Bank of America 2001 Annual Report Download - page 112

BANK OF AMERICA 2001 ANNUAL REPORT
110
Note 16 Stock Incentive Plans
At December 31, 2001, the Corporation had certain stock-based compensation plans which are described below. The Corporation applies the provisions
of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock option and award plans. In
accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123), “Accounting for Stock Based Compensation,” the Corporation has
also elected to provide disclosures as if the Corporation had adopted the fair-value based method of measuring outstanding employee stock options
in 2001, 2000 and 1999 as indicated below:
As reported Pro forma
(Dollars in millions, except per share data) 2001 2000 1999 2001 2000 1999
Net income $6,792 $7,517 $7,882 $6,441 $ 7,215 $7,563
Net income available to common shareholders 6,787 7,511 7,876 6,436 7,209 7,557
Earnings per common share 4.26 4.56 4.56 4.04 4.38 4.38
Diluted earnings per common share 4.18 4.52 4.48 3.96 4.34 4.30
In determining the pro forma disclosures above, the fair value of options granted was estimated on the date of grant using the Black-Scholes option-
pricing model. The Black-Scholes model was developed to estimate the fair value of traded options, which have different characteristics than
employee stock options, and changes to the subjective assumptions used in the model can result in materially different fair value estimates. The
weighted average grant-date fair values of the options granted during 2001, 2000 and 1999 were based on the following assumptions:
Risk-free Interest rates Dividend Yield Expected Lives (Years) Volatility
2001 2000 1999 2001 2000 1999 2001 2000 1999 2001 2000 1999
Key Employee Stock Plan 5.05% 6.74% 5.19% 4.50% 4.62% 2.91% 77726.68% 25.59% 24.91%
Take Ownership! 4.89 6.57 4.73 5.13 4.62 3.06 44431.62 30.27 27.67
Compensation expense under the fair-value based method is recognized over the vesting period of the related stock options. Accordingly, the pro
forma results of applying SFAS 123 in 2001, 2000 and 1999 may not be indicative of future amounts.
Key Employee Stock Plan
The Key Employee Stock Plan, as amended and restated, provides for different types of awards including stock options, restricted stock and performance
shares (or restricted stock units). Under the plan, ten-year options to purchase approximately 97.3 million shares of common stock have been granted
through December 31, 2001 to certain employees at the closing market price on the respective grant dates. Options granted under the plan generally
vest in three or four equal annual installments. At December 31, 2001, approximately 76.2 million options were outstanding under this plan. Approxi-
mately 3.8 million shares of restricted stock and restricted stock units were granted during 2001. These shares of restricted stock generally vest in
three equal annual installments beginning one year from the grant date. The Corporation incurred restricted stock expense of $182 million, $273
million and $324 million for the years ended December 31, 2001, 2000 and 1999, respectively.
Take Ownership!
The Bank of America Global Associate Stock Option Program (Take Ownership!) covers all employees below a specified executive grade level. Under
the plan, eligible employees received an award of a predetermined number of stock options entitling them to purchase shares of the Corporation’s
common stock at the fair market value on the grant date. Options granted on the first business day of 1999, 2000 and 2001 vest 25 percent on the
first anniversary of the date of grant, 25 percent on the second anniversary of the date of grant and 50 percent on the third anniversary of the date
of grant. These options have a term of five years after the grant date. On January 2, 2001, options to purchase approximately 22.8 million shares of
common stock at $46.75 per share were granted under the plan. At December 31, 2001, approximately 62.1 million options were outstanding under this
plan. No further awards may be granted under this plan.
2002 Associates Stock Option Plan
On September 26, 2001, the Board approved the Bank of America Corporation 2002 Associates Stock Option Plan which covers all employees below a
specified executive grade level. Under the plan, eligible employees received a one-time award of a predetermined number of options entitling them to
purchase shares of the Corporation’s common stock. Approximately 54 million options were granted subsequent to December 31, 2001 at the closing
price of $61.36. The options vest as follows: 50 percent of the options become exercisable after the Corporation’s common stock closes at or above
$76.36 per share for ten consecutive trading days; the remaining 50 percent of the options become exercisable after the Corporation’s common stock
closes at or above $91.36 for ten consecutive trading days. Regardless of the stock price, all options will be fully exercisable February 1, 2006. No
option can be exercised before June 1, 2002. The options expire on the close of business January 31, 2007.