Hawaiian Electric
understates bank income

The company delays releasing its
financial statement until Feb. 7

Hawaiian Electric Industries Inc. delayed releasing its fourth-quarter and year-end earnings yesterday until Feb. 7 and said subsidiary American Savings Bank incorrectly applied amortization methods involving its mortgage-backed securities portfolio.

The parent company said it plans to make an adjustment that likely will boost net income by $2 million to $4 million over an undetermined period of time.

A conference call set for this morning was postponed and rescheduled for Feb. 8.

"We have our arms around the issue and are working on the detailed calculations," said Robert F. Clarke, chairman, president and chief executive of HEI. "I'm confident the matter will be resolved over the next two weeks."

Mortgage-backed securities are investment securities that are backed by mortgage loans.

HEI used an interest method in which its securities portfolio was amortized using the remaining life of the securities rather than the entire life of the securities, which is called for by the Statement of Financial Accounting Standards. HEI said the yield now will be calculated for the entire life of the securities.

The company didn't disclose how far back it might need to go to make the adjustments, but the applicable accounting standards didn't become effective until the first quarter of 1998. HEI, the state's largest utility, purchased American Savings Bank in 1988.

Analysts surveyed by Thomson Financial had been expecting HEI to report fourth-quarter net income of 41 cents a share and full-year earnings of $1.70.