Center Financial Corp. in Los Angeles said Thursday that it would restate prior years' earnings because of accounting errors.
The $1.5 billion-asset banking company said it would delay for an unspecified time the release of its second-quarter earnings, pending a restatement of its annual and quarterly earnings from 2002 through 2004. Center improperly accounted for the gains and losses of its interest rate swaps during this period, said Patrick Hartman, who was hired in March as chief financial officer.
Brett D. Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp., said that he does not expect earnings in that period to be materially affected.
Center had earlier delayed the filing of its 2004 annual report until March 31, after determining its accounting weaknesses. In that report, Mr. Hartman said the company used appropriate accounting methods in calculating fourth-quarter earnings but not full-year earnings.
The company also said Thursday that it does not expect the restatement to affect its second-quarter earnings. It said that it expects to report record net income of about $6.1 million and returns on assets and equity that are significantly above industry averages.
Last month one of Center's competitors in the Koreatown section of Los Angeles, Nara Bancorp, restated its 2002 and 2003 earnings after outside counsel determined that it had improperly accounted for a 2002 profit-sharing arrangement with its former chief executive.
Mr. Rabatin said that the accounting errors at both companies were mainly a result of their growing so fast over the last several years and failing to keep up with the new sophistication of their operations.
In late trading Thursday, Center's stock was down more than 2%, to $25.05.
