Servicing Is Not at Issue In Bank of America's Slip.

Charlotte, NC -- Bank of America is restating its earnings back through 2002 to reflect a change in its interpretation of accounting rules pertaining to derivative instruments used to hedge interest rate risk exposure and foreign exchange exposure.

The restatement will increase earnings by $345 million cumulatively - including a beginning balance adjustment prior to 2002 - as changes in the value of hedging instruments, which previously had been subject to hedge accounting treatment, are marked-to-market for the reporting periods involved.

However, the restatement shaved $421 million, or $0.10 per share, from the bank's 2005 earnings. Earnings for 2004 and 2003 were also reduced.

The bank said that by using a "short cut" methodology, it had classified the derivatives as hedge instruments. But it now believes that under Financial Accounting Statement 133, many of the transactions affected by the restatement did not qualify for this "short cut" method of designating hedge instruments.

Bank of America said its financial strength is "not adversely affected" by the restatement, which will cause shareholders equity to be adjusted upward by $308 million, or less than 1%. However, the restatement means that quarterly and annual reported income ...