Settlement Expected to Reduce Q3-14 Pretax Earnings by $5.3 Billion
and Negatively Impact EPS by Approximately $0.43 per Share
CHARLOTTE, N.C.--(BUSINESS WIRE)--Aug. 21, 2014--
Bank of America announced today that it has reached a comprehensive
settlement with the U.S. Department of Justice (DoJ), certain federal
agencies and six states. The settlement includes releases on the
securitization, origination, sale and other specified conduct relating
to residential mortgage-backed securities (RMBS) and collateralized debt
obligations (CDOs), and an origination release on residential mortgage
loans sold to Government Sponsored Enterprises (GSEs) and private-label
(PLS) RMBS trusts, or guaranteed by the Federal Housing Authority (FHA).
The claims relate primarily to conduct that occurred at Countrywide and
Merrill Lynch prior to Bank of America's acquisition of those entities.
Bank of America will pay a total of $9.65 billion in cash and provide
approximately $7.0 billion worth of consumer relief. The cash portion
consists of a $5.02 billion civil monetary penalty and $4.63 billion in
compensatory remediation payments.
“We believe this settlement, which resolves significant remaining
mortgage-related exposures, is in the best interests of our
shareholders, and allows us to continue to focus on the future,” said
Chief Executive Officer Brian Moynihan.
The settlement resolves certain actual and potential civil claims by the
DoJ, the Securities and Exchange Commission (SEC) and State Attorneys
General from California, Delaware, Illinois, Kentucky, Maryland and New
York (State AGs), all of which are members of the Residential Mortgage
Backed Securities Working Group of the Financial Fraud Enforcement Task
Force; the FHA; and the Government National Mortgage Association (Ginnie
Mae), as well as all pending claims against Bank of America entities
brought by the Federal Deposit Insurance Corporation (FDIC).
Borrower relief will be in the form of mortgage modifications, including
first-lien principal and forbearance forgiveness and second-lien
extinguishments, low- to moderate-income mortgage originations, and
community reinvestment and neighborhood stabilization efforts, with
initiatives focused on communities experiencing, or at risk of, urban
blight. This includes lien releases, uninhabitable and abandoned
property demolition, and remediation and property donations. Also, Bank
of America will support the expansion of available affordable rental
housing. Bank of America has committed to complete delivery of the
relief by no later than August 31, 2018. The consumer relief will be
subject to oversight by an independent monitor.
The settlement is expected to reduce third-quarter 2014 pretax earnings
by $5.3 billion, or approximately $0.43 per share after tax. The EPS
impact reflects the varying tax treatment of the components of the
The settlement resolves matters pertaining to certain pending civil
enforcement investigations, including investigations by the DoJ and the
State AGs relating to RMBS, CDOs and related mortgage activities,
including origination, by Bank of America, Countrywide, Merrill Lynch
and their affiliates. The claims released include current and potential
claims for securitization-related conduct occurring prior to January 1,
2009 under the Financial Institutions Reform, Recovery, and Enforcement
Act (FIRREA). The origination release with respect to loans sold to PLS
trusts covers all loans originated by Bank of America and its legacy
entities and securitized prior to January 1, 2009; the origination
release with respect to loans sold to the GSEs covers all loans sold to
the GSEs by Bank of America or Countrywide prior to December 31, 2013.
The FHA release covers loans originated by Bank of America or
Countrywide on or after May 1, 2009, on which claims were submitted on
or before December 31, 2013 to the FHA.
The settlement does not cover potential criminal claims; potential
claims against individuals; and certain purported whistleblower actions.
In addition, it does not cover the O’Donnell case (High Speed Swim
Lane). The company has reviewed the most recent court ruling in this
case, issued on July 30, 2014, and will file an appeal with the United
States Court of Appeals for the Second Circuit.
Certain statements in this news release represent the current
expectations, plans or forecasts of Bank of America based on available
information and are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by the fact that they do not relate
strictly to historical or current facts. These statements often use
words like “expects,” “anticipates,” “believes,” “estimates,” “targets,”
“intends,” “plans,” “predict,” “goal” and other similar expressions or
future or conditional verbs such as “will,” “may,” “might,” “should,”
“would” and “could.” Forward-looking statements speak only as of the
date they are made, and Bank of America undertakes no obligation to
update any forward-looking statement to reflect the impact of
circumstances or events that arise after the date the forward-looking
statement was made.
These statements are not guarantees of future results or performance and
involve certain risks, uncertainties and assumptions that are difficult
to predict and are often beyond Bank of America's control. Actual
outcomes and results may differ materially from those expressed in, or
implied by, any forward-looking statements. You should not place undue
reliance on any forward-looking statement and should consider all of the
uncertainties and risks discussed under Item 1A. “Risk Factors” of Bank
of America's Annual Report on Form 10-K for the year ended December 31,
2013 and in any of Bank of America's other subsequent Securities and
Exchange Commission filings.
Bank of America
Bank of America is one of the world's leading financial institutions,
serving individual consumers, small businesses, middle-market businesses
and large corporations with a full range of banking, investing, asset
management and other financial and risk management products and
services. The company provides unmatched convenience in the United
States, serving approximately 49 million consumer and small business
relationships with approximately 5,000 retail banking offices and
approximately 16,000 ATMs and award-winning online banking with 30
million active users and more than 15 million mobile users. Bank of
America is among the world's leading wealth management companies and is
a global leader in corporate and investment banking and trading across a
broad range of asset classes, serving corporations, governments,
institutions and individuals around the world. Bank of America offers
industry-leading support to approximately 3 million small business
owners through a suite of innovative, easy-to-use online products and
services. The company serves clients through operations in more than 40
countries. Bank of America Corporation stock (NYSE: BAC) is listed on
the New York Stock Exchange.
Visit the Bank of America newsroom for more Bank
of America news.
Source: Bank of America
Investors May Contact:
Lee McEntire, Bank of America, 1.980.388.6780
Blum, Bank of America (Fixed Income), 1.212.449.3112
Lawrence Grayson, Bank of America, 1.864.370.6709
Dubrowski, Bank of America, 1.980.388.2840