Bank of America 2006 Annual Report Download - page 37

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Bank of America Corporation and Subsidiaries
This report contains certain statements that are forward-looking within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Actual
outcomes and results may differ materially from those expressed in, or
implied by, our forward-looking statements. Words such as “expects,”
“anticipates,” “believes,” “estimates” and other similar expressions or
future or conditional verbs such as “will,” “should,” “would” and “could”
are intended to identify such forward-looking statements. Readers of the
Annual Report of Bank of America Corporation and its subsidiaries (the
Corporation) should not rely solely on the forward-looking statements and
should consider all uncertainties and risks throughout this report as well
as those discussed under Item 1A. “Risk Factors” of this Annual Report
on Form 10-K. The statements are representative only as of the date they
are made, and the Corporation undertakes no obligation to update any
forward-looking statement.
Possible events or factors that could cause results or performance to
differ materially from those expressed in our forward-looking statements
include the following: changes in general economic conditions and
economic conditions in the geographic regions and industries in which the
Corporation operates which may affect, among other things, the level of
nonperforming assets, charge-offs and provision expense; changes in the
interest rate environment which may reduce interest margins and impact
funding sources; changes in foreign exchange rates; adverse movements
and volatility in debt and equity capital markets; changes in market rates
and prices which may adversely impact the value of financial products
including securities, loans, deposits, debt and derivative financial instru-
ments, and other similar financial instruments; political conditions and
related actions by the United States abroad which may adversely affect the
Corporation’s businesses and economic conditions as a whole; liabilities
resulting from litigation and regulatory investigations, including costs,
expenses, settlements and judgments; changes in domestic or foreign tax
laws, rules and regulations as well as court, Internal Revenue Service or
other governmental agencies’ interpretations thereof; various monetary
and fiscal policies and regulations, including those determined by the
Board of Governors of the Federal Reserve System (FRB), the Office of the
Comptroller of the Currency (OCC), the Federal Deposit Insurance Corpo-
ration (FDIC), state regulators and the Financial Services Authority (FSA);
changes in accounting standards, rules and interpretations; competition
with other local, regional and international banks, thrifts, credit unions and
other nonbank financial institutions; ability to grow core businesses; ability
to develop and introduce new banking-related products, services and
enhancements, and gain market acceptance of such products; mergers
and acquisitions and their integration into the Corporation; decisions to
downsize, sell or close units or otherwise change the business mix of the
Corporation; and management’s ability to manage these and other risks.
The Corporation, headquartered in Charlotte, North Carolina, oper-
ates in 30 states, the District of Columbia and 44 foreign countries. The
Corporation provides a diversified range of banking and nonbanking finan-
cial services and products domestically and internationally through three
business segments: Global Consumer and Small Business Banking,
Global Corporate and Investment Banking, and Global Wealth and Invest-
ment Management.
At December 31, 2006, the Corporation had $1.5 trillion in assets
and approximately 203,000 full-time equivalent employees. Notes to
Consolidated Financial Statements referred to in Management’s Dis-
cussion and Analysis of Financial Condition and Results of Operations are
incorporated by reference into Management’s Discussion and Analysis of
Financial Condition and Results of Operations. Certain prior period
amounts have been reclassified to conform to current period presentation.
Recent Events
In January 2007, the Board of Directors (the Board) authorized a stock
repurchase program of up to 200 million shares of the Corporation’s
common stock at an aggregate cost not to exceed $14.0 billion to be
completed within a period of 12 to 18 months. In April 2006, the Board
authorized a stock repurchase program of up to 200 million shares of the
Corporation’s common stock at an aggregate cost not to exceed $12.0
billion to be completed within a period of 12 to 18 months, of which the
lesser of approximately $4.9 billion, or 63.1 million shares, remains avail-
able for repurchase under the program at December 31, 2006.
In January 2007, the Board declared a regular quarterly cash divi-
dend on common stock of $0.56 per share, payable on March 23, 2007
to common shareholders of record on March 2, 2007. In October 2006,
the Board declared a regular quarterly cash dividend on common stock of
$0.56 per share which was paid on December 22, 2006 to common
shareholders of record on December 1, 2006. In July 2006, the Board
increased the quarterly cash dividend on common stock 12 percent from
$0.50 to $0.56 per share.
In December 2006, the Corporation completed the sale of its retail
and commercial business in Hong Kong and Macau (Asia Commercial
Banking business) to China Construction Bank (CCB) for $1.25 billion. The
sale resulted in a $165 million gain (pre-tax) that was recorded in Other
Income.
In November 2006, the Corporation announced a definitive agree-
ment to acquire U.S. Trust Corporation (U.S. Trust) for $3.3 billion in cash.
U.S. Trust is one of the largest and most respected U.S. firms which
focuses exclusively on managing wealth for high net-worth and ultra high
net-worth individuals and families. The acquisition will significantly
increase the size and capabilities of the Corporation’s wealth business
and position it as one of the largest financial services companies manag-
ing private wealth in the U.S. The transaction is expected to close in the
third quarter of 2007.
In November 2006, the Corporation issued 81,000 shares of Bank of
America Corporation Floating Rate Non-Cumulative Preferred Stock, Series
E with a par value of $0.01 per share for $2.0 billion. In September 2006,
the Corporation issued 33,000 shares of Bank of America Corporation
6.204% Non-Cumulative Preferred Stock, Series D with a par value of
$0.01 per share for $825 million. In July 2006, the Corporation redeemed
its 700,000 shares, or $175 million, of Fixed/Adjustable Rate Cumulative
Bank of America 2006 35