Bank of America Restates Profit, Adding $345 Million

-- Bank of America Corp., the No. 2 U.S. bank, restated earnings for the past four years because it improperly accounted for hedges used to protect against movements in interest rates and foreign currencies. The changes added $345 million to the bank's $51 billion of profit during the period.

The restatement cuts earnings per share for each of the past three years and increases net income for 2002, the Charlotte, North Carolina-based bank said today in a statement. Shareholders' equity rose $308 million, or less than 1 percent. The bank also said it fixed ``certain weaknesses in internal controls'' related to the mistakes.

Bank of America joins companies including Fannie Mae and General Electric Co.'s finance arm in acknowledging some transactions didn't comply with Statement of Financial Accounting Standards 133, which governs the use of interest-rate swaps and other derivatives.

``The interpretations of how to apply SFAS 133, a quite complex standard, continue to evolve,'' Alvaro de Molina, the company's chief financial officer, said in a statement.

The bank said profit in 2002 increased by 10 cents a share, and it fell 2 cents, 5 cents and 10 cents in 2003, 2004 and 2005, respectively. Shares of the company rose 32 cents to $44.87 at 10:15 a.m. in composite trading on the New York Stock Exchange.

SEC Investigation

SFAS 133 is at the heart of the pending restatement of an estimated $10.8 billion at Fannie Mae, the biggest provider of mortgage financing.

Fannie Mae's federal regulator found the company's use of interest-rate swaps, swaptions and interest-rate cap contracts failed to show the derivatives qualified for treatment as ``perfectly effective'' hedges, in which any loss in an underlying asset's value is offset by an equal gain in the derivative.

Last year GE restated its 2001-2005 results and said that the U.S. Securities and Exchange Commission was conducting a formal investigation into its derivatives accounting.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.