Pennsylvania-based Malvern Bancorp and its former chief financial officer agreed to settle allegations levied by the Securities and Exchange Commission (SEC) regarding antifraud, reporting, books and records, and internal accounting control violations.
The bank and Joseph Gangemi, its former CFO, agreed to cease and desist from further violations and pay penalties of $350,000 and $40,000, respectively. The SEC said in an administrative proceeding Tuesday it found Gangemi caused Malvern’s violations.
The details: Between December 2017 and February 2021, Malvern repeatedly failed to timely recognize and account for impairment issues regarding large commercial real estate loans causing material misstatements over several quarters, the SEC alleged in its order.
Gangemi improperly reviewed and approved accounting on troubled debt restructurings (TDRs), loan impairments and charge-offs, and impairment of other real estate owned, the order stated.
The bank would restate its financials for the quarter ending Dec. 31, 2019, and the fiscal year ending Sept. 30, 2020. Gangemi knew or should have known the bank’s accounting was incorrect but failed to maintain accurate books and records and implement effective internal control over financial reporting, the SEC said.
In one example, Gangemi allegedly failed to reclassify a client’s loan restructuring as a TDR in line with Accounting Standards Codification Topic 310, despite the client’s sole tenant filing for bankruptcy and backing out of its lease, per the order. The bank’s primary federal banking regulator later reviewed the loan and declared it impaired.
Malvern and Gangemi settled without admitting or denying the SEC’s findings.
In July, Malvern merged with First Bank. First Bank did not respond to a request for comment.