Bank of America 2001 Annual Report Download - page 103

BANK OF AMERICA 2001 ANNUAL REPORT
101
Note 11 Trust Preferred Securities
Trust preferred securities are Corporation obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely Junior Subordinated
Deferrable Interest Notes of the Corporation (the Notes).
Since October 1996, the Corporation has formed fourteen wholly-owned grantor trusts to issue trust preferred securities to the public. The grantor
trusts have invested the proceeds of such trust preferred securities in junior subordinated notes of the Corporation. Certain of the trust preferred securities
were issued at a discount. Such trust preferred securities may be redeemed prior to maturity at the option of the Corporation. The sole assets of each
of the grantor trusts are the Notes held by such grantor trusts. Each issue of the Notes has an interest rate equal to the corresponding trust preferred
securities distribution rate. The Corporation has the right to defer payment of interest on the Notes at any time or from time to time for a period not
exceeding five years provided that no extension period may extend beyond the stated maturity of the relevant Notes. During any such extension period,
distributions on the trust preferred securities will also be deferred and the Corporation’s ability to pay dividends on its common and preferred stock will
be restricted.
The trust preferred securities are subject to mandatory redemption upon repayment of the related Notes at their stated maturity dates or their
earlier redemption at a redemption price equal to their liquidation amount plus accrued distributions to the date fixed for redemption and the premium,
if any, paid by the Corporation upon concurrent repayment of the related Notes.
Periodic cash payments and payments upon liquidation or redemption with respect to trust preferred securities are guaranteed by the Corporation
to the extent of funds held by the grantor trusts (the Preferred Securities Guarantee). The Preferred Securities Guarantee, when taken together with the
Corporation’s other obligations, including its obligations under the Notes, will constitute a full and unconditional guarantee, on a subordinated basis, by
the Corporation of payments due on the trust preferred securities.
The Corporation is required by the Federal Reserve Board to maintain certain levels of capital for bank regulatory purposes. The Federal Reserve
Board has determined that certain cumulative preferred securities having the characteristics of trust preferred securities qualify as minority interest,
which is included in Tier 1 capital for bank and financial holding companies. Such Tier 1 capital treatment provides the Corporation with a more
cost-effective means of obtaining capital for bank regulatory purposes than if the Corporation were to issue preferred stock.