Bank of America 2001 Annual Report Download - page 106

BANK OF AMERICA 2001 ANNUAL REPORT
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alleged violations of consumer protection, securities, environmental, banking and other laws.
In view of the inherent difficulty of predicting the outcome of such matters, the Corporation cannot state what the eventual outcome of pending
matters will be; however, based on current knowledge, Management does not believe that liabilities arising from pending litigation, if any, will have a
material adverse effect on the consolidated financial position, operations or liquidity of the Corporation.
The Corporation and certain present and former officers and directors have been named as defendants in a number of actions filed in several
federal courts that have been consolidated for pretrial purposes before a Missouri federal court. The amended complaint in the consolidated actions
alleges, among other things, that the defendants failed to disclose material facts about BankAmerica’s losses relating to D.E. Shaw Securities Group,
L.P. (“D.E. Shaw”) and related entities until mid-October 1998, in violation of various provisions of federal and state laws. The amended complaint
also alleges that the proxy statement-prospectus of August 4, 1998 (the “Proxy Statement”), falsely stated that the merger between NationsBank
Corporation (NationsBank) and BankAmerica would be one of equals and alleges a scheme to have NationsBank gain control over the newly merged
entity. The Missouri federal court has certified classes (the “Classes”) consisting generally of persons who were stockholders of NationsBank or
BankAmerica on September 30, 1998, or were entitled to vote on the merger, or who purchased or acquired securities of the Corporation or its
predecessors between August 4, 1998 and October 13, 1998. The amended complaint substantially survived a motion to dismiss. Discovery has been
completed. A former NationsBank stockholder who opted out of the NationsBank shareholder Class has commenced an action in the Missouri federal
court (the “Opt-Out Action”) asserting claims substantially similar to the claims related to D.E. Shaw set forth in the consolidated action. Similar
class actions have been filed in California state courts. Plaintiffs in one such class action, brought on behalf of California residents who owned
BankAmerica stock, claim that the Proxy Statement falsely stated that the merger would be one of equals. Plaintiffs in that matter have recently been
included in the federal action as part of the BankAmerica shareholder Class and will not be proceeding in California state court. Other California state
court class actions (the “Other Actions”) were consolidated, but have not been certified as class actions. The Missouri federal court enjoined prosecution
of those consolidated cases as a class action. The plaintiffs who were enjoined appealed to the United States Court of Appeals for the Eighth Circuit,
which upheld the district court’s injunction. Those plaintiffs have sought review in the United States Supreme Court.
Subsequent to December 31, 2001, the Corporation announced that it had reached an agreement in principle to settle the Class actions. The pro-
posed settlement provides for payment of $333 million to the NationsBank Classes and $157 million to the BankAmerica Classes. The proposed settle-
ment is subject to a number of conditions, including judicial approval. The Corporation agreed to the proposed settlement without admitting liability.
The proposed settlement will be paid from existing litigation reserves and insurance and will not have an impact on the Corporation's financial results.
On July 30, 2001, the Securities and Exchange Commission issued a cease-and-desist order finding violations of Section 13(a) of the Securities
Exchange Act of 1934 and Rules 13a-1, 13a-11, 13a-13 and 12b-20 promulgated thereunder, with respect to BankAmerica’s accounting for, and the
disclosures relating to, the D.E. Shaw relationship. The Corporation consented to the order without admitting or denying the findings. In the Matter
of BankAmerica Corp., Exch. Act Rel. No. 44613, Acctg & Audit. Enf. Rel. No. 1249, Admin. Proc. No. 3-10541.
Terrorist Attacks of September 11, 2001
The Corporation incurred certain costs and losses associated with the terrorist attacks of September 11, 2001, such as property losses and costs to
re-establish business operations. Management believes that these costs and losses will not be material to the Corporation’s financial position or results
of operations.
Note 13 Shareholders’ Equity and Earnings Per Common Share
On December 11, 2001, the Corporation’s Board of Directors (the Board) authorized a new stock repurchase program of up to 130 million shares of the
Corporation’s common stock at an aggregate cost of up to $10.0 billion. No shares had been repurchased under the 2001 program at December 31, 2001.
On July 26, 2000, the Board authorized a stock repurchase program of up to 100 million shares of the Corporation’s common stock at an aggregate
cost of up to $7.5 billion. At December 31, 2001, the remaining buyback authority for common stock under the 2000 program totaled $2.1 billion, or
two million shares. On June 23, 1999, the Board authorized the repurchase of up to 130 million shares of the Corporation’s common stock at an aggregate
cost of up to $10.0 billion. The 1999 stock repurchase plan was completed in 2000. During 2001, the Corporation repurchased approximately 82 million
shares of its common stock in open market repurchases at an average per-share price of $57.58, which reduced shareholders’ equity by $4.7 billion.
During 2000, the Corporation repurchased approximately 68 million shares of its common stock in open market repurchases at an average per-share
price of $48.17, which reduced shareholders’ equity by $3.3 billion. Management anticipates it will continue to repurchase shares at least equal to shares
issued under its various stock option plans.
Other shareholders’ equity at December 31, 2001 consisted of premiums written on put options of $14 million and restricted stock award plan
deferred compensation of $52 million. At December 31, 2000, other shareholders’ equity consisted of premiums written on put options of $20 million,
restricted stock award plan deferred compensation of $114 million and a loan to the employee stock ownership plan (ESOP) trust of $32 million.
In September 1999, the Corporation began selling put options on its common stock to independent third parties. The put option program was
designed to partially offset the cost of share repurchases. The put options give the holders the right to sell shares of the Corporation’s common stock
to the Corporation on certain dates at specified prices. The put option contracts allow the Corporation to determine the method of settlement, and