Bank of America 2010 Annual Report Download - page 211

seeks in excess of $400 million in compensatory damages and interest,
among other relief. On February 17, 2010, the court dismissed all of plain-
tiffs’ claims. On March 18, 2010, plaintiffs filed a notice of appeal to the
U.S. Court of Appeals for the Second Circuit and on April 1, 2010, the
Corporation filed a cross-appeal. Briefing was completed in December 2010.
NOTE 15 Shareholders’ Equity
Common Stock
In October 2010, July 2010, April 2010 and January 2010, the Board
declared the fourth, third, second and first quarters’ cash dividends of
$0.01 per common share, which were paid on December 24, 2010, Sep-
tember 24, 2010, June 25, 2010 and March 26, 2010 to common share-
holders of record on December 3, 2010, September 3, 2010, June 4, 2010
and March 5, 2010, respectively. In addition, in January 2011, the Board
declared a first quarter cash dividend of $0.01 per common share payable on
March 25, 2011 to common shareholders of record on March 4, 2011.
On February 23, 2010, the Corporation held a special meeting of stock-
holders at which it obtained shareholder approval of an amendment to the
Corporation’s amended and restated certificate of incorporation to increase
the number of authorized shares of common stock from 10.0 billion to
11.3 billion. On April 28, 2010, at the Corporation’s 2010 Annual Meeting
of Stockholders, the Corporation obtained shareholder approval of an amend-
ment to the Corporation’s amended and restated certificate of incorporation
to increase the number of authorized shares of common stock from 11.3 bil-
lion to 12.8 billion.
In January 2009, the Corporation issued 1.4 billion shares of common
stock in connection with its acquisition of Merrill Lynch. For additional infor-
mation regarding the Merrill Lynch acquisition, see Note 2 – Merger and
Restructuring Activity. During 2009 and 2008, in connection with preferred
stock issuances to the U.S. government under the Troubled Asset Relief
Program (TARP), the Corporation issued warrants to purchase 121.8 million
shares of common stock at an exercise price of $30.79 per share and
150.4 million shares of common stock at an exercise price of $13.30 per
share. The U.S. Treasury auctioned these warrants in March 2010.
In May 2009, the Corporation issued 1.3 billion shares of its common
stock at an average price of $10.77 per share through an at-the-market
issuance program resulting in gross proceeds of approximately $13.5 billion.
Through a 2008 authorized share repurchase program, the Corporation
had the ability to repurchase shares of its common stock, subject to certain
restrictions, from time to time, in the open market or in private transactions.
The 2008 authorized repurchase program expired on January 23, 2010.
There is no existing Board authorized share repurchase program. In 2010, the
Corporation did not repurchase any shares of common stock and issued
approximately 98.6 million shares under employee stock plans. At Decem-
ber 31, 2010, the Corporation had reserved 1.5 billion unissued shares of
common stock for future issuances under employee stock plans, common
stock warrants, convertible notes and preferred stock.
Preferred Stock
During 2010, 2009 and 2008, the aggregate dividends declared on preferred
stock were $1.4 billion, $4.5 billion and $1.3 billion, respectively. This
included $474 million and $536 million in 2010 and 2009 related to pre-
ferred stock issued or remaining outstanding as a part of the Merrill Lynch
acquisition.
In connection with the Merrill Lynch acquisition, Merrill Lynch non-con-
vertible preferred shareholders received Bank of America Corporation pre-
ferred stock having substantially identical terms. On October 15, 2010, all of
the outstanding shares of the mandatory convertible preferred stock of Merrill
Lynch automatically converted into an aggregate of 50 million shares of the
Corporation’s Common Stock in accordance with the terms of these preferred
securities.
In October 2008, in connection with TARP, the Corporation issued to the
U.S. Treasury non-voting perpetual preferred stock and warrants for $15.0 bil-
lion. In addition, in January 2009, in connection with TARP and the Merrill
Lynch acquisition, the Corporation issued additional preferred stock for
$30.0 billion.
In December 2009, the Corporation repurchased the non-voting perpetual
preferred stock previously issued to the U.S. Treasury (TARP Preferred Stock)
through the use of $25.7 billion in excess liquidity and $19.3 billion in
proceeds from the sale of 1.3 billion Common Equivalent Securities (CES)
valued at $15.00 per unit. The CES consisted of depositary shares repre-
senting interests in shares of Common Equivalent Junior Preferred Stock,
Series S (Common Equivalent Stock) and contingent warrants to purchase an
aggregate of 60 million shares of the Corporation’s common stock. On Feb-
ruar y 23, 2010, the Corporation held a special meeting of stockholders at
which it obtained shareholder approval of an amendment to the Corporation’s
amended and restated certificate of incorporation to increase the number of
authorized shares of common stock. Accordingly, the Common Equivalent
Stock automatically converted in full into 1.286 billion shares of common
stock on February 24, 2010. In addition, as a result, the contingent warrants
expired without having become exercisable and the CES ceased to exist.
During 2009, the Corporation entered into agreements with certain hold-
ers of non-government perpetual preferred stock to exchange their holdings of
approximately $7.3 billion aggregate liquidation preference, before third-party
issuance costs, of approximately 323 million shares of perpetual preferred
stock for approximately 545 million shares of common stock with a fair value
of stock issued of $6.1 billion. In addition, the Corporation exchanged
approximately $3.9 billion aggregate liquidation preference, before third-party
issuance costs, of approximately 144 million shares of non-government
preferred stock for approximately 200 million shares of common stock in
an exchange offer with a fair value of stock issued of $2.5 billion. In total,
these exchanges resulted in the exchange of approximately $11.3 billion
aggregate liquidation preference, before third-party issuance costs, of ap-
proximately 467 million shares of preferred stock into approximately 745 mil-
lion shares of common stock with a fair value of stock issued of $8.6 billion.
In addition, during 2009, the Corporation exchanged 3.6 million shares, or
$3.6 billion aggregate liquidation preference of Series L 7.25% Non-Cumula-
tive Perpetual Convertible Preferred Stock into 255 million shares of common
stock valued at $2.8 billion, which was accounted for as an induced conver-
sion of preferred stock.
As a result of these exchanges, the Corporation recorded an increase to
retained earnings and net income (loss) applicable to common shareholders
of $576 million. This represents the net of a $2.62 billion benefit due to the
excess of the carrying value of the Corporation’s non-convertible preferred
stock over the fair value of the common stock exchanged. This was partially
offset by a $2.04 billion inducement representing the excess of the fair value
of the common stock exchanged over the fair value of the common stock that
would have been issued under the original conversion terms.
Bank of America 2010 209