2004 Annual Report: Financial Review: Statements and Notes: Note 13 Shareholders’ Equity and Earnings Per Common Share

Note 13 Shareholders’ Equity and Earnings Per Common Share During the second quarter of 2004, the Board approved a 2-for-1 stock split in the form of a common stock dividend and increased the quarterly cash dividends 12.5 percent from $0.40 to $0.45 per post-split share. The common stock dividend was effective August 27, 2004 to common shareholders of record on August 6, 2004 and the cash dividend was effective September 24, 2004 to common shareholders of record on September 3, 2004. All prior period common share and related per common share information has been restated to reflect the 2-for-1 stock split. The following table presents the monthly share repurchase activity for the three months and years ended December 31, 2004, 2003 and 2002, including total common shares repurchased under announced programs, weighted average per share price and the remaining buyback authority under announced programs.   Number of Common Shares Repurchased under Announced Programs(1) Weighted Average Per Share Price(1)   Remaining Buyback Authority under Announced Programs: Dollars(2) Remaining Buyback Authority under Announced Programs: Shares(2)   Number of Common Shares Repurchased under Announced Programs (1) Weighted Average Per Share Price (1)   Remaining Buyback Authority under Announced Programs (2) (Dollars in millions, except per share information; shares in thousands)   Dollars Shares Three months ended March 31, 2004 24,306      $40.03      $12,378 204,178 Three months ended June 30, 2004 49,060 41.07   7,978 155,118 Three months ended September 30, 2004 40,430 43.56   6,217 114,688 October 1-31, 2004 16,102 44.24   5,505 98,586 November 1-30, 2004 11,673 45.84   4,969 86,913 December 1-31, 2004    6,288 46.32   4,678 80,625      Three months ended December 31, 2004   34,063 45.17                 Year ended December 31, 2004 147,859 42.52         Number of Common Shares Repurchased under Announced Programs Weighted Average Per Share Price   Remaining Buyback Authority under Announced Programs: Dollars Remaining Buyback Authority under Announced Programs: Shares   Number of Common Shares Repurchased under Announced Programs (3) Weighted Average Per Share Price (3)   Remaining Buyback Authority under Announced Programs (4) (Dollars in millions, except per share information; shares in thousands)   Dollars Shares Three months ended March 31, 2003 36,800         $34.24   $13,930 270,370 Three months ended June 30, 2003 60,600 37.62   10,610 209,770 Three months ended September 30, 2003  50,230 40.32   8,585 159,540 October 1-31, 2003 13,800 40.28   8,029 145,740 November 1-30, 2003 64,212 37.68   5,610 81,528 December 1-31, 2003   33,044 38.10   4,351 48,484      Three months ended December 31, 2003  111,056 38.13                 Year ended December 31, 2003 258,686 37.88         Number of Common Shares Repurchased under Announced Programs(5) Weighted Average Per Share Price(5)   Remaining Buyback Authority under Announced Programs: Dollars(6) Remaining Buyback Authority under Announced Programs: Shares(6)   Number of Common Shares Repurchased under Announced Programs (5) Weighted Average Per Share Price (5)   Remaining Buyback Authority under Announced Programs (6) (Dollars in millions, except per share information; shares in thousands)   Dollars Shares Three months ended March 31, 2002 62,414 $31.33   $ 8,200 202,556 Three months ended June 30, 2002 102,430 36.36   4,476 100,126 Three months ended September 30, 2002  33,556 33.31   3,359 66,570 October 1-31, 2002 15,200 34.29   2,837 51,370 November 1-30, 2002 4,200 35.02   2,690 47,170 December 1-31, 2002        - -   2,690 47,170      Three months ended December 31, 2002   19,400 34.45                 Year ended December 31, 2002 217,800 34.28       (1) Reduced Shareholders' Equity by $6.3 billion and increased diluted earnings per common share by $0.06 in 2004. These repurchases were partially offset by the issuance of approximately 121 million shares of common stock under employee plans, which increased Shareholders' Equity by $3.9 billion, net of $127 of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.06 in 2004. (2) On January 22, 2003, the Board authorized a stock repurchase program of up to 260 million shares of the Corporation's common stock at an aggregate cost of $12.5 billion. This repurchase plan was completed during the second quarter of 2004. On January 28, 2004, the Board authorized a stock repurchase program of up to 180 million shares of the Corporation's common stock at an aggregate cost not to exceed $9.0 billion and to be completed within a period of 18 months. (3) Reduced Shareholders' Equity by $9.8 billion and increased diluted earnings per common share by $0.11 in 2003. These repurchases were partially offset by the issuance of approximately 139 million shares of common stock under employee plans, which increased Shareholders' Equity by $4.2 billion, net of $123 of deferred compensation related to restricted stock awards, and decreased diluted earnings per common share by $0.08 in 2003. (4) On December 11, 2001, the Board authorized a stock repurchase program of up to 260 million shares of the Corporation's common stock at an aggregate cost of up to $10.0 billion. This repurchase plan was completed during the second quarter of 2003. On January 22, 2003, the Board authorized a stock repurchase program of up to 260 million shares of the Corporation's common stock at an aggregate cost of $12.5 billion. This repurchase plan was completed during the second quarter of 2004. (5) Reduced Shareholders' Equity by $7.5 billion and increased diluted earnings per common share by $0.11 in 2002 These repurchases were partially offset by the issuance of approximately 100 million shares of common stock under employee plans, which increased Shareholders' Equity by $2.6 billion and decreased diluted earnings per common share by $0.06 in 2002. (6) On July 26, 2000, the Board authorized a stock repurchase program of up to 200 million shares of the Corporation's common stock at an aggregate cost of up to $7.5 billion. This repurchase plan was completed during the first quarter of 2002. On December 11, 2001, the Board authorized a stock repurchase program of up to 260 million shares of the Corporation's common stock at an aggregate cost of up to $10.0 billion. This repurchase plan was completed during the second quarter of 2003.

We will continue to repurchase shares, from time to time, in the open market or in private transactions through our previously approved repurchase plans.

At December 31, 2004, the Corporation had no shares issued and outstanding of ESOP Convertible Preferred Stock, Series C (ESOP Preferred Stock). ESOP Preferred Stock in the amounts of $54 million, $4 million and $7 million for 2004, 2003 and 2002, respectively, was converted into the Corporation’s common stock at a ratio of 3.36 shares of the Corporation’s common stock.

At December 31, 2004, the Corporation had 690,000 shares authorized and 382,450 shares, or $95 million, outstanding of Bank of America 6.75% Perpetual Preferred Stock with a stated value of $250 per share. Ownership is held in the form of depositary shares paying dividends quarterly at an annual rate of 6.75 percent. On or after April 15, 2006, the Corporation may redeem Bank of America 6.75% Perpetual Preferred Stock, in whole or in part, at its option, at $250 per share, plus accrued and unpaid dividends. 

The Corporation also had 805,000 shares authorized and 700,000 shares, or $175 million, outstanding of Bank of America Fixed/Adjustable Rate Cumulative Preferred Stock with a stated value of $250 per share. Ownership is held in the form of depositary shares paying dividends quarterly at an annual rate of 6.60 percent through April 1, 2006. After April 1, 2006, the rate will adjust based on a U.S. Treasury security plus 50 bps. On or after April 1, 2006, the Corporation may redeem Bank of America Fixed/Adjustable Rate Cumulative Preferred Stock, in whole or in part, at its option, at $250 per share, plus accrued and unpaid dividends.

In addition to the preferred stock described above, the Corporation had 35,045 shares authorized and 7,739 shares, or $1 million, outstanding of the Series B Preferred Stock with a stated value of $100 per share paying dividends quarterly at an annual rate of 7.00 percent. The Corporation may redeem the Series B Preferred Stock, in whole or in part, at its option, at $100 per share, plus accrued and unpaid dividends.

All preferred stock outstanding has preference over our common stock with respect to the payment of dividends and distribution of our assets in the event of a liquidation or dissolution. Except in certain circumstances, the holders of preferred stock have no voting rights.

The following table presents the changes in Accumulated OCI for 2004 and 2003.

	2004: Pre-tax Amount	2004: Income Tax Expense (Benefit)	2004: After-tax Amount		2003: Pre-tax Amount	2003: Income Tax Expense (Benefit)	2003: After-tax Amount
	2004				2003
	Pre-tax Amount	Income Tax Expense (Benefit)	After-tax Amount		Pre-tax Amount	Income Tax Expense (Benefit)	After-tax Amount
(Dollars in millions)
Balance, January 1	$(3,242)	$(1,094)	$(2,148)		$1,944	$712	$1,232
Net unrealized gains (losses) (1)	1,691	547	1,144		(3,774)	(1,314)	(2,460)
Less: Net realized gains recorded to net income	2,513	930	1,583		1,412	492	920
Balance, December 31	$(4,064)	$(1,477)	$(2,587)		$(3,242)	$(1,094)	$(2,148)
(1) Net unrealized gains (losses) include the valuation changes of AFS debt and marketable equity securities, foreign currency translation adjustments, derivatives, and other.

The calculation of earnings per common share and diluted earnings per common share for 2004, 2003 and 2002 is presented below. See Note 1 of the Consolidated Financial Statements for a discussion on the calculation of earnings per common share.

(Dollars in millions, except per share information; shares in thousands)	2004	2003	2002
Earnings per common share
Net income	$14,143	$10,810	$9,249
Preferred stock dividends	(16)	(4)	(5)
Net income available to common shareholders	$14,127	$10,806	$9,244
Average common shares issued and outstanding	3,758,507	2,973,407	3,040,085
Earnings per common share	$  3.76	$  3.63	$ 3.04
Diluted earnings per common share
Net income available to common shareholders	$14,127	$10,806	$9,244
Convertible preferred stock dividends	2	4	5
Net income available to common shareholders and assumed   conversions	$14,129	$10,810	$9,249
Average common shares issued and outstanding	3,758,507	2,973,407	3,040,085
Dilutive potential common shares (1,2)	65,436	56,949	90,850
Total diluted average common shares issued and outstanding	3,823,943	3,030,356	3,130,935
Diluted earnings per common share	$  3.69	$  3.57	$ 2.95
(1) For 2004, 2003 and 2002, average options to purchase 10 million, 19 million and 45 million shares, respectively, were outstanding but not included in the computation of earnings per common share because they were antidilutive. (2) Includes incremental shares from assumed conversions of convertible preferred stock, restricted stock units, restricted stock shares and stock options.