Bank of America 2008 Annual Report Download - page 133

In connection with the Merrill Lynch acquisition, the Corporation
recorded certain guarantees, primarily standby liquidity facilities and let-
ters of credit, with a fair value of approximately $1.0 billion. At January 1,
2009, the maximum payout that could arise from these guarantees
ranged from $0 to approximately $20.0 billion.
Countrywide
On July 1, 2008, the Corporation acquired Countrywide through its merger
with a subsidiary of the Corporation. Under the terms of the agreement,
Countrywide shareholders received 0.1822 of a share of Bank of America
Corporation common stock in exchange for each share of Countrywide
common stock. The acquisition of Countrywide significantly improved the
Corporation’s mortgage originating and servicing capabilities, while mak-
ing us a leading mortgage originator and servicer.
As provided by the merger agreement, 583 million shares of Country-
wide common stock were exchanged for 107 million shares of the Corpo-
ration’s common stock. The $2.0 billion of Countrywide’s Series B
convertible preferred shares that were previously held by the Corporation
were cancelled.
The merger is being accounted for as a purchase in accordance with
SFAS 141. Accordingly, the purchase price was preliminarily allocated to
the assets acquired and liabilities assumed based on their estimated fair
values at the merger date as summarized below. The final allocation of
the purchase price will be finalized upon completing the analysis of the
fair values of Countrywide’s assets and liabilities.
Countrywide Preliminary Purchase Price Allocation
(Dollars in billions)
Purchase price (1) $ 4.2
Preliminary allocation of the purchase price
Countrywide stockholders’ equity
(2)
8.4
Pre-tax adjustments to reflect assets acquired and liabilities assumed
at fair value:
Loans (9.8)
Investments in other financial instruments (0.3)
Mortgage servicing rights (1.5)
Other assets (0.8)
Deposits (0.2)
Notes payable and other liabilities (0.9)
Pre-tax total adjustments (13.5)
Deferred income taxes 4.9
After-tax total adjustments (8.6)
Fair value of net assets acquired (0.2)
Preliminary goodwill resulting from the Countrywide merger (3) $ 4.4
(1) The value of the shares of common stock exchanged with Countrywide shareholders was based upon the
average of the closing prices of the Corporation’s common stock for the period commencing two trading
days before, and ending two trading days after January 11, 2008, the date of the Countrywide merger
agreement.
(2) Represents the remaining Countrywide shareholders’ equity as of the acquisition date after the
cancellation of the $2.0 billion of Series B convertible preferred shares owned by the Corporation, as
part of the merger.
(3) No goodwill is expected to be deductible for federal income tax purposes. All the goodwill was allocated
to Global Consumer and Small Business Banking.
The Corporation acquired certain loans for which there was, at the
time of the merger, evidence of deterioration of credit quality since origi-
nation and for which it was probable that all contractually required pay-
ments would not be collected. For more information, see the Countrywide
SOP 03-3 discussion in Note 6 – Outstanding Loans and Leases to the
Consolidated Financial Statements.
LaSalle
On October 1, 2007, the Corporation acquired all the outstanding shares
of LaSalle, for $21.0 billion in cash. As part of the acquisition, ABN
AMRO Bank N.V. (the seller) capitalized approximately $6.3 billion as
equity of intercompany debt prior to the date of acquisition. With this
acquisition, the Corporation significantly expanded its presence in metro-
politan Chicago, Illinois and Michigan by adding LaSalle’s commercial
banking clients, retail customers and banking centers. LaSalle’s results
of operations were included in the Corporation’s results beginning
October 1, 2007.
The LaSalle acquisition was accounted for under the purchase method
of accounting in accordance with SFAS 141. The purchase price has been
allocated to the assets acquired and the liabilities assumed based on
their fair values at the LaSalle acquisition date as summarized in the fol-
lowing table.
LaSalle Purchase Price Allocation
(Dollars in billions)
Purchase price $21.0
Allocation of the purchase price
LaSalle stockholders’ equity 12.5
LaSalle goodwill and other intangible assets (2.7)
Adjustments, net-of-tax, to reflect assets acquired and liabilities
assumed at fair value:
Loans and leases (0.1)
Premises and equipment (0.2)
Identified intangibles
(1)
1.0
Other assets (0.3)
Exit and termination liabilities (0.4)
Fair value of net assets acquired 9.8
Goodwill resulting from the LaSalle merger (2) $11.2
(1) Includes core deposit intangibles of $0.7 billion, and other intangibles of $0.3 billion. The amortization
life for core deposit intangibles and other intangibles is 10 years. These intangibles are amortized on an
accelerated basis.
(2) No goodwill is deductible for federal income tax purposes. The goodwill has been allocated across all of
the Corporation’s business segments.
The Corporation acquired certain loans for which there was, at the
time of the merger, evidence of deterioration of credit quality since origi-
nation and for which it was probable that all contractually required pay-
ments would not be collected. The outstanding contractual balance of
such loans was approximately $850 million and the recorded fair value
was approximately $650 million as of the merger date. At December 31,
2007, the outstanding contractual balance of such loans was approx-
imately $710 million and the recorded fair value was approximately $590
million. At December 31, 2008, the outstanding contractual balance and
the recorded fair value of these loans were not material.
U.S. Trust Corporation
On July 1, 2007, the Corporation acquired all the outstanding shares of
U.S. Trust Corporation for $3.3 billion in cash. The Corporation allocated
$1.7 billion to goodwill and $1.2 billion to intangible assets as part of the
purchase price allocation. U.S. Trust Corporation’s results of operations
were included in the Corporation’s results beginning July 1, 2007. The
acquisition significantly increased the size and capabilities of the Corpo-
ration’s wealth management business and positions it as one of the larg-
est financial services companies managing private wealth in the U.S.
Bank of America 2008 131