Bank of America 2001 Annual Report Download - page 90

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BANK OF AMERICA 2001 ANNUAL REPORT
88
Note 2 Exit and Restructuring Charges
Exit Charges
On August 15, 2001, the Corporation announced that it was exiting its auto leasing and subprime real estate lending businesses. As a result of this
strategic decision, the Corporation recorded pre-tax exit charges in the third quarter of 2001 of $1.7 billion ($1.3 billion after-tax) consisting of provision
for credit losses of $395 million and noninterest expense of $1.3 billion. Business exit costs within noninterest expense consisted of the write-off of
goodwill of $685 million, auto lease residual charges of $400 million, real estate servicing asset charges of $145 million and other transaction costs
of $75 million. See Note Six for additional information on the exit-related provision for credit losses.
During the fourth quarter of 2001, $17.5 billion of subprime loans were securitized and retained in the available-for-sale securities portfolio.
Approximately $1 billion of subprime real estate loans remain in loans held for sale in other assets. The run off of the auto lease portfolio is occurring
as expected. At the exit date, the auto lease portfolio was approximately 495,000 units with total residual exposure of $6.8 billion. At December 31, 2001,
approximately 401,000 units remained with a residual exposure of $5.4 billion.
Merger and Restructuring Charges
As part of its productivity and investment initiatives announced on July 28, 2000, the Corporation recorded a pre-tax charge of $550 million ($346 million
after-tax) in the third quarter of 2000. Of the $550 million restructuring charge, approximately $475 million was used to cover severance and related
costs and approximately $75 million was used for other costs related to process change and channel consolidation. At December 31, 2000 the reserve
balance was $293 million. At December 31, 2001, the restructuring reserve had been substantially utilized.
In connection with the 1998 merger of BankAmerica Corporation and Bank of America Corporation, formerly NationsBank Corporation, the
Corporation recorded pre-tax merger charges of $525 million ($358 million after-tax) in 1999 which consisted of approximately $219 million of severance,
change in control and other employee-related costs, $187 million of conversion and related costs including occupancy, equipment and customer
communication expenses, $128 million of exit and related costs and a $9 million reduction of other merger costs. At December 31, 2000, the merger
reserve balance was $32 million. The merger reserve was substantially utilized at December 31, 2001.