After five months of trying to figure out why it couldn’t find $6.2 million recorded on its books, a bank has given up, restated its previous financial results, and reassigned its CFO.
On Monday, Willow Financial Bancorp filed an amended annual report for its 2007 and 2006 fiscal years. To make up for the missing $6.2 million, the firm recorded it as a charge to earnings for the first two quarters of fiscal year 2006, when its “out of balance condition first arose.”
The holding company for Willow Financial Bank, a Pennsylvania community bank with $1.6 billion in assets, Willow Financial Bancorp announced in November that it had a problem. It then spent more than $2 million over five months in “exhaustive efforts” to figure out what had gone wrong but wasn’t able to properly correct its previous accounting entries, the bank said in its amended annual report.
Its restated financial statements include a pretax income hit of $8.3 million, a $365,000 charge to its fiscal 2004 retained earnings, and fixes for errors in accounting for an acquisition and goodwill calculation totaling approximately $497,000.
“Basically they said, ‘we spent $2 million trying to find it,’ and I guess it was better from a cost perspective to [take a charge] against it and move on,” says David Darst, a senior analyst who covers Willow for FTN Midwest Securities Corp.
The day after filing the amended 10-K and its 10-Q for the quarter ended September 30, 2007, Willow reassigned CFO Joseph Crowley as senior vice president and gave its chief accounting officer, Neil Kalani, finance chief duties. Joe Crivelli, a spokesman for Willow who works for Gregory FCA Communications, declined to explain the reason for Crowley’s reassignment.
Crowley became CFO of Willow when it merged with Chester Valley Bancorp nearly three years ago. The acquisition has been a problem area for Willow ever since, according to Darst, as it has lost approximately $150 million in market capitalization and may have to take a $25 million to $40 million write-down on goodwill for the transaction. In addition, its audit firm, KPMG, has found material weaknesses and says Willow has ineffective internal controls.
Willow expects to file its second-quarter results by the end of May, says Crivelli, with the third-quarter report to follow shortly thereafter. Nasdaq has threatened the bank with delisting for its late filings.