Community Banks Inc. in Harrisburg, Pa., said Monday that it would lower previously reported first-quarter earnings by 31% because it has determined that it had misapplied a new accounting rule.
The $3.8 billion-asset company said the earnings revision would not affect its deal to be sold to Susquehanna Bancshares Inc. in Lititz, Pa.
Community said it earned $6.6 million in the first quarter, $3.1 million less than previously reported, because it had to reclassify a balance-sheet restructuring.
President and chief executive Eddie L. Dunklebarger said in a press release that he is "disappointed" the company could not apply Financial Accounting Standard 159 the way it had initially intended. Community attributed the confusion to the Securities and Exchange Commission's belated interpretation of the rule.
Nonetheless, Mr. Dunklebarger called the restructuring "a prudent business decision." The company sold off lower-yielding securities so that it could reinvest in higher-yielding ones, adding roughly $1 million to pretax net interest income this year.
Susquehanna announced May 1 that it had agreed to acquire Community for $860 million. The deal is expected to close by yearend.
