Bank of America (BAC, quote) announced it has agreed to settle a class action lawsuit over its acquisition of Merrill Lynch in a settlement much larger than excepted of $.2.43 billion.  The lawsuit was on the behalf of Bank of American stock holders when Bank of America announced plans to buy Merrill Lynch during the fall out of the financial crisis in the fall of 2008.  The lawsuit made allegations that several of Bank of American officers made misleading or false statement about the financial health of not only Merrill Lynch but of Bank of American as well.

In the settlement reached today Bank of American is denying any allegations and has agreed to the settlement to rid the burden and cost of the lawsuit.  If that is the case why was the settlement so much greater than anyone expected?

According to Bank of American CEO Brian Moynihan in a statement, "As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients,"

The settlement is still pending approval by the court.

Bank of America's Bottom Line

The settlement according to Bank of America will be paid by using the remaining funds in the litigation reserve funds.  Roughly $1.6 billion in expenses will be recorded in its third quarter.

The bank cautions this expense, combined with other charges, is thought to lower Bank of America’s third quarter earnings by roughly $0.28 per share.