Bank of America Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Shareholders' Equity

Shareholders' Equity

12 Months Ended

Dec. 31, 2012

Shareholders Equity [Abstract]

Stockholders' Equity Note Disclosure

Shareholders’ Equity

Common Stock




Declared Quarterly Cash Dividends on Common Stock

Declaration Date	Record Date	Payment Date	Dividend Per Share
Declaration Date	Record Date	Payment Date	Dividend Per Share
January 23, 2013	March 1, 2013	March 22, 2013	$	0.01
October 24, 2012	December 7, 2012	December 28, 2012	0.01
July 11, 2012	September 7, 2012	September 28, 2012	0.01
April 11, 2012	June 1, 2012	June 22, 2012	0.01
January 11, 2012	March 2, 2012	March 23, 2012	0.01

In 2012 and 2011, in connection with the exchanges described in Preferred Stock in this Note, the Corporation issued 50 million and 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.

At December 31, 2012, the Corporation had warrants outstanding and exercisable to purchase 121.8 million shares of common stock at an exercise price of $30.79 per share expiring on October 28, 2018, and warrants outstanding and exercisable to purchase 150.4 million shares of common stock at an exercise price of $13.30 per share expiring on January 16, 2019. These warrants were originally issued in connection with preferred stock issuances to the U.S. Department of the Treasury in 2010 and are listed on the New York Stock Exchange.

In connection with employee stock plans, in 2012, the Corporation issued approximately 297 million shares and repurchased approximately 104 million shares of its common stock to satisfy tax withholding obligations. At December 31, 2012, the Corporation had reserved 1.9 billion unissued shares of common stock for future issuances under employee stock plans, common stock warrants, convertible notes and preferred stock.

Preferred Stock

The dividends declared on preferred stock were $1.4 billion for 2012, 2011 and 2010.

In 2012, the Corporation entered into various agreements with certain preferred stock and Trust Securities holders pursuant to which the Corporation and the holders of these securities agreed to exchange shares of various series of non-convertible preferred stock with a carrying value of $296 million and Trust Securities with a carrying value of $760 million for 50 million shares of the Corporation’s common stock with a fair value of $412 million, and $398 million in cash. The $246 million difference between the carrying value of the preferred stock and Trust Securities retired and the fair value of consideration issued was recorded in retained earnings as a $44 million reduction to preferred stock dividends and a $202 million gain in noninterest income.

In 2012, the Corporation issued shares of the Corporation’s Series F Preferred Stock and Series G Preferred Stock for $633 million under stock purchase contracts. For additional information, see Preferred Stock Summary in this Note and Note 12 – Long-term Debt.

In 2011, the Corporation entered into separate agreements with certain institutional preferred stock and Trust Securities holders (the Exchange Agreements) pursuant to which the Corporation and the holders of these securities 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 Exchange Agreements related to Trust Securities are described in Note 12 – 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.

Additionally, as a part of the Exchange Agreements, a portion of the Series L 7.25% Non-Cumulative Perpetual Convertible Preferred Stock (Series L Preferred Stock) with an aggregate liquidation preference and carrying value of $269 million was exchanged for 20 million common shares valued at $123 million and senior notes valued at $129 million. The $17 million difference between the carrying value of the Series L Preferred Stock and the fair value of the consideration issued to holders of the Series L Preferred Stock was reclassified from preferred stock to common stock and additional paid-in capital. Because the number of common shares issued to the Series L Preferred Stock holders was in excess of the number of common shares issuable pursuant to the original conversion terms, the $220 million fair value of consideration transferred to the Series L Preferred Stock holders in excess of the $32 million fair value of securities issuable pursuant to the original conversion terms was recorded as a non-cash preferred stock dividend. The dividend did not impact total

shareholders’ equity since it reduced retained earnings and increased common stock and additional paid-in capital by the same amount.

The table below lists the aggregate liquidation value of each series of preferred stock exchanged in 2012 and 2011.




Preferred Stock Exchanged

	Preferred Shares Exchanged	Liquidation Value ^{(1, 2)}
(Dollars in millions, actual shares)	Preferred Shares Exchanged	Liquidation Value ^{(1, 2)}
Non-convertible
Series D	260	$	7
Series E	6,800	170
Series J	1,058	26
Series K	4,929	123
Series M	4,958	124
Series 1	1,587	47
Series 2	7,579	227
Series 3	563	17
Series 4	5,965	179
Series 5	6,134	185
Series 6	5,612	6
Total non-convertible	45,445	1,111
Convertible
Series L	269,139	269
Total exchanged	314,584	$	1,380


⁽¹⁾	Amounts shown are before third-party issuance costs.


⁽²⁾	Carrying value of preferred stock exchanged was $1,379 million.

The Series T Preferred Stock issued as part of the Berkshire investment has a liquidation value of $100,000 per share and dividends on the Series T Preferred Stock accrue on the liquidation value at a rate per annum of six percent but will be paid only when and if declared by the Board out of legally available funds. Subject to the approval of the Board of Governors of the Federal Reserve System, the Series T Preferred Stock may be redeemed by the Corporation at any time at a redemption price of $105,000 per share plus any accrued, unpaid dividends. The Series T Preferred Stock has no maturity date and ranks senior to the outstanding common stock with respect to the payment of dividends and distributions in liquidation. At any time when dividends on the Series T Preferred Stock have not been paid in full, the unpaid amounts will accrue dividends at a rate per annum of eight percent and the Corporation will not be permitted to pay dividends or other distributions on, or to repurchase, any outstanding common stock or any of the Corporation’s outstanding preferred stock of any series. Following payment in full of accrued but unpaid dividends on the Series T Preferred Stock, the dividend rate remains at eight percent per annum.

The table below presents a summary of perpetual preferred stock previously issued by the Corporation and outstanding at December 31, 2012.




Preferred Stock Summary

(Dollars in millions, except as noted)
Series	Description	Initial Issuance Date	Total Shares Outstanding	Liquidation Preference per Share (in dollars)		Carrying Value ⁽¹⁾		Per Annum Dividend Rate		Redemption Period
Series B ⁽²⁾	7% Cumulative Redeemable	June 1997	7,571	$	100	$	1	7.00	%	n/a
Series D ^{(3, 8)}	6.204% Non-Cumulative	September 2006	26,174	25,000		654		6.204	%	On or after September 14, 2011
Series E ^{(3, 8)}	Floating Rate Non-Cumulative	November 2006	12,691	25,000		317		3-mo. LIBOR + 35 bps ⁽⁶⁾		On or after November 15, 2011
Series F ^{(3, 8)}	Floating Rate Non-Cumulative	March 2012	1,409	100,000		141		3-mo. LIBOR + 40 bps ⁽⁶⁾		On or after March 15, 2012
Series G ^{(3, 8)}	Adjustable Rate Non-Cumulative	March 2012	4,926	100,000		493		3-mo. LIBOR + 40 bps ⁽⁶⁾		On or after March 15, 2012
Series H ^{(3, 8)}	8.20% Non-Cumulative	May 2008	114,483	25,000		2,862		8.20	%	On or after May 1, 2013
Series I ^{(3, 8)}	6.625% Non-Cumulative	September 2007	14,584	25,000		365		6.625	%	On or after October 1, 2017
Series J ^{(3, 8)}	7.25% Non-Cumulative	November 2007	38,053	25,000		951		7.25	%	On or after November 1, 2012
Series K ^{(3, 9)}	Fixed-to-Floating Rate Non-Cumulative	January 2008	61,773	25,000		1,544		8.00% through 1/29/18; 3-mo. LIBOR + 363 bps thereafter		On or after January 30, 2018
Series L	7.25% Non-Cumulative Perpetual Convertible	January 2008	3,080,182	1,000		3,080		7.25	%	n/a
Series M ^{(3, 9)}	Fixed-to-Floating Rate Non-Cumulative	April 2008	52,399	25,000		1,310		8.125% through 5/14/18; 3-mo. LIBOR + 364 bps thereafter		On or after May 15, 2018
Series T	6% Cumulative	September 2011	50,000	100,000		2,918		6.00	%	See description in Preferred Stock in this Note
Series 1 ^{(3, 4)}	Floating Rate Non-Cumulative	November 2004	3,275	30,000		98		3-mo. LIBOR + 75 bps ⁽⁵⁾		On or after November 28, 2009
Series 2 ^{(3, 4)}	Floating Rate Non-Cumulative	March 2005	9,967	30,000		299		3-mo. LIBOR + 65 bps ⁽⁵⁾		On or after November 28, 2009
Series 3 ^{(3, 4)}	6.375% Non-Cumulative	November 2005	21,773	30,000		653		6.375	%	On or after November 28, 2010
Series 4 ^{(3, 4)}	Floating Rate Non-Cumulative	November 2005	7,010	30,000		210		3-mo. LIBOR + 75 bps ⁽⁶⁾		On or after November 28, 2010
Series 5 ^{(3, 4)}	Floating Rate Non-Cumulative	March 2007	14,056	30,000		422		3-mo. LIBOR + 50 bps ⁽⁶⁾		On or after May 21, 2012
Series 6 ^{(3, 7)}	6.70% Non-Cumulative Perpetual	September 2007	59,388	1,000		59		6.70	%	On or after February 3, 2009
Series 7 ^{(3, 7)}	6.25% Non-Cumulative Perpetual	September 2007	16,596	1,000		17		6.25	%	On or after March 18, 2010
Series 8 ^{(3, 4)}	8.625% Non-Cumulative	April 2008	89,100	30,000		2,673		8.625	%	On or after May 28, 2013
Total			3,685,410			$	19,067


⁽¹⁾	Amounts shown are before third-party issuance costs and other Merrill Lynch purchase accounting related adjustments of $299 million.


⁽²⁾	Series B Preferred Stock does not have early redemption/call rights.


⁽³⁾	The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at its option, at the liquidation preference plus declared and unpaid dividends.


⁽⁴⁾	Ownership is held in the form of depositary shares, each representing a 1/1,200th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.


⁽⁵⁾	Subject to 3.00% minimum rate per annum.


⁽⁶⁾	Subject to 4.00% minimum rate per annum.


⁽⁷⁾	Ownership is held in the form of depositary shares, each representing a 1/40th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.


⁽⁸⁾	Ownership is held in the form of depositary shares, each representing a 1/1,000th interest in a share of preferred stock, paying a quarterly cash dividend, if and when declared.


⁽⁹⁾	Ownership is held in the form of depositary shares, each representing a 1/25th interest in a share of preferred stock, paying a semi-annual cash dividend, if and when declared, until the redemption date adjusts to a quarterly cash dividend, if and when declared, thereafter.

n/a = not applicable

Series L Preferred Stock listed in the Preferred Stock Summary table does not have early redemption/call rights. Each share of the Series L Preferred Stock may be converted at any time, at the option of the holder, into 20 shares of the Corporation’s common stock plus cash in lieu of fractional shares. The Corporation may cause some or all of the Series L Preferred Stock, at its option, at any time or from time to time, to be converted into shares of common stock at the then-applicable conversion rate if, for 20 trading days during any period of 30 consecutive trading days, the closing price of common stock exceeds 130 percent of the then-applicable conversion price of the Series L Preferred Stock. If a conversion of Series L Preferred Stock occurs subsequent to a dividend record date but prior to the dividend payment date, the Corporation will still pay any accrued dividends payable.

All series of preferred stock in the Preferred Stock Summary table have a par value of $0.01 per share, are not subject to the operation of a sinking fund, have no participation rights, and with the exception of the Series L Preferred Stock, are not convertible. The holders of the Series B Preferred Stock and Series 1 through 8 Preferred Stock have general voting rights, and the holders of the other series included in the table have no general voting rights. All outstanding series of preferred stock of the Corporation have preference over the Corporation’s common stock with respect to the payment of dividends and distribution of the Corporation’s assets in the event of a liquidation or dissolution. With the exception of the Series T Preferred Stock, if any dividend payable on these series is in arrears for three or more semi-annual or six or more quarterly dividend periods, as applicable (whether consecutive or not), the holders of these series and any other class or series of preferred stock ranking equally as to payment of dividends and upon which equivalent voting rights have been conferred and are exercisable (voting as a single class), will be entitled to vote for the election of two additional directors. These voting rights terminate when the Corporation has paid in full dividends on these series for at least two semi-annual or four quarterly dividend periods, as applicable, following the dividend arrearage.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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