Bank of America 2011 Annual Report Download - page 230

228 Bank of America 2011
of TBW) entitled Bank of America, National Association as indenture
trustee, custodian and collateral agent for Ocala Funding, LLC v.
Federal Deposit Insurance Corporation. The suit seeks judicial
review of the FDIC’s denial of the administrative claims brought by
BANA in the FDIC’s Colonial and Platinum receivership
proceedings. BANA’s claims allege that Ocala’s losses were in
whole or in part the result of Colonial and Platinum’s participation
in TBW’s alleged fraud. BANA seeks a court order requiring the
FDIC to allow BANA’s claims in an amount equal to Ocala’s losses
and, accordingly, to permit BANA, as trustee, collateral agent,
custodian and depositary for Ocala, to share appropriately in
distributions of any receivership assets that the FDIC makes to
creditors of the two failed banks.
On March 14, 2011, the FDIC moved to dismiss BANA’s action,
primarily on the ground that Ocala Funding had not exhausted its
administrative remedies. BANA filed an amended complaint
alleging that it had exhausted its administrative remedies. On
August 5, 2011, the FDIC answered and moved to dismiss the
amended complaint, and asserted counterclaims against BANA in
its individual capacity seeking approximately $900 million in
damages. The counterclaims allege that Colonial sent 4,808 loans
to BANA as bailee; that BANA converted the loans into Ocala
collateral without first ensuring that Colonial was paid; and that
Colonial was never paid for these loans. BANA filed an opposition
to the FDIC’s motion to dismiss on October 21, 2011, along with
a motion to dismiss the FDIC’s counterclaims.
NOTE 15 Shareholders’ Equity
Common Stock
In November 2011, August 2011, May 2011 and January 2011,
the Corporation’s Board of Directors (the Board) declared the
fourth, third, second and first quarter cash dividends of $0.01 per
common share, which were paid on December 23, 2011,
September 23, 2011, June 24, 2011 and March 25, 2011 to
common shareholders of record on December 2, 2011,
September 2, 2011, June 3, 2011 and March 4, 2011,
respectively. In addition, in January 2012, the Board declared a
first quarter cash dividend of $0.01 per common share payable
on March 23, 2012 to common shareholders of record on March 2,
2012.
In connection with the exchanges described below in Preferred
Stock, the Corporation issued 400 million shares of common
stock.
On September 1, 2011, the Corporation closed the sale to
Berkshire Hathaway, Inc. (Berkshire) of 50,000 shares of the
Series T Preferred Stock and a warrant (the Warrant) to purchase
700 million shares of the Corporation’s common stock for an
aggregate purchase price of $5.0 billion in cash. Of the $5.0 billion
in cash proceeds, $2.9 billion was allocated to preferred stock
and $2.1 billion to the Warrant on a relative fair value basis. The
discount on the Series T Preferred Stock is not subject to accretion.
The portion of proceeds allocated to the Warrant was recorded as
additional paid-in capital. The Warrant is exercisable at the holder’s
option at any time, in whole or in part until September 1, 2021,
at an exercise price of $7.142857 per share of common stock.
The Warrant may be settled in cash or by exchanging all or a portion
of the Series T Preferred Stock. For additional information on the
Berkshire investment and Series T Preferred Stock, see Preferred
Stock in this Note.
On February 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 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 amendment to
the Corporation’s amended and restated certificate of
incorporation to increase the number of authorized shares of
common stock from 11.3 billion 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.
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.
In connection with employee stock plans in 2011, the
Corporation issued approximately 51 million shares and
repurchased approximately 28 million shares of its common stock
to satisfy tax withholding obligations. At December 31, 2011, the
Corporation had reserved 2.2 billion unissued shares of common
stock for future issuances under employee stock plans, common
stock warrants, convertible notes and preferred stock.
There is no existing Board authorized share repurchase
program.
Preferred Stock
During both 2011 and 2010, the dividends declared on preferred
stock were $1.4 billion, and $4.5 billion for 2009.
In 2011, the Corporation entered into separate agreements
with certain institutional preferred and Trust Security holders (the
Exchange Agreements) pursuant to which the Corporation and
each security holder agreed to exchange shares, or depository
shares representing fractional interests in shares, of various
series of the Corporation’s preferred stock, par value $0.01 per
share, or Trust Securities for an aggregate of 400 million shares
of the Corporation’s common stock valued at $2.2 billion and $2.3
billion aggregate principal amount of senior notes. The exchanges,
in the aggregate, increased Tier 1 common capital by $3.9 billion,
or approximately 29 bps. The Exchange Agreements related to
Trust Securities are described in Note 13 – Long-term Debt and
the Exchange Agreements related to preferred stock are described
below.
As part of the Exchange Agreements, the Corporation
exchanged non-convertible preferred stock, with an aggregate
liquidation preference of $815 million and carrying value of $814
million, for 72 million shares of common stock valued at $399
million and senior notes valued at $231 million. The $184 million
difference between the carrying value of the non-convertible
preferred stock and the fair value of the consideration issued to
the holders of the non-convertible preferred stock was recorded
in retained earnings as a non-cash reduction to preferred stock
dividends.