Cadence Financial Corp. in Starkville, Miss., said Friday that it will slash its previously reported first-quarter earnings from $3.7 million to $103,000 after discovering certain securities were improperly classified.
Under its interpretation of statement No. 159 of financial accounting standards, the $1.9 billion-asset Cadence reclassified roughly $168 million of collateralized mortgage obligations and mortgage-backed securities as "held for trading" during the first quarter, the company stated.
But after an alert from the American Institute of Certified Public Accountants and comments from the Securities and Exchange Commission raised concern about this interpretation, Cadence revisited the issue and decided to restate first-quarter earnings.
"Our decision to rescind the application of SFAS 159 to this transaction will have no effect on Cadence's cash flow, strong financial condition, or our book value," Lewis F. Mallory Jr., the company's chairman and chief executive officer, said in a press release. "Our board of directors does not expect that it will have any impact on our dividends."
Cadence said it will file an amended first-quarter earnings report by July 25.