerging
markets country is at a different stage
 
                                      23
<PAGE>
 
of development with a unique set of economic fundamentals; therefore, it is
not possible to predict what developments will occur and what impact these
developments will ultimately have on the economies of these countries or on
the Corporation's financial statements.
 
Asia
 
  At March 31, 1999, approximately $700 million, or approximately 8 percent,
of total cross-border outstandings were to countries in Asia, compared with
approximately $800 million, or approximately 9 percent, at December 31, 1998.
This decrease reflects the impact of the Corporation's efforts to actively
manage and reduce its Asian exposures, including the closing of four offices
in early 1999. Substantially all of these cross-border outstandings were to
customers in countries in which the Corporation maintains branch networks
and/or subsidiaries.
 
  At March 31, 1999, the Corporation had Asian nonaccrual loans of $17
million, compared with $14 million at December 31, 1998. The Corporation had
Asian net credit losses of approximately $4 million in each of the first
quarters of 1999 and 1998.
 
  The Corporation continues to closely monitor the situation in Asian markets
and to manage its portfolio in order to maximize its future results, all
within the parameters of the Corporation's established risk management
processes.
 
                           LIQUIDITY RISK MANAGEMENT
 
  Liquidity risk is defined as the risk of loss from the Corporation's
inability to meet its obligations when they come due, without incurring
unacceptable costs. For additional information related to the Corporation's
liquidity risk management, see pages 47 and 48 of the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K.
 
  The Corporation's liquid assets, which 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,
were $8.8 billion at March 31, 1999, compared with $8.2 billion at December
31, 1998. This increase reflected an increase in the Corporation's available
for sale portfolio used to manage interest rate risk. The Corporation also has
access to additional funding through the public markets. Management considers
overall liquidity at March 31, 1999 to be adequate to meet current
obligations, to support expectations for future changes in asset and liability
levels and to carry on normal operations.
 
                            MARKET RISK MANAGEMENT
 
  Market risk is defined as the risk of loss arising from adverse changes in
market prices, such as interest rates and foreign exchange rates, on financial
instruments. The Corporation's market risk management process includes the
management of all forms of market risk, including balance sheet and off-
balance-sheet exposures. Market risk is managed within policies and limits
established by the Asset, Liability and Capital Committee (ALCCO) and the
Market Risk Committee (MRC) and approved by the Corporation's Board of
Directors (the Board). The MRC is responsible for allocating the overall
market risk limits set by ALCCO to the Corporation's market risk-taking
activities, considering the results of its risk modeling process as well as
other internal and external factors. Further information with respect to the
Corporation's management of market risk is included on pages 48 through 51 of
the Corporation's 1998 Annual Report to Stockholders, which is incorporated by
reference into its 1998 Annual Report on Form 10-K.
 
Trading Activities
 
  The Corporation's trading activities involve providing risk management and
capital markets products and services to its customers, including interest
rate derivatives, foreign exchange contracts, and debt and equity
 
                                      24
<PAGE>
 
underwriting and distribution capabilities. In addition, the Corporation takes
proprietary trading positions, including positions in domestic equity
securities, high yield and emerging markets fixed income securities, and local
currency debt and equity securities and related derivatives. The risk
positions taken by the Corporation in these financial instruments are subject
to ALCCO and MRC approved limits.
 
  The Corporation manages the market risk related to its trading businesses on
a daily basis using a Value-at-Risk (VAR) methodology. VAR is defined as the
statistical estimate of the potential loss that the Corporation could incur
from an adverse movement in market prices. The Corporation uses a 99 percent
confidence level, which means that the Corporation would not expect to exceed
the potential loss as calculated by VAR more than once out of every 100
trading days. The VAR methodology requires a number of key assumptions
including those relating to the time to liquidate positions, the confidence
level for losses, the number of days of price and rate history to be used, the
impact of credit spread risk, and the treatment of event risk.
 
  The following table shows the aggregate VAR for the Corporation's trading
businesses at March 31, 1999 and December 31, 1998.
 
<TABLE>
<CAPTION>
                                                          March 31, December 31,
                                                            1999        1998
Quarters Ended                                            --------- ------------
                                                              (in millions)
<S>                                                       <C>       <C>
VAR......................................................    $38        $30
Average VAR..............................................     37         33
VAR limit................................................     45         45
</TABLE>
 
  The VAR calculations above include the effects of various interest rate and
foreign exchange rate risks. The aggregate VAR and average VAR associated with
the Corporation's foreign exchange activities were approximately $5 million
and $7 million, respectively, for the first quarter of 1999 and $7 million and
$6 million, respectively, for the fourth quarter of 1998. The calculations do
not take into account the potential diversification benefits of the different
positions taken across trading portfolios.
 
  In addition to the VAR methodology, the Corporation employs other market
risk management tools which include loss limits and overall portfolio size
limits, as well as monthly stress tests and scenario analyses. While the VAR
methodology and supplementary risk management tools are effective for managing
market risk, they do not preclude the occurrence of trading losses during
periods of extreme volatility.
 
Asset and Liability Management (ALM)
 
  The Corporation's U.S. dollar denominated assets and liabilities are exposed
to interest rate risk, which can be defined as the exposure of the
Corporation's net income or financial condition to adverse movements in
interest rates. At March 31, 1999, U.S. dollar denominated assets comprised
the majority of the Corporation's balance sheet. The Corporation's U.S. dollar
denominated positions are evaluated and managed centrally through the Global
Treasury group, utilizing several modeling methodologies. The two principal
methodologies used are market value sensitivity and net interest revenue at
risk. The results of these models are reviewed monthly with ALCCO and at least
quarterly with the Board.
 
  Market value sensitivity is defined as the potential change in market value,
or the economic value, of the Corporation's assets and liabilities resulting
from changes in interest rates. Net interest revenue at risk is defined as the
exposure of the Corporation's net interest revenue over the next twelve months
to an adverse movement in interest rates. Both of these methodologies are
designed to isolate the effects of market changes in interest rates on the
Corporation's existing positions, and they exclude other factors such as
competitive pricing considerations, future changes in the asset and liability
mix and other management actions. Therefore, they are not by themselves
measures of future levels of net interest revenue.
 
 
                                      25
<PAGE>
 
  These two methodologies provide different but complementary measures of the
level of interest rate risk; the longer-term view is modeled through market
value sensitivity, while the shorter-term view is evaluated through net
interest revenue at risk over the next twelve months. Under current ALCCO
directives, market value sensitivity cannot exceed 3.6 percent of total risk-
based capital and net interest revenue at risk cannot exceed 2 percent of
annual net interest revenue.
 
  The following table illustrates the Corporation's quarter-end and average
U.S. dollar denominated positions for market value sensitivity and net
interest revenue at risk at March 31, 1999 and December 31, 1998.
 
<TABLE>
<CAPTION>
                                             March 31, 1999   December 31, 1998
                                           ------------------ ------------------
                                           Quarter- Quarterly Quarter- Quarterly
                                             End     Average    End     Average
                                           -------- --------- -------- ---------
                                                   (dollars in millions)
<S>                                        <C>      <C>       <C>      <C>
Market value sensitivity(1)...............   $253     $201      $145     $124
Percent of risk-based capital.............    3.1%     2.5%      1.8%     1.5%
Net interest revenue at risk(2)...........   $ 10     $ 13      $ 21     $ 18
Percent of net interest revenue...........     .4%      .5%       .9%      .7%
</TABLE>
--------
(1) Based on a 100 basis point adverse interest rate shock. At both March 31,
    1999 and December 31, 1998, the Corporation's market value sensitivity was
    negatively biased to rising interest rates. The increase in market value
    sensitivity was primarily attributable to the Corporation's strategic
    growth in its available for sale securities portfolio.
(2) Based on the greater of a 100 basis point adverse interest rate shock or a
    200 basis point adverse change in interest rates over the next twelve-
    month period. At March 31, 1999, the adverse position was based on a 100
    basis point upward interest rate shock and at December 31, 1998, the
    adverse position was based on a 200 basis point decline in interest rates
    over the next twelve-month period.
 
  The Corporation's non-U.S. dollar denominated assets and liabilities are
exposed to interest rate and foreign exchange rate risks. Non-U.S. dollar
denominated interest rate and foreign exchange rate risks are managed by the
Corporation's overseas units, with oversight by the Boston-based Global
Treasury group. ALCCO establishes overall limits for each country in which the
Corporation has local market interest rate risk and foreign exchange rate
risk. Limits are updated at least annually for current market conditions,
considering business and economic conditions in the country at a particular
point in time. The overseas units report as to compliance with these limits on
a regular basis.
 
  The majority of the Corporation's non-U.S. dollar denominated interest rate
and foreign exchange rate risk exposure stems from its operations in Latin
America, primarily Argentina and Brazil. The Corporation's Argentine balance
sheet and off-balance-sheet ALM positions primarily relate to its corporate
lending and retail businesses. At March 31, 1999, the market value sensitivity
and net interest revenue at risk of the Corporation's Argentine non-U.S.
dollar denominated ALM positions were approximately $7 million and $1 million,
respectively, and the limits were $18 million and $22 million, respectively.
At December 31, 1998, the market value sensitivity and net interest revenue at
risk of the Corporation's Argentine non-U.S. dollar denominated ALM positions
were approximately $6 million and $5 million, respectively.
 
  The Corporation's Brazilian balance sheet and off-balance-sheet ALM
positions, which are mostly short-term in nature, primarily relate to
corporate lending, trade financing and treasury activities. The interest rate
risk related to these ALM positions is managed using a VAR methodology, which
is discussed above in the "Trading Activities" section. The VAR positions are
calculated on a daily basis. The VAR exposure for the Corporation's Brazilian
non-U.S. dollar denominated ALM positions was approximately $11 million and $7
million at March 31, 1999 and December 31, 1998, respectively. The total VAR
limit was $17 million. The Corporation's Brazilian operation also utilizes
other market risk management tools such as stress testing, scenario analyses,
and concentration and notional limits to manage the interest rate exposure in
its ALM portfolio.
 
 
                                      26
<PAGE>
 
  When deemed appropriate, the Corporation will take positions in certain
currencies with the intention of taking advantage of movements in currency and
interest rates. Whenever these positions are taken, they are subject to limits
established by ALCCO and the MRC, as discussed above. Compliance with these
limits is reviewed regularly by the Corporation's independent capital markets
risk management function. The majority of the Corporation's foreign exchange
risk is generated by its operations in Argentina and Brazil, and is managed
within the overall currency positions.
 
  The average currency positions during the quarters ended March 31, 1999 and
December 31, 1998 were as follows:
 
<TABLE>
<CAPTION>
                                                            Quarterly Average
                                                          ----------------------
                                                          March 31, December 31,
                                                            1999        1998
                                                          --------- ------------
                                                              (in millions)
   <S>                                                    <C>       <C>
   Argentina(1)..........................................   $330        $350
   Brazil(2).............................................     38          95
</TABLE>
--------
(1) Positions represent local currency assets funded by U.S. dollar
    denominated liabilities.
(2) Positions represent U.S. dollar assets funded by local currency
    liabilities.
 
  To date, the Corporation's currency positions have been liquid in nature and
management has been able to close and re-open these positions as necessary.
 
  The level of U.S. dollar and non-U.S. dollar exposure maintained by the
Corporation is a function of the market environment and may change from period
to period based on interest rate and other economic expectations.
 
 
                                      27
<PAGE>
 
                       DERIVATIVE FINANCIAL INSTRUMENTS
 
  Derivatives provide the Corporation with significant flexibility in managing
its interest rate risk and foreign exchange exposures, enabling it to manage
risk efficiently and respond quickly to changing market conditions while
minimizing the impact on balance sheet leverage. The Corporation routinely
uses non-leveraged rate-related derivative instruments, primarily interest
rate swaps, as part of its asset and liability management practices. The level
and term of such contracts may be modified as necessary, in response to
balance sheet changes and other management actions, while complying with ALCCO
directives for market value sensitivity and net interest revenue at risk.
Derivatives not used for asset and liability management are included in the
derivative trading portfolio and principally relate to providing risk
management products to the Corporation's customers.
 
  The following table is a summary of the Corporation's notional amounts and
fair values of interest rate derivatives and foreign exchange contracts
included in its trading and ALM portfolios.
 
<TABLE>
<CAPTION>
                                                  March 31, 1999
                         -----------------------------------------------------------------
                           Trading Portfolio(1)               ALM Portfolio(1)
                         ------------------------- ---------------------------------------
                                        Fair                     Fair
                                   Value(2)(3)(4)             Value(2)(3)
                         Notional ---------------- Notional ---------------  Unrecognized
                          Amount  Asset  Liability  Amount  Asset Liability Gain (Loss)(5)
                         -------- ------ --------- -------- ----- --------- --------------
                                                   (in millions)
<S>                      <C>      <C>    <C>       <C>      <C>   <C>       <C>
Interest rate contracts
  Futures and forwards.. $ 3,254  $    2           $   891                       $ (5)
  Interest rate swaps...  28,178     285  $  320    12,575  $258    $144           89
  Interest rate options
    Purchased(6)........  35,331     269             2,400    55                   55
    Written or sold(6)..  25,535             283     1,899            51          (39)
                         -------  ------  ------   -------  ----    ----         ----
                         $92,298  $  556  $  603   $17,765  $313    $195         $100
                         =======  ======  ======   =======  ====    ====         ====
Foreign exchange
 contracts
  Spot and forward
   contracts............ $84,652  $1,246  $1,271   $13,795  $ 17    $ 56         $(39)
  Options purchased.....   3,540      55
  Options written or
   sold.................   3,266              72
                         -------  ------  ------   -------  ----    ----         ----
                         $91,458  $1,301  $1,343   $13,795  $ 17    $ 56         $(39)
                         =======  ======  ======   =======  ====    ====         ====
<CAPTION>
                                                 December 31, 1998
                         -----------------------------------------------------------------
                           Trading Portfolio(1)               ALM Portfolio(1)
                         ------------------------- ---------------------------------------
                                        Fair                     Fair
                                   Value(2)(3)(4)             Value(2)(3)
                         Notional ---------------- Notional ---------------  Unrecognized
                          Amount  Asset  Liability  Amount  Asset Liability Gain (Loss)(5)
                         -------- ------ --------- -------- ----- --------- --------------
                                                   (in millions)
<S>                      <C>      <C>    <C>       <C>      <C>   <C>       <C>
Interest rate contracts
  Futures and forwards.. $ 4,037  $    2           $   734                       $ (6)
  Interest rate swaps...  29,164     471  $  470     8,366  $219    $ 81          110
  Interest rate options
    Purchased(6)........  32,640     191             2,411    89                   89
    Written or sold(6)..  24,199             200     1,911            66          (66)
                         -------  ------  ------   -------  ----    ----         ----
                         $90,040  $  664  $  670   $13,422  $308    $147         $127
                         =======  ======  ======   =======  ====    ====         ====
Foreign exchange
 contracts
  Spot and forward
   contracts............ $48,206  $1,221  $1,274   $ 3,469  $ 35    $ 22         $ 13
  Options purchased.....   3,581      68                68
  Options written or
   sold.................   3,711              54
                         -------  ------  ------   -------  ----    ----         ----
                         $55,498  $1,289  $1,328   $ 3,537  $ 35    $ 22         $ 13
                         =======  ======  ======   =======  ====    ====         ====
</TABLE>
 
                                      28
<PAGE>
 
--------
(1) Contracts under master netting agreements are shown on a net basis for
    both the trading and ALM portfolios.
(2) 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 the
    balance sheet date. The fair value amounts of the trading portfolio are
    included in trading assets or funds borrowed, as applicable. The majority
    of derivatives that are part of the ALM portfolio are accounted for on the
    accrual basis, and are not carried at fair value. When certain contracts,
    such as futures, are subject to daily cash settlements, the fair value of
    these instruments is zero.
(3) The current credit exposure from interest rate derivatives and foreign
    exchange contracts at March 31, 1999 and December 31, 1998 is represented
    by the fair value of contracts reported in the "Asset" column.
(4) The average asset and liability fair value amounts for interest rate
    derivatives included in the trading portfolio for the quarters ended March
    31, 1999 and December 31, 1998 were approximately $609 million and $637
    million, respectively, and $635 million and $657 million, respectively.
    The average asset and liability fair value amounts for foreign exchange
    contracts included in the trading portfolio were both approximately $1.3
    billion for the quarter ended March 31, 1999. The average asset and
    liability fair value amounts for foreign exchange contracts included in
    the trading portfolio were both approximately $1.1 billion for the quarter
    ended December 31, 1998.
(5) Unrecognized gain or loss represents the amount of gain or loss, based on
    fair value, which has not been recognized in the income statement as of
    the balance sheet date. This includes amounts related to contracts that
    have been terminated. Such amounts are recognized as an adjustment of
    yield over the period being managed. At March 31, 1999, there were $4
    million of unrecognized gains related to terminated contracts that are
    being amortized to net interest revenue over a weighted average period of
    49 months. At December 31, 1998, there were $4 million of unrecognized
    gains related to terminated contracts that were being amortized to net
    interest revenue over a weighted average period of 46 months.
(6) The ALM portfolio includes equity contracts entered into by the
    Corporation's Argentine operations. These contracts are linked to
    Argentine deposit products, where the holder receives payment based on
    changes in the prices of underlying Argentine securities. These contracts
    are scheduled to mature prior to the end of 1999.
 
  Net trading gains or losses from interest rate derivatives are recorded in
trading profits and commissions. The Corporation's interest rate derivative
trading activities primarily include providing risk management products to
customers. Net trading gains from interest rate derivatives were $3 million
and $6 million for the quarters ended March 31, 1999 and 1998, respectively.
Derivatives are also used to manage risk in other trading portfolios, such as
emerging markets securities. The results of these derivative activities are
combined with the results of the respective trading portfolio to determine the
overall performance of the trading business and, as such, are not included in
the results of derivative trading activities.
 
  Net trading gains from foreign exchange activities, which include foreign
exchange spot, forward and options contracts, for the quarters ended March 31,
1999 and 1998 were $45 million and $28 million, respectively, and are recorded
in other income.
 
 
                                      29
<PAGE>
 
  The following table summarizes the remaining maturity and notional amount of
interest rate derivatives as of March 31, 1999, and the notional amount of
interest rate derivatives as of December 31, 1998, entered into for asset and
liability management purposes.
 
<TABLE>
<CAPTION>
                                      Remaining Maturity-Notional Amount
                          ----------------------------------------------------------
                                                              March 31, December 31,
                          Less than  1-3    3-5  Greater than   1999        1998
                           1 year   years  years   5 years      Total      Total
                          --------- ------ ----- ------------ --------- ------------
                                                (in millions)
<S>                       <C>       <C>    <C>   <C>          <C>       <C>
Futures and
 forwards(1)............   $   891                             $   891    $   734
Interest rate swaps(2)..     7,679  $1,480 $678     $2,738      12,575      8,366
Interest rate options(3)
  Purchased.............     2,400                               2,400      2,411
  Written or sold.......     1,899                               1,899      1,911
                           -------  ------ ----     ------     -------    -------
                           $12,869  $1,480 $678     $2,738     $17,765    $13,422
                           =======  ====== ====     ======     =======    =======
</TABLE>
--------
(1) At March 31, 1999 and December 31, 1998, represents contracts entered into
    by the Corporation's Brazilian operations in the local market which are
    linked to short-term interest bearing assets and liabilities.
(2) At March 31, 1999, includes $6.6 billion and $5.7 billion of interest rate
    swap contracts entered into by the Corporation's domestic and
    international operations, respectively. Of the domestic interest rate
    swaps, approximately $4 billion are linked to notes payable, $.6 billion
    to deposits and $1.2 billion to loans. Of the international interest rate
    swaps, approximately $5.7 billion were entered into by the Brazilian
    operations and are scheduled to mature in less than one year. The
    Brazilian interest rate swaps typically include the exchange of floating
    rate indices that are indigenous to the Brazilian market.
(3) At March 31, 1999 and December 31, 1998, includes equity contracts entered
    into by the Corporation's Argentine operations. These contracts are linked
    to Argentine deposit products, where the holder receives payment based on
    changes in the prices of underlying Argentine securities. These contracts
    are scheduled to mature prior to the end of 1999.
 
  The Corporation routinely reviews its asset and liability derivative
positions to determine that such instruments continue to function as effective
risk management tools. Additional information on the Corporation's derivative
products, including accounting policies, is included on pages 51 and 52, and
in Notes 1 and 22 to the Financial Statements, in the Corporation's 1998
Annual Report to Stockholders, which is incorporated by reference into its
1998 Annual Report on Form 10-K.
 
 
                                      30
<PAGE>
 
                       RECENT ACCOUNTING PRONOUNCEMENTS
 
  In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires that all derivative
instruments, including certain derivative instruments embedded in other
contracts, be recorded on the balance sheet as either an asset or liability
measured at its fair value. Changes in the derivative's fair value should be
recognized currently in earnings unless the derivative is designated as a
hedge. When designated as a hedge, the fair value should be recognized
currently in earnings or in other nonowner changes in equity, depending on
whether such designation is as a fair value or as a cash flow hedge. With
respect to fair value hedges, the fair value of the derivative, as well as
changes in the fair value of the hedged item, are reported in the income
statement. With cash flow hedges, changes in the derivative's fair value are
reported in other nonowner changes in equity and reclassified to the income
statement in periods in which earnings are affected by the hedged variable
cash flows or forecasted transaction. SFAS No. 133 also requires a company to
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting treatment.
 
  SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999, and cannot be applied retroactively. The Corporation
intends to adopt the SFAS No. 133 as of January 1, 2000; however, it has not
yet quantified the financial statement impact of adoption, nor determined the
method of adoption. The Corporation anticipates that adoption could increase
volatility in earnings and other nonowner changes in equity, and could result
in certain modifications to systems and hedging methodologies.
 
                                      31
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                           CONSOLIDATED BALANCE SHEET
 
               (in millions, except share and per share amounts)
 
 
<TABLE>
<CAPTION>
                                                          March 31, December 31,
                                                            1999        1998
                                                          --------- ------------
<S>                                                       <C>       <C>
                         ASSETS
Cash and due from banks..................................  $ 2,992    $ 3,773
Interest bearing deposits in other banks.................    1,116      1,533
Federal funds sold and securities purchased under agree-
 ments to resell.........................................    3,655      2,463
Trading assets...........................................    4,213      3,802
Securities
  Available for sale.....................................   13,472     12,075
  Held to maturity (fair value of $414 in 1999 and $464
   in 1998)..............................................      410        459
Loans and lease financing
  United States operations...............................   29,241     29,171
  International operations...............................   13,534     13,635
                                                           -------    -------
    Total loans and lease financing (net of unearned in-
     come of $508 in 1999 and $526 in 1998)..............   42,775     42,806
Reserve for credit losses................................     (758)      (754)
Premises and equipment, net..............................    1,291      1,319
Due from customers on acceptances........................      327        338
Accrued interest receivable..............................      599        561
Other assets.............................................    5,616      5,138
                                                           -------    -------
TOTAL ASSETS.............................................  $75,708    $73,513
                                                           =======    =======
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       32
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                           CONSOLIDATED BALANCE SHEET
 
               (in millions, except share and per share amounts)
                                  (continued)
 
<TABLE>
<CAPTION>
                                                         March 31, December 31,
                                                           1999        1998
                                                         --------- ------------
<S>                                                      <C>       <C>
          LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Domestic offices
    Noninterest bearing.................................  $ 6,298    $ 6,554
    Interest bearing....................................   27,724     28,371
  Overseas offices
    Noninterest bearing.................................    1,534      1,144
    Interest bearing....................................   12,912     12,431
                                                          -------    -------
      Total deposits....................................   48,468     48,500
Funds borrowed
  Federal funds purchased...............................    1,250        628
  Term federal funds purchased..........................      917      1,468
  Securities sold under agreements to repurchase........    4,014      3,145
  Other funds borrowed..................................    7,697      6,775
Acceptances outstanding.................................      329        338
Accrued expenses and other liabilities..................    2,459      2,254
Notes payable...........................................    4,616      4,593
Guaranteed preferred beneficial interests in Corpora-
 tion's junior subordinated
 debentures.............................................      995        995
                                                          -------    -------
TOTAL LIABILITIES.......................................   70,745     68,696
                                                          -------    -------
Commitments and contingencies
Stockholders' equity
 Preferred stock without par value
  Authorized shares--10,000,000
  Issued and outstanding shares--none...................
 Common stock, par value $1.00
  Authorized shares--500,000,000
  Issued shares--307,005,814 in 1999 and 307,317,780 in
   1998
  Outstanding shares--296,626,441 in 1999 and
   294,971,900 in 1998..................................      307        307
 Surplus................................................    1,106      1,118
 Retained earnings......................................    3,982      3,895
 Accumulated other nonowner changes in equity
  Net unrealized loss on securities available for sale,
   net of tax...........................................      (23)       (19)
  Cumulative translation adjustments, net of tax........      (14)       (14)
 Treasury stock, at cost (10,379,373 shares in 1999 and
  12,345,880 shares in 1998)............................     (395)      (470)
                                                          -------    -------
TOTAL STOCKHOLDERS' EQUITY..............................    4,963      4,817
                                                          -------    -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..............  $75,708    $73,513
                                                          =======    =======
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       33
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                        CONSOLIDATED STATEMENT OF INCOME
 
                (dollars in millions, except per share amounts)
 
<TABLE>
<CAPTION>
<S>                                                            <C>      <C>
Quarters Ended March 31                                         1999     1998
                                                               -------  -------
Interest Income
  Loans and lease financing, including fees................... $ 1,034  $ 1,012
  Securities..................................................     205      178
  Trading assets..............................................      24       30
  Federal funds sold and securities purchased under agreements
   to resell..................................................      81       84
  Deposits in other banks.....................................      28       33
                                                               -------  -------
    Total interest income.....................................   1,372    1,337
                                                               -------  -------
Interest Expense
  Deposits of domestic offices................................     229      239
  Deposits of overseas offices................................     244      223
  Funds borrowed..............................................     180      207
  Notes payable...............................................      84       65
                                                               -------  -------
    Total interest expense....................................     737      734
                                                               -------  -------
Net interest revenue..........................................     635      603
  Provision for credit losses.................................      70      140
                                                               -------  -------
  Net interest revenue after provision for credit losses......     565      463
                                                               -------  -------
Noninterest Income
  Financial service fees and commissions......................     334      165
  Trust and investment management fees........................      79       79
  Trading profits and commissions.............................      39       34
  Securities gains/(losses), net..............................      (2)      25
  Other income................................................     145      286
                                                               -------  -------
    Total noninterest income..................................     595      589
                                                               -------  -------
Noninterest Expense
  Salaries....................................................     402      293
  Employee benefits...........................................      71       61
  Occupancy expense...........................................      64       54
  Equipment expense...........................................      45       40
  Other expense...............................................     224      213
                                                               -------  -------
    Total noninterest expense.................................     806      661
                                                               -------  -------
Income before income taxes....................................     354      391
Provision for income taxes....................................     131      153
                                                               -------  -------
NET INCOME.................................................... $   223  $   238
                                                               =======  =======
NET INCOME APPLICABLE TO COMMON STOCK......................... $   223  $   234
                                                               =======  =======
Per common share
Net income
  Basic....................................................... $   .75  $   .80
  Diluted..................................................... $   .75  $   .79
Dividends declared............................................ $   .32  $   .29
Average number of common shares (in thousands)
  Basic....................................................... 295,935  292,542
  Diluted..................................................... 298,477  296,840
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       34
<PAGE>
 
                             BANKBOSTON CORPORATION
 
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
 
                                 (in millions)
 
<TABLE>
<CAPTION>
<S>                                                             <C>     <C>
Quarters Ended March 31                                          1999    1998
                                                                ------  ------
Balance, beginning of period................................... $4,817  $4,610
Net income.....................................................    223     238
Other nonowner changes in equity
  Change in unrealized gain (loss) on securities available for
   sale, net of tax and
   reclassification adjustment.................................     (4)      3
  Change in foreign currency translation adjustment, net of
   tax.........................................................             (2)
                                                                ------  ------
    Total nonowner changes in equity...........................    219     239
                                                                ------  ------
Common stock issued in connection with
  Exercise of stock options....................................      5      25
  Dividend reinvestment and common stock purchase plan.........      6       5
  Restricted stock grants, net of forfeitures..................     (2)      5
  Other, principally employee benefit plans....................     13      12
Cash dividends declared
  Preferred stock..............................................             (4)
  Common stock.................................................    (95)    (85)
                                                                ------  ------
Balance, end of period......................................... $4,963  $4,807
                                                                ======  ======
</TABLE>
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       35
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
                                 (in millions)
 
<TABLE>
<CAPTION>
                                                                 1999    1998
Quarters Ended March 31                                         ------  ------
<S>                                                             <C>     <C>
Cash Flows From Operating Activities
Net income....................................................  $  223  $  238
Reconciliation of net income to net cash used for operating
 activities
 Provision for credit losses..................................      70     140
 Depreciation and amortization................................      56      44
 Provision for deferred taxes.................................      (4)    (28)
 Net gains on sales of securities available for sale and
  other assets................................................     (10)   (232)
 Change in trading assets.....................................    (431)   (150)
 Net change in interest receivable and payable................     (43)     44
 Other, net...................................................    (117)   (207)
                                                                ------  ------
   Net cash used for operating activities.....................    (256)   (151)
                                                                ------  ------
Cash Flows From Investing Activities
Net cash provided from interest bearing deposits in other
 banks........................................................     417     173
Net cash used for federal funds sold and securities purchased
 under agreements to resell...................................  (1,192)   (456)
Securities available for sale
 Sales........................................................   2,209   2,536
 Maturities...................................................     600     657
 Purchases....................................................  (4,136) (3,858)
Securities held to maturity
 Maturities...................................................      54       8
 Purchases....................................................      (5)     (8)
Net cash provided from (used for) lending and lease
 activities...................................................    (234)    111
Proceeds from sales of loan portfolios........................           1,207
Proceeds from sales of other real estate owned................       9       5
Expenditures for premises and equipment.......................     (86)   (100)
Proceeds from sales of businesses and premises and equipment..      75     352
Payment for purchase business combination, net of cash
 acquired.....................................................            (207)
Purchases of investment in bank-owned life insurance..........            (400)
Other, net....................................................     (13)    149
                                                                ------  ------
 Net cash provided from (used for) investing activities.......  (2,302)    169
                                                                ------  ------
Cash Flows From Financing Activities
Net cash used for deposits....................................     (32)   (815)
Net cash provided from funds borrowed.........................   1,913     772
Repayment/repurchase of notes payable.........................    (342)    (20)
Net proceeds from issuance of notes payable...................     365     548
Net proceeds from issuance of common stock....................      22      41
Dividends paid................................................     (95)    (89)
                                                                ------  ------
 Net cash provided from financing activities..................   1,831     437
Effect of foreign currency translation on cash................     (54)     (7)
                                                                ------  ------
NET CHANGE IN CASH AND DUE FROM BANKS.........................    (781)    448
Cash and Due from Banks at January 1..........................   3,773   4,006
                                                                ------  ------
Cash and Due from Banks at March 31...........................  $2,992  $4,454
                                                                ======  ======
Interest payments made........................................  $  742  $  688
Income tax payments made......................................  $   17  $   56
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       36
<PAGE>
 
                            BANKBOSTON CORPORATION
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.The accompanying interim consolidated financial statements of BankBoston
Corporation (the Corporation) are unaudited. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information contained herein have been made. Certain
amounts reported in prior periods have been reclassified for comparative
purposes. This information should be read in conjunction with the
Corporation's 1998 Annual Report on Form 10-K.
 
2.Merger Agreement
 
  In March 1999, the Corporation entered into an Agreement and Plan of Merger
with Fleet Financial Group, Inc. (Fleet), a bank holding company based in
Boston with assets of $106 billion at March 31, 1999, pursuant to which the
Corporation will merge with Fleet. On the closing date of the merger, each
share of common stock of the Corporation outstanding immediately prior to the
merger will be converted into the right to receive 1.1844 shares of Fleet
common stock. Outstanding options to purchase common stock of the Corporation
will be converted into options to purchase common stock of Fleet on the same
basis. The merger is expected to be accounted for as a pooling of interests.
The Corporation expects to close the merger, which is subject to stockholder
and regulatory approvals, in the latter half of 1999, and anticipates that in
order to obtain regulatory approval of the transaction, the combined entity
will be required to divest approximately $13 billion of deposits. The combined
entity will record merger and restructuring charges of approximately $1
billion (on a pre-tax basis) in connection with the merger.
 
3.Securities
 
  A summary comparison of securities available for sale by type is as follows:
 
<TABLE>
<CAPTION>
                                                                  December 31,
                                                March 31, 1999        1998
                                               ---------------- ----------------
                                                       Carrying         Carrying
                                                Cost    Value    Cost    Value
                                               ------- -------- ------- --------
                                                         (in millions)
<S>                                            <C>     <C>      <C>     <C>
U.S. Treasury................................. $   780 $   778  $   704 $   711
U.S. government agencies and corporations--
 mortgage-backed securities...................   7,900   7,874    7,065   7,095
States and political subdivisions.............      35      35       34      34
Foreign debt securities.......................   2,436   2,364    2,184   2,111
Other debt securities.........................   1,380   1,387    1,135   1,145
Marketable equity securities..................     321     375      346     339
Other equity securities.......................     659     659      640     640
                                               ------- -------  ------- -------
                                               $13,511 $13,472  $12,108 $12,075
                                               ======= =======  ======= =======
</TABLE>
 
  Other equity securities include securities which are not traded on
established exchanges and are carried at cost.
 
  A summary comparison of securities held to maturity by type is as follows:
 
<TABLE>
<CAPTION>
                                                                  December 31,
                                                 March 31, 1999       1998
                                                 --------------- ---------------
                                                 Amortized Fair  Amortized Fair
                                                   Cost    Value   Cost    Value
                                                 --------- ----- --------- -----
                                                          (in millions)
<S>                                              <C>       <C>   <C>       <C>
U.S. Treasury...................................   $  8    $  8    $  7    $  7
U.S. government agencies and corporations--
 mortgage-backed securities.....................    389     393     439     444
Foreign debt securities.........................     13      13      13      13
                                                   ----    ----    ----    ----
                                                   $410    $414    $459    $464
                                                   ====    ====    ====    ====
</TABLE>
 
 
                                      37
<PAGE>
 
                             BANKBOSTON CORPORATION
 
                   NOTES TO FINANCIAL STATEMENTS (continued)
 
4.Loans and Lease Financing
 
  The following are the details of loan and lease financing balances:
 
<TABLE>
<CAPTION>
                                                          March 31, December 31,
                                                            1999        1998
                                                          --------- ------------
                                                              (in millions)
<S>                                                       <C>       <C>
United States operations
  Commercial, industrial and financial...................  $17,028    $16,294
  Commercial real estate
    Construction.........................................      228        215
    Other................................................    3,531      3,871
  Consumer-related
    Residential mortgages................................    1,840      2,035
    Home equity..........................................    2,325      2,294
    Credit card..........................................      379        404
    Other................................................    2,433      2,532
  Lease financing........................................    1,768      1,801
  Unearned income........................................     (291)      (275)
                                                           -------    -------
                                                            29,241     29,171
                                                           -------    -------
International operations
  Commercial and industrial..............................    9,288      9,295
  Banks and other financial institutions.................      523        597
  Governments and official institutions..................      138         95
  Consumer-related
    Residential mortgages................................    1,249      1,251
    Credit card..........................................      327        362
    Other................................................    1,162      1,192
  Lease financing........................................      705        725
  All other..............................................      359        369
  Unearned income........................................     (217)      (251)
                                                           -------    -------
                                                            13,534     13,635
                                                           -------    -------
                                                           $42,775    $42,806
                                                           =======    =======
</TABLE>
 
 
                                       38
<PAGE>
 
                            BANKBOSTON CORPORATION
 
                   NOTES TO FINANCIAL STATEMENTS (continued)
 
5.Reserve for Credit Losses
 
  An analysis of the reserve for credit losses is as follows:
 
<TABLE>
<CAPTION>
                                                                     1999  1998
Quarters Ended March 31                                              ----  ----
                                                                        (in
                                                                     millions)
<S>                                                                  <C>   <C>
Balance, beginning of period........................................ $754  $712
Provision...........................................................   70   140
Reserves of entities acquired.......................................         14
Domestic credit losses
  Commercial, industrial and financial..............................  (22)  (16)
  Commercial real estate............................................         (1)
  Consumer-related
    Residential mortgages...........................................   (1)   (3)
    Credit card.....................................................   (5)  (21)
    Home equity.....................................................   (1)   (2)
    Other...........................................................  (17)  (23)
International credit losses.........................................  (37)  (90)
                                                                     ----  ----
      Total credit losses...........................................  (83) (156)
                                                                     ----  ----
Domestic recoveries
  Commercial, industrial and financial..............................    1     3
  Commercial real estate............................................    3     2
  Consumer-related
    Residential mortgages...........................................    1     1
    Credit card.....................................................    1     1
    Other...........................................................    4     4
International recoveries............................................    7     4
                                                                     ----  ----
      Total recoveries..............................................   17    15
                                                                     ----  ----
Net credit losses...................................................  (66) (141)
                                                                     ----  ----
Balance, end of period.............................................. $758  $725
                                                                     ====  ====
</TABLE>
 
  At March 31, 1999, loans for which impairment has been recognized in
accordance with Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," totaled $171 million, of
which loans totaling $5 million required no valuation reserve and loans
totaling $166 million required a valuation reserve of $40 million. At December
31, 1998, impaired loans totaled $191 million, of which loans totaling $15
million required no valuation reserve and loans totaling $176 million required
a valuation reserve of $40 million. For the quarters ended March 31, 1999 and
1998, average impaired loans were approximately $171 million and $172 million,
respectively. Interest recognized on impaired loans during these periods was
not significant.
 
 
                                      39
<PAGE>
 
                            BANKBOSTON CORPORATION
 
                   NOTES TO FINANCIAL STATEMENTS (continued)
 
6.Guaranteed Preferred Beneficial Interests in Corporation's Junior
Subordinated Debentures
 
  Since November 1996, the Corporation has formed five wholly-owned grantor
trusts, BankBoston Capital Trust I, II, III, IV and V (collectively, the
Trusts), for the exclusive purpose of issuing capital securities (Trust
Securities) and investing the proceeds from the sale of such securities in
junior subordinated debentures issued by the Corporation. The aggregate amount
of such debentures outstanding totaled $995 million at both March 31, 1999 and
December 31, 1998.
 
  There have been no issuances of Trust Securities by BankBoston Capital Trust
V. A summary of the Trust Securities issued and outstanding, net of discount,
is as follows:
 
<TABLE>
<CAPTION>
                          BankBoston     BankBoston
                         Capital Trust  Capital Trust     BankBoston        BankBoston
                               I             II        Capital Trust III Capital Trust IV
                         -------------  -------------  ----------------- ----------------
<S>                      <C>            <C>            <C>               <C>
Amount outstanding (in
 millions)..............          $250           $250            $248             $247
Original issue date.....      11/26/96       12/10/96          6/4/97           6/8/98
Rate....................          8.25%          7.75%    Libor + .75%     Libor + .60%
Earliest prepayment
 option date............      12/15/06       12/15/06         6/15/07           6/8/03
Stated maturity.........      12/15/26       12/15/26         6/15/27           6/8/28
Distribution payment
 frequency.............. semi-annually  semi-annually       quarterly        quarterly
Liquidation preference
 per Trust Security.....        $1,000         $1,000          $1,000           $1,000
</TABLE>
 
  All of the Trust Securities may be prepaid at the option of the Trusts, in
whole or in part, on or after the prepayment option dates listed above. At
March 31, 1999, the interest rates on the Capital Trust III and IV floating
rate Trust Securities were 5.75% and 5.63%, respectively. The Corporation's
guarantees of the Trust Securities, together with the other obligations of the
Corporation with respect to the Trust Securities, constitute a full and
unconditional guarantee by the Corporation of all of the Trusts' obligations
under the Trust Securities.
 
  The Corporation owns all of the common securities of the Trusts, the sole
assets of which are their respective subordinated debentures. The principal
amount of subordinated debentures held by each Trust equals the aggregate
liquidation amount of its Trust Securities and its common securities. The
subordinated debentures bear interest at the same rate, and will mature on the
same date, as the corresponding Trust Securities.
 
7.Business Segment Information
 
  Effective December 31, 1998, the Corporation adopted SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
new standard requires disclosure of financial and descriptive information
about an entity's reportable operating segments. In accordance with the new
standard, the Corporation has presented financial and descriptive information
for four principal operating segments--the Wholesale Bank, the Regional Bank,
Argentina and Brazil. For information about these segments, as well as other
segments not individually reportable, see Management's Discussion and Analysis
under the section entitled "Line of Business Information."
 
 
                                      40
<PAGE>
 
                            BANKBOSTON CORPORATION
 
                   NOTES TO FINANCIAL STATEMENTS (continued)
 
8.Earnings per Share
 
  A summary of the Corporation's calculation of earnings per share follows.
Share and per share information for 1998 has been adjusted to reflect the
Corporation's two-for-one stock split effected in June 1998.
 
<TABLE>
<CAPTION>
                                                              1999      1998
Quarters Ended March 31                                     --------- --------
(in millions)
<S>                                                         <C>       <C>
Net income................................................. $     223 $    238
Less preferred dividends...................................                  4
                                                            --------- --------
Net income applicable to common stock...................... $     223 $    234
                                                            ========= ========
<CAPTION>
(in thousands)
<S>                                                         <C>       <C>
Weighted average number of common shares outstanding used
 in calculation of basic earnings per share................   295,935  292,542
Incremental shares from the assumed exercise of dilutive
 stock options as of the beginning of the period...........     2,542    4,298
                                                            --------- --------
Weighted average number of common shares outstanding used
 in calculation of diluted earnings per share..............   298,477  296,840
                                                            ========= ========
  Basic earnings per common share.......................... $     .75 $    .80
                                                            ========= ========
  Diluted earnings per common share........................ $     .75 $    .79
                                                            ========= ========
</TABLE>
 
9.Contingencies
 
  The Corporation and its subsidiaries are defendants in a number of legal
proceedings arising in the normal course of business. 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 should not be material
to the Corporation's financial condition or results of operations.
 
10.Nonowner Changes in Equity
 
  The Corporation reports nonowner changes in equity in accordance with SFAS
No. 130, "Reporting Comprehensive Income." Nonowner changes in equity consist
of net income and other nonowner changes, composed of unrealized gains and
losses on securities available for sale and foreign currency translation
adjustments. The Corporation has reported nonowner changes in equity for the
quarters ended March 31, 1999 and 1998 in the accompanying consolidated
statement of changes in stockholders' equity on a net-of-tax basis. The
changes in unrealized gain (loss) on securities available for sale have also
been presented net of reclassification adjustments related to net securities
gains (losses) that were realized from sales and writedowns of such securities
during the respective periods. These gains (losses), on an after-tax basis,
amounted to $(1) million and $15 million for the quarters ended March 31, 1999
and 1998, respectively. Tax provisions (benefits) related to other nonowner
changes in equity for the quarters ended March 31, 1999 and 1998 were as
follows: change in unrealized gain (loss) on securities available for sale,
$(3) million and $12 million, respectively; reclassification adjustment, $(1)
million and $10 million, respectively; and change in foreign currency
translation, zero and $(1) million, respectively.
 
                                      41
<PAGE>
 
Consolidated Balance Sheet Averages by Quarter
 
Last Nine Quarters
 
<TABLE>
<CAPTION>
                                       1997                            1998                1999
                          ------------------------------- ------------------------------- -------
                             1       2       3       4       1       2       3       4       1
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
                                                       (in millions)
<S>                       <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
         ASSETS
Interest bearing
 deposits in other
 banks..................  $ 1,961 $ 1,748 $ 1,737 $ 1,683 $ 1,579 $ 1,077 $   962 $ 1,238 $ 1,100
Federal funds sold and
 securities purchased
 under agreements to
 resell.................    2,189   1,896   2,018   2,322   2,524   3,252   3,483   3,470   5,523
Trading assets..........    1,498   1,590   1,924   1,769   2,072   2,248   1,663   1,594   1,874
Securities..............    9,261   9,488   9,661  10,538  10,606  11,188  11,692  12,171  13,247
Loans and lease
 financing..............   41,732  42,112  42,429  43,242  43,706  44,196  45,069  45,731  42,536
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 Total earning assets...   56,641  56,834  57,769  59,554  60,487  61,961  62,869  64,204  64,280
Other assets............    6,583   7,112   7,935   8,538   9,223   9,275   9,632  11,127  11,830
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 TOTAL ASSETS...........  $63,224 $63,946 $65,704 $68,092 $69,710 $71,236 $72,501 $75,331 $76,110
                          ======= ======= ======= ======= ======= ======= ======= ======= =======
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Deposits
Domestic offices
 Noninterest bearing....  $ 6,951 $ 7,229 $ 7,182 $ 7,535 $ 7,482 $ 7,031 $ 6,186 $ 5,763 $ 5,688
 Interest bearing.......   24,622  24,657  24,713  24,825  25,594  25,786  26,147  28,618  28,750
Overseas offices
 Noninterest bearing....      599     626     709     883   1,134   1,178   1,019   1,091   1,350
 Interest bearing.......    9,727   9,734  10,385  11,009  11,564  11,409  11,187  11,917  11,628
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 Total deposits.........   41,899  42,246  42,989  44,252  45,774  45,404  44,539  47,389  47,416
Federal funds purchased
 and
 repurchase agreements..    5,923   5,776   6,047   6,318   5,337   5,358   6,825   7,267   8,448
Other funds borrowed....    4,943   5,690   6,320   6,412   6,972   7,696   7,598   6,012   4,928
Notes payable(1)........    3,316   3,351   3,336   3,524   3,749   4,392   5,149   5,477   5,526
Other liabilities.......    2,191   2,216   2,464   3,106   3,148   3,508   3,618   4,417   4,915
Stockholders' equity....    4,952   4,667   4,548   4,480   4,730   4,878   4,772   4,769   4,877
                          ------- ------- ------- ------- ------- ------- ------- ------- -------
 TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY..  $63,224 $63,946 $65,704 $68,092 $69,710 $71,236 $72,501 $75,331 $76,110
                          ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
--------
(1)Amounts include guaranteed preferred beneficial interests in Corporation's
  junior subordinated debentures.
 
                                       42
<PAGE>
 
Consolidated Statement of Income by Quarter--Taxable Equivalent Basis
 
Last Nine Quarters
 
<TABLE>
<CAPTION>
                                     1997                         1998                 1999
                          ---------------------------  -----------------------------  ------
                            1      2      3      4       1      2       3       4       1
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
                                     (in millions, except per share amounts)
<S>                       <C>    <C>    <C>    <C>     <C>    <C>     <C>     <C>     <C>
Net Interest Revenue....  $620.0 $615.9 $571.1 $621.5  $603.3 $639.5  $624.9  $658.9  $634.8
Taxable equivalent
 adjustment.............     5.0    4.5    5.4    9.6     3.7    5.4     4.7     9.3     4.3
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
 Total net interest
  revenue...............   625.0  620.4  576.5  631.1   607.0  644.9   629.6   668.2   639.1
Provision for credit
 losses.................    60.0   60.0   40.0   40.0   140.0   60.0    60.0   120.0    70.0
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
 Net interest revenue
  after provision for
  credit losses.........   565.0  560.4  536.5  591.1   467.0  584.9   569.6   548.2   569.1
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
Noninterest Income
Financial service fees
 and commissions........   139.2  157.6  170.4  195.7   165.1  194.6   222.8   294.5   333.5
Trust and investment
 management fees........    66.0   69.4   72.8   74.8    79.3   82.1    82.3    82.4    79.1
Trading profits and
 commissions............    19.3   27.9   19.9   (8.6)   34.0   (3.7)  (52.1)   19.0    39.0
Securities
 gains/(losses), net....     8.8   31.9   11.3   27.4    24.8   11.4    16.6   (12.2)   (2.0)
Other income............    96.4   90.0  173.8  119.1   285.8  173.0   115.5   216.8   145.1
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
 Total noninterest
  income................   329.7  376.8  448.2  408.4   589.0  457.4   385.1   600.5   594.7
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
Noninterest Expense
Salaries................   257.7  260.2  263.8  283.0   292.7  305.1   384.4   390.9   401.9
Employee benefits.......    52.7   51.3   54.0   56.3    60.9   63.3    64.1    68.2    71.5
Occupancy expense.......    50.8   52.1   49.6   51.3    54.4   55.8    58.3    62.9    64.0
Equipment expense.......    35.6   35.8   36.1   38.4    40.1   39.6    40.8    45.9    44.6
Other expense...........   147.4  178.5  197.8  171.5   212.9  183.6   238.0   248.0   223.5
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
 Total noninterest
  expense...............   544.2  577.9  601.3  600.5   661.0  647.4   785.6   815.9   805.5
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
Income before income
 taxes..................   350.5  359.3  383.4  399.0   395.0  394.9   169.1   332.8   358.3
Provision for income
 taxes..................   138.7  142.8  152.3  154.7   153.0  147.6    59.4   116.6   131.0
Taxable equivalent
 adjustment.............     5.0    4.5    5.4    9.6     3.7    5.4     4.7     9.3     4.3
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
 Taxable equivalent
  provision.............   143.7  147.3  157.7  164.3   156.7  153.0    64.1   125.9   135.3
                          ------ ------ ------ ------  ------ ------  ------  ------  ------
NET INCOME..............  $206.8 $212.0 $225.7 $234.7  $238.3 $241.9  $105.0  $206.9  $223.0
                          ====== ====== ====== ======  ====== ======  ======  ======  ======
Per Common Share(1)
Net Income
 Basic..................  $  .64 $  .68 $  .75 $  .79  $  .80 $  .81  $  .35  $  .70  $  .75
 Diluted................     .63    .68    .73    .78     .79    .80     .35     .70     .75
Cash dividends
 declared...............     .22    .26    .26    .26     .29    .29     .29     .29     .32
</TABLE>
--------
(1)All per share information has been adjusted to reflect the Corporation's
  two-for-one stock split effected in June 1998.
 
                                       43
<PAGE>
 
         AVERAGE BALANCES AND INTEREST RATES, Taxable Equivalent Basis
 
<TABLE>
<CAPTION>
                                     1999                        1998
Quarters Ended March 31              ----                        ----
                          Average             Average Average             Average
                          Volume  Interest(1)  Rate   Volume  Interest(1)  Rate
                          ------- ----------- ------- ------- ----------- -------
         ASSETS                            (dollars in millions)
<S>                       <C>     <C>         <C>     <C>     <C>         <C>
Interest Bearing
 Deposits with Other
 Banks
  U.S...................  $   198    $   3      5.55% $   118    $   2      5.76%
  International.........      902       24     11.09    1,461       31      8.85
                          -------    -----            -------    -----
    Total...............    1,100       27     10.09    1,579       33      8.62
                          -------    -----     -----  -------    -----     -----
Federal Funds Sold and
 Resale Agreements
  U.S...................    4,419       49      4.54      626        9      5.90
  International.........    1,104       32     11.58    1,898       75     16.06
                          -------    -----            -------    -----
    Total...............    5,523       81      5.95    2,524       84     13.54
                          -------    -----     -----  -------    -----     -----
Trading Assets
  U.S...................    1,277       13      4.16    1,148       16      5.64
  International.........      597       11      7.51      924       14      6.31
                          -------    -----            -------    -----
    Total...............    1,874       24      5.23    2,072       30      5.94
                          -------    -----     -----  -------    -----     -----
Securities
  U.S.
   Available for
    sale(2).............   10,379      154      6.01    8,378      133      6.56
   Held to maturity.....      437        7      6.04      636       10      6.27
  International
   Available for
    sale(2).............    2,431       47      7.73    1,592       38      9.54
                          -------    -----            -------    -----
    Total...............   13,247      208      6.33   10,606      181      6.92
                          -------    -----     -----  -------    -----     -----
Loans and Lease
 Financing (Net of
 Unearned Income)
  U.S...................   29,118      590      8.21   30,387      641      8.55
  International.........   13,418      446     13.49   13,319      372     11.31
                          -------    -----            -------    -----
    Total(3)............   42,536    1,036      9.88   43,706    1,013      9.39
                          -------    -----     -----  -------    -----     -----
   Total earning
    assets..............   64,280    1,376      8.68   60,487    1,341      8.99
                                     -----     -----             -----     -----
   Nonearning assets....   11,830                       9,223
                          -------                     -------
    Total Assets........  $76,110                     $69,710
                          =======                     =======
    LIABILITIES AND
  STOCKHOLDERS' EQUITY
Deposits
  U.S.
   Savings deposits.....  $17,479    $  98      2.28% $14,730    $  98      2.69%
   Time deposits........   11,271      143      5.14   10,864      150      5.61
  International.........   11,628      232      8.10   11,564      214      7.51
                          -------    -----            -------    -----
    Total...............   40,378      473      4.75   37,158      462      5.04
                          -------    -----     -----  -------    -----     -----
Federal Funds Purchased
 and Repurchase
 Agreements
  U.S...................    8,227       89      4.38    5,204       74      5.81
  International.........      221        3      5.44      133        3      7.90
                          -------    -----            -------    -----
    Total...............    8,448       92      4.40    5,337       77      5.86
                          -------    -----     -----  -------    -----     -----
Other Funds Borrowed
  U.S...................    3,768       46      4.97    5,395       81      6.08
  International.........    1,160       42     14.71    1,577       49     12.58
                          -------    -----            -------    -----
    Total...............    4,928       88      7.26    6,972      130      7.55
                          -------    -----     -----  -------    -----     -----
Notes Payable
  U.S.(4)...............    5,224       78      6.07    3,425       58      6.90
  International.........      302        6      7.38      324        7      8.62
                          -------    -----            -------    -----
    Total...............    5,526       84      6.14    3,749       65      7.05
                          -------    -----     -----  -------    -----     -----
  Total interest bearing
   liabilities..........   59,280      737      5.04   53,216      734      5.59
                                     -----     -----             -----     -----
  Demand deposits--
   U.S..................    5,688                       7,482
  Demand deposits--
   International........    1,350                       1,134
  Other noninterest
   bearing liabilities..    4,915                       3,148
  Stockholders' equity..    4,877                       4,730
                          -------                     -------
    Total Liabilities
     and Stockholders'
     Equity.............  $76,110                     $69,710
                          =======                     =======
NET INTEREST REVENUE AS
 A PERCENTAGE OF AVERAGE
 INTEREST EARNING ASSETS
  U.S...................  $45,828    $ 401      3.55% $41,293    $ 421      4.14%
  International.........   18,452      238      5.23%  19,194      186      3.92%
                          -------    -----            -------    -----
    Total...............  $64,280    $ 639      4.03% $60,487    $ 607      4.07%
                          =======    =====            =======    =====
</TABLE>
--------
(1) Income is shown on a fully taxable equivalent basis.
(2) Average rates for securities available for sale are based on the
    securities' amortized cost.
(3) Loans and lease financing includes nonaccrual balances.
(4) Amounts include guaranteed preferred beneficial interests in Corporation's
    junior subordinated debentures.
 
                                       44
<PAGE>
 
            CHANGE IN NET INTEREST REVENUE--VOLUME AND RATE ANALYSIS
 
  The following table presents, on a fully taxable equivalent basis, an
analysis of the effect on net interest revenue of volume and rate changes. The
change due to the volume/rate variance has been allocated to volume.
 
              First Quarter 1999 Compared With First Quarter 1998
 
<TABLE>
<CAPTION>
                                               Increase (Decrease)
                                                Due to Change in
                                               ---------------------
                                                 Volume      Rate     Net Change
                                               ----------  ---------  ----------
                                                       (in millions)
<S>                                            <C>         <C>        <C>
Interest income
  Loans and lease financing
    U.S.......................................  $     (26) $     (25)    $(51)
    International.............................          3         71       74
                                                                         ----
                                                                           23
                                                                         ----
  Other earning assets
    U.S.......................................         79        (23)      56
    International.............................        (19)       (25)     (44)
                                                                         ----
                                                                           12
                                                                         ----
Total interest income.........................         81        (46)      35
Total interest expense........................         44        (41)       3
                                                                         ----
Net interest revenue..........................         38         (6)    $ 32
                                                                         ====
</TABLE>
 
                                       45
<PAGE>
 
                           PART II--OTHER INFORMATION
 
Item 4. Submission of Matters to a Vote of Security Holders.
 
(a) The Annual Meeting of Stockholders of the Corporation was held on April 22,
    1999.
 
(b) The following matters were submitted to a vote of the Stockholders of the
    Corporation:
 
<TABLE>
<CAPTION>
   (1)Election of
        Directors
 
        Nominee           Total Votes For Total Votes Withheld
   <S>                    <C>             <C>
      Wayne A. Budd         251,796,406        4,468,305
      Alice F. Emerson      250,994,429        5,270,282
      Charles K. Gifford    250,608,444        5,656,267
      Glenn P. Strehle      251,841,572        4,423,139
      Daniel P. Burnham     250,461,580        5,803,131
</TABLE>
 
<TABLE>
   <S>     <C>     <C>
   (2)Selection of
    Independent
    Auditors
      Total Votes
       For         254,771,582
      Total Votes
       Against         689,590
      Total
       Abstentions     803,539
   (3)Stockholder
    Proposal A
    regarding
    Annual Meeting
    Date
      Total Votes
       For           4,138,104
      Total Votes
       Against     212,370,882
      Total
       Abstentions   3,854,823
      Total Broker
       Nonvotes     35,900,902
   (4)Stockholder
    Proposal B
    regarding
    Political
    Activities
      Total Votes
       For          12,385,288
      Total Votes
       Against     195,606,675
      Total
       Abstentions  12,371,846
      Total Broker
       Nonvotes     35,900,902
   (5)Stockholder
    Proposal C
    regarding
    Executive
    Compensation
      Total Votes
       For          10,524,265
      Total Votes
       Against     204,819,353
      Total
       Abstentions   5,018,189
      Total Broker
       Nonvotes     35,902,904
</TABLE>
 
                                       46
<PAGE>
 
Item 6. Exhibits and Reports on Form 8-K.
 
 (a) Exhibits.
 
<TABLE>
   <C>   <S>
   12(a) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges (excluding interest on deposits).
   12(b) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges (including interest on deposits).
   12(c) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges and Preferred Stock Dividend Requirements (excluding
          interest on deposits).
   12(d) --Computation of the Corporation's Consolidated Ratio of Earnings to
          Fixed Charges and Preferred Stock Dividend Requirements (including
          interest on deposits).
   27    --Financial Data Schedule.
</TABLE>
 
 (b) Current Reports on Form 8-K.
 
  During the first quarter of 1999, the Corporation filed three Current
Reports on Form 8-K, dated January 21, 1999, February 3, 1999 and March 14,
1999, each of which contained information pursuant to Items 5 and 7 of Form 8-
K. The Corporation has also filed two Current Reports on Form 8-K, dated April
2, 1999 and April 15, 1999, each of which contained information pursuant to
Items 5 and 7 of Form 8-K.
 
                                      47
<PAGE>
 
                                  SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          BANKBOSTON CORPORATION
 
                                                   /s/ Charles K. Gifford
                                          _____________________________________
                                                     Charles K. Gifford
                                                 Chairman of the Board and
                                                  Chief Executive Officer
 
                                                  /s/ Susannah M. Swihart
                                          _____________________________________
                                                    Susannah M. Swihart
                                               Vice Chairman, Chief Financial
                                                          Officer
                                                       and Treasurer
 
Date: May 11, 1999
 
                                      48